10-KT/A 1 a2217780z10-kta.htm 10-KT/A

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PART IV

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-K/A
(Amendment No. 2)

(Mark One)    

o

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ý

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from March 30, 2012 to December 31, 2012

Commission file number 1-8747



AMC ENTERTAINMENT INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  43-1304369
(I.R.S. Employer
Identification No.)

920 Main
Kansas City, Missouri

(Address of principal executive offices)

 

64105
(Zip Code)

          Registrant's telephone number, including area code: (816) 221-4000



          Securities registered pursuant to Section 12(b) of the Act: None



          Securities registered pursuant to Section 12(g) of the Act: None.

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

          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 ý    No o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý

          State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.

          No voting stock of AMC Entertainment Inc. is held by non-affiliates of AMC Entertainment Inc.

Title of each class of common stock   Number of shares
Outstanding as of February 17, 2013
Common Stock, 1¢ par value   1

DOCUMENTS INCORPORATED BY REFERENCE

None

   


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        Explanatory Note:    AMC Entertainment Inc. hereby amends Parts II and IV of its Annual Report on Form 10-K for the Transition Period ended December 31, 2012 to include the amended Item 6. Selected Financial Data, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Item 8. Financial Statements and Supplementary Data and Item 15. Exhibits and Financial Statement Schedules, to revise and generally conform the treatment of certain items in the financial statements of AMC Entertainment Inc. included in this Report on Form 10-K/A to the previously filed financial statements of our parent, AMC Entertainment Holdings, Inc. ("Holdings"). Holdings' financial statements, which remain unchanged and are not affected by this report, were included in Amendment No. 6 to Holdings' Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 3, 2013. There have been no other changes, events or other transactions to recognize since the orginal filing date.

AMC ENTERTAINMENT INC.

FORM 10-K/A
FOR THE TRANSITION PERIOD ENDED DECEMBER 31, 2012

INDEX

        Prior 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 $30,300,000 and increased other long-term liabilities by $1,163,000 as of December 31, 2012. The Company has restated its December 31, 2012 balance sheet from amounts previously reported to reflect these adjustments.

        Management also determined that during the successor period from August 31, 2012 through December 31, 2012, 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.

        The prior period adjustment for the period noted above has been recorded during 2012. The Company adjusted for the cumulative effect in the carrying amount of other long-term liabilities for the error related to the successor period from August 31, 2012 through December 31, 2012 of $5,520,000 with an offsetting adjustment to the income tax provision during the fourth quarter of 2012.

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        The impact of the item noted above on 2012 Other long-term liabilities and Accumulated deficit as of December 31, 2012 is presented below:

(in thousands)
  Income Tax
Provision
 

Cumulative increase in Other long-term liabilities

  $ 5,520  

Cumulative increase in Accumulated deficit

  $ 5,520  

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Item 6.    Selected Financial Data.

 
  Years Ended(1)(3)  
(In thousands, except operating data)
  From
Inception
August 31,
2012
through
December 31,
2012
(restated)
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
  52 Weeks
Ended
March 31,
2011
  52 Weeks
Ended
April 1,
2010
  52 Weeks
Ended
April 2,
2009
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Statement of Operations Data:

                                     

Revenues:

                                     

Admissions

  $ 548,632   $ 816,031   $ 1,721,295   $ 1,644,837   $ 1,659,549   $ 1,534,644  

Concessions

    229,739     342,130     689,680     644,997     627,235     608,977  

Other revenue

    33,121     47,911     111,002     72,704     71,021     71,435  
                           

Total revenues

    811,492     1,206,072     2,521,977     2,362,538     2,357,805     2,215,056  
                           

Operating Costs and Expenses:

                                     

Film exhibition costs

    291,561     436,539     916,054     860,470     901,076     819,192  

Concession costs

    30,545     47,326     93,581     79,763     69,164     64,733  

Operating expense(6)

    230,434     297,328     696,783     691,264     588,365     555,468  

Rent

    143,374     189,086     445,326     451,874     419,227     427,617  

General and administrative:

                                     

Merger, acquisition and transactions costs

    3,366     172     2,622     14,085     2,280     650  

Management fee

        2,500     5,000     5,000     5,000     5,000  

Other

    29,110     27,025     51,776     58,136     57,858     53,628  

Depreciation and amortization

    71,633     80,971     212,817     211,444     186,350     198,224  

Impairment of long-lived assets

            285     12,779     3,765     65,397  
                           

Operating costs and expenses

    800,023     1,080,947     2,424,244     2,384,815     2,233,085     2,189,909  

Operating income (loss)

    11,469     125,125     97,733     (22,277 )   124,720     25,147  

Other expense (income)

    49     960     1,402     27,847     11,032      

Interest expense:

                                     

Corporate borrowings

    45,259     67,614     161,645     143,522     126,458     115,757  

Capital and financing lease obligations

    1,873     2,390     5,968     6,198     5,652     5,990  

Equity in (earnings) losses of non-consolidated entities

    2,480     (7,545 )   (12,559 )   (17,178 )   (30,300 )   (24,823 )

Gain on NCM transactions

                (64,441 )        

Investment expense (income)(5)

    290     (41 )   17,641     (384 )   (204 )   (1,661 )
                           

Earnings (loss) from continuing operations before income taxes

    (38,482 )   61,747     (76,364 )   (117,841 )   12,082     (70,116 )

Income tax provision (benefit)

    3,500     2,500     2,015     1,950     (68,800 )   5,800  
                           

Earnings (loss) from continuing operation

    (41,982 )   59,247     (78,379 )   (119,791 )   80,882     (75,916 )

Earnings (loss) from discontinued operations, net of income tax provision(2)

    (688 )   35,153     (3,609 )   (3,062 )   (11,092 )   (5,256 )
                           

Net earnings (loss)

  $ (42,670 ) $ 94,400   $ (81,988 ) $ (122,853 ) $ 69,790   $ (81,172 )
                           

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  Years Ended(1)(3)  
(In thousands, except operating data)
  From
Inception
August 31,
2012
through
December 31,
2012
(restated)
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
  52 Weeks
Ended
March 31,
2011
  52 Weeks
Ended
April 1,
2010
  52 Weeks
Ended
April 2,
2009
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Balance Sheet Data (at period end):

                                     

Cash and equivalents

  $ 130,928         $ 272,337   $ 301,158   $ 495,343   $ 534,009  

Corporate borrowings

    2,078,675           2,146,534     2,102,540     1,832,854     1,687,941  

Other long-term liabilities

    433,151           426,829     432,439     309,591     308,701  

Capital and financing lease obligations

    122,645           62,220     65,675     57,286     60,709  

Stockholder's equity

    768,585           154,340     360,159     760,559     1,039,603  

Total assets

    4,273,838           3,637,992     3,740,245     3,653,177     3,725,597  

Other Data:

                                     

Net cash provided by operating activities

  $ 73,892   $ 79,497   $ 197,327   $ 92,072   $ 258,015   $ 200,701  

Capital expenditures

    (72,774 )   (40,116 )   (139,359 )   (129,347 )   (97,011 )   (121,456 )

Proceeds from sale/leasebacks

            953     4,905     6,570      

Screen additions

    22     13     26     55     6     83  

Screen acquisitions

    166             960          

Screen dispositions

    19     62     120     400     105     77  

Average screens—continuing operations(4)

    4,732     4,742     4,811     4,920     4,319     4,379  

Number of screens operated

    4,988     4,819     4,868     4,962     4,347     4,446  

Number of theatres operated

    344     333     338     352     289     299  

Screens per theatre

    14.5     14.5     14.4     14.1     15.0     14.9  

Attendance (in thousands)—continuing operations(4)

    60,336     90,616     194,205     188,810     194,155     190,639  

(1)
Cash dividends declared on common stock for fiscal 2012, 2011, 2010, and 2009 were $109,581,000, $278,258,000, $329,981,000, and $35,989,000, respectively. No dividends were declared during the Transition Period.

(2)
All fiscal years presented includes earnings and losses from discontinued operations related to seven theatres in Canada and one theatre in the UK that were sold or closed in the Transition Period and 44 theatres in Mexico that were sold during fiscal 2009. During the period of March 30, 2012 through August 30, 2012, the Company recorded gains, net of lease termination expense, on the disposition of the seven Canada theatres and the one United Kingdom theatre of approximately $39,000,000, primarily due to the write-off of long-term lease liabilities extinguished in connection with the sales and closure.

(3)
On November 15, 2012, the Company announced it had changed its fiscal year to a calendar year so that the calendar year shall begin on January 1st and end on December 31st of each year. Prior to the change, fiscal years refer to the fifty-two weeks, and in some cases fifty-three weeks, ending on the Thursday closest to the last day of March.

In connection with the change of control, 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. The consolidated financial statements presented herein are those of Successor from its inception

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    on August 31, 2012 through December 31, 2012, 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.

(4)
Includes consolidated theatres only.

(5)
During fiscal 2012, investment loss (income) includes an impairment loss of $17,751,000, related to the Company's investment in RealD Inc. common stock.

(6)
Includes theatre and other closure expense (income) during the period August 31, 2012 through December 31, 2012, the period March 30, 2012 through August 30, 2012 and for fiscal years 2012, 2011, 2010, and 2009 of $2,381,000, $4,191,000, $7,449,000, $60,763,000, $2,573,000, and $(2,262,000), respectively. In the fourth quarter of fiscal 2011, the Company permanently closed 73 underperforming screens in six theatre locations while continuing to operate 89 screens at these locations, and discontinued development of and ceased use of certain vacant and under-utilized retail space at four other theatres, resulting in a charge of $55,015,000 for theatre and other closure expense.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

        The following discussion relates to the audited financial statements of AMC Entertainment Inc., included elsewhere in this Form 10-K. This discussion contains forward-looking statements. Please see "Forward-Looking Statements" for a discussion of the risks, uncertainties and assumptions relating to these statements.

        All references to the Transition Period, ("Transition Period"), in this section are for the period March 30, 2012 through December 31, 2012 and are derived by combining the audited results of operations of our Predecessor from March 30, 2012 to August 30, 2012 with the audited results of operations of our Successor from August 31, 2012 to December 31, 2012. These pro forma combined results for the Transition Period do not purport to represent what our consolidated results of operations would have been if the Successor had actually been formed on March 30, 2012, nor have we made any attempt to either include or exclude expenses or income that would have resulted had the acquisition actually occurred on March 30, 2012.

Overview

        We are one of the world's leading theatrical exhibition companies. During the Transition Period, we permanently closed four theatres with 40 screens in the U.S., permanently closed one theatre operated pursuant to a joint venture with 6 screens, temporarily closed one theatre and 35 screens in the U.S. to remodel into dine-in theatres, re-opened one theatre and 35 screens that were previously closed to remodel into dine-in theatres in the U.S., sold or closed 7 theatres with 154 screens located in Canada and one theatre with 12 screens in the UK and acquired 11 theatres with 166 screens in the U.S. As of December 31, 2012, we owned, operated or had interests in 344 theatres and 4,988 screens.

        Our Theatrical Exhibition revenues are generated primarily from box office admissions and theatre concession sales. The balance of our revenues are generated from ancillary sources, including on-screen advertising, fees earned from the AMC Stubs™ guest frequency membership program, rental of theatre auditoriums, breakage income from gift card and packaged ticket sales, on-line ticketing fees and arcade games located in theatre lobbies.

        Box office admissions are our largest source of revenue. We predominantly license "first-run" films from distributors owned by major film production companies and from independent distributors. We license films on a film-by-film and theatre-by-theatre basis. Film exhibition costs are accrued based on the applicable admissions revenues and estimates of the final settlement pursuant to our film licenses. Licenses that we enter into typically state that rental fees are based on either aggregate terms established prior to the opening of the picture or on a mutually agreed settlement upon the conclusion of the picture run. Under an aggregate terms formula, we pay the distributor a specified percentage of box office gross or pay based on a scale of percentages tied to different amounts of box office gross. The settlement process allows for negotiation based upon how a film actually performs.

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        Technical innovation has allowed us to enhance the consumer experience through premium formats such as IMAX, 3D and other large screen formats. When combined with our major markets' customer base, the operating flexibility of digital technology will enhance our capacity utilization and dynamic pricing capabilities. This will enable us to achieve higher ticket prices for premium formats and provide incremental revenue from the exhibition of alternative content such as live concerts, sporting events, Broadway shows, opera and other non-traditional programming. Within each of our major markets, we are able to charge a premium for these services relative to our smaller markets. We will continue to broaden our content offerings and enhance the guest experience through the installation of additional IMAX and ETX (our proprietary large screen format) screens and the presentation of attractive alternative content as well as substantial upgrades to seating concepts.

        Concessions sales are our second largest source of revenue after box office admissions. Concessions items traditionally include popcorn, soft drinks, candy and hot dogs. Different varieties of concession items are offered at our theatres based on preferences in that particular geographic region. Our strategy emphasizes prominent and appealing concessions counters designed for rapid service and efficiency, including a guest friendly self-serve experience. We design our theatres to have more concessions capacity to make it easier to serve larger numbers of customers. Strategic placement of large concessions stands within theatres increases their visibility, aids in reducing the length of lines, allows flexibility to introduce new concepts and improves traffic flow around the concessions stands. To address recent consumer trends, we are expanding our menu of premium food and beverage products to include made-to-order drinks and meals, customized coffee, healthy snacks, premium beers, wine and mixed drinks and other gourmet products. We plan to invest across a spectrum of enhanced food and beverage formats, from simple, less capital-intensive concession design improvements to the development of new dine-in theatre options to rejuvenate theatres approaching the end of their useful lives as traditional movie theatres and, in some of our larger theatres, to more efficiently leverage their additional capacity. The costs of these conversions in some cases are partially covered by investments from the theatre landlord. We have successfully implemented our dine-in theatre concepts at 11 locations, which feature full kitchen facilities, seat-side servers and a separate bar and lounge area. We plan to continue to invest in one or more enhanced food and beverage offerings over the next three years across approximately 200 theatres.

        Our revenues are dependent upon the timing and popularity of film releases by distributors. The most marketable films are usually released during the summer and the calendar year-end holiday seasons. Therefore, our business is highly seasonal, with higher attendance and revenues generally occurring during the summer months and holiday seasons. Our results of operations may vary significantly from quarter to quarter.

        During the 2012 calendar year, films licensed from our seven largest distributors based on revenues accounted for approximately 90% of our U.S. admissions revenues. Our revenues attributable to individual distributors may vary significantly from year to year depending upon the commercial success of each distributor's motion pictures in any given year.

        During the period from 1990 to 2011, the annual number of first-run films released by distributors in the United States ranged from a low of 370 in 1995 to a high of 638 in 2008, according to the Motion Picture Association of America 2011 MPAA Theatrical Market Statistics and prior reports. The number of digital 3D films released annually increased from a low of 0 in 2002 to a high of 51 in 2012.

        We continually upgrade the quality of our theatre circuit by adding new screens through new builds (including expansions) and acquisitions, substantial upgrades to seating concepts, expansion of food and beverage offerings, including dine-in-theatres, and by disposing of older screens through closures and sales. We are an industry leader in the development and operation of theatres. Typically our theatres have 12 or more screens and offer amenities to enhance the movie-going experience, such as stadium seating providing unobstructed viewing, digital sound and premium seat design. As of

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December 31, 2012, we have 2,368 3D enabled screens, including ETX 3D enabled screens, and 134 IMAX 3D enabled screens; approximately 47.5% of our screens were 3D enabled screens, including IMAX 3D enabled screens, and approximately 2.7% of our screens were IMAX 3D enabled screens. We are the largest IMAX exhibitor in the world with a 45% market share in the United States, and each of our IMAX local installations is protected by geographic exclusivity. On July 16, 2012, we, along with the IMAX Corporation, announced an expansion of our existing joint revenue sharing arrangement to include the installation of 8 confirmed and up to 18 additional IMAX theatres in the United States. The following table identifies the upgrades to our theatre circuit:

Format
  Number of
Screens As of
December 31, 2012
  Number of
Screens As of
March 29, 2012
  Increase
(decrease) in
Number of
Screens
 

Digital

    4,428     3,692     736  

3D enabled

    2,234     2,208     26  

IMAX (3D enabled)

    134     128     6  

ETX (3D enabled)

    15     17     (2 )

Dine-in theatres

    111     81     30  

Premium seating

    77     33     44  

Stock-Based Compensation

        Upon the change of control as a result of the Merger, all of the stock options and restricted stock interests under both the amended and restated 2004 Stock Option Plan and the 2010 Equity Incentive Plan were cancelled and holders received payments aggregating approximately $7,035,000. See Note 2—Merger included elsewhere in this Transition Report on Form 10-K for additional information. Subsequent to the Merger, the Company has no stock-based compensation arrangements.

Significant Events

        Our Transition Period includes four more days than the thirty-nine weeks ended December 29, 2011. The last four days of our Transition Period also occurred during the year-end holiday season when the most marketable motion pictures are released, which generally drive higher attendance and revenues.

        In December 2012, the Company completed the acquisition of 4 theatres and 61 screens from Rave Reviews Cinemas, LLC and 6 theatres and 95 screens from Rave Digital Media, LLC, (and together "Rave theatres"). The purchase price for the Rave theatres, paid in cash at closing, was $87,555,000, net of cash acquired, and is subject to working capital and other purchase price adjustments. For additional information about this acquisition, see Note 3—Acquisition to our Consolidated Financial Statements under Part II Item 8. of this Transition Report on Form 10-K.

        On August 30, 2012, Wanda acquired Parent through a merger between Parent and Wanda Film Exhibition Co. Ltd. ("Merger Subsidiary"), an indirect subsidiary of Wanda, whereby Merger Subsidiary merged with and into Parent with Parent continuing as the surviving corporation and as an indirect subsidiary of Wanda.

        In July and August of 2012, we sold 6 and closed 1 of our 8 theatres located in Canada. One theatre with 20 screens was closed prior to the end of the lease term and we made a payment to the landlord to terminate this lease for $7,562,000. Two theatres with 48 screens were sold under an asset purchase agreement to Empire Theatres Limited and 4 theatres with 86 screens were sold under the share purchase agreement to Cineplex, Inc. The total net proceeds from the sales were approximately $1,472,000, and are subject to purchase price adjustments. The operations of these 7 theatres have been eliminated from our ongoing operations during fiscal 2013. We do not have any significant continuing

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involvement in the operations of these 7 theatres after the dispositions. During August of 2012, we sold one theatre in the UK with 12 screens. Proceeds from this sale were $395,000 and are subject to working capital and other purchase price adjustments as described in the sales agreement. The results of operations of these 8 theatres have been classified as discontinued operations, and information presented for all periods reflects the new classification. We are in discussions with the landlords regarding the ongoing operations at the remaining theatre located in Canada and the remaining theatre located in the UK. We recorded gains, net of lease termination expense, on the sales of these theatres of approximately $39,000,000, which are included in discontinued operations and reflect the write off of long-term lease liabilities extinguished in connection with the sales and closure.

        On July 2, 2012, we entered into a waiver and fourth amendment to our 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 us to change our 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, 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.

        On June 22, 2012, we announced we had received the requisite consents from holders of each of our Notes due 2019 and our Notes due 2020, (collectively, the "Notes") for (i) a waiver of the requirement for us 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 (collectively 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. We 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.

        On April 6, 2012, we redeemed $51,035,000 aggregate principal amount of our 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. We 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, we issued a call notice for our 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, we irrevocably deposited $141,027,000 plus accrued and unpaid interest to September 1, 2012 with a trustee to satisfy and to discharge our obligations under the Notes due 2014 and the indenture. We recorded a loss on redemption of $1,297,000 prior to the Merger in Other Expense related to the extinguishment of the Notes due 2014.

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        Prior to the fourth quarter of fiscal 2012, we recognized breakage income when gift card redemptions were deemed remote and we determined that there was no legal obligation to remit the unredeemed gift cards to the relevant tax jurisdiction ("Remote Method"), which, based on historical information, we concluded to be 18 months after the gift card was issued. At the end of the fourth quarter of fiscal 2012, we concluded we had accumulated a sufficient level of historical data from a large pool of homogeneous transactions to allow us to reasonably and objectively determine an estimated gift card breakage rate and the pattern of actual gift card redemptions. Accordingly, we changed our method for recording gift card breakage income to recognize breakage income and derecognize the gift card liability for unredeemed gift cards in proportion to actual redemptions of gift cards ("Proportional Method"). We believe the Proportional Method is preferable to the Remote Method as it better reflects the gift card earnings process resulting in the recognition of gift card breakage income over the period of gift card redemptions (i.e., over the performance period). We will continue to review historical gift card redemption information at each reporting period to assess the continued appropriateness of the gift card breakage rates and pattern of redemption.

        In accordance with ASC 250, Accounting Changes and Error Corrections, we concluded that this accounting change represented a change in accounting estimate effected by a change in accounting principle and accordingly, accounted for the change as a change in estimate following a cumulative catch-up method. As a result, the cumulative catch-up adjustment recorded at the end of the fourth quarter of fiscal 2012 resulted in an additional $14,969,000 of gift card breakage income under the Proportional Method. Inclusive of this cumulative catch-up, we recognized $32,633,000 of gift card breakage income in fiscal 2012. Gift card breakage income has been reclassified from other income to other theatre revenues during fiscal 2012 with conforming reclassifications made for prior periods.

        On February 7, 2012, we launched a cash tender offer to purchase up to $160,000,000 aggregate principal amount of our outstanding $300,000,000 aggregate principal amount of 8% Senior Subordinated Notes due 2014 ("Notes due 2014"). On February 21, 2012, holders of $108,955,000 aggregate principal amount of our Notes due 2014 tendered pursuant to the cash tender offer. On February 22, 2012, we accepted for purchase $58,063,000 aggregate principal amount for total consideration equal to (i) $972.50 per $1,000 in principal amount of notes validly tendered plus (ii) $30 per $1,000 in principal amount of the notes validly tendered. On March 7, 2012 we accepted for purchase the remaining $50,892,000 aggregate principal amount of our Notes due 2014 tendered on February 21, 2012 for total consideration equal to (i) $972.50 per $1,000 in principal amount of notes validly tendered plus (ii) $30 per $1,000 in principal amount of the notes validly tendered. We also accepted $10,000 aggregate principal amount of Notes due 2014 tendered after February 21, 2012 for total consideration equal to $972.50 per $1,000 in principal amount of the notes validly tendered. We recorded a loss on extinguishment of $640,000 related to the cash tender offer and redeemed our Notes due 2014 during the fifty-two weeks ended March 29, 2012. On March 7, 2012 we announced our intent to redeem $51,035,000 aggregate principal amount of Notes due 2014 at a price of $1,000 per $1,000 principal amount such that an aggregate of $160,000,000 of Notes due 2014 would be retired through the tender offer and redemption. On April 6, 2012, we completed the redemption of $51,035,000 aggregate principal amount of Notes due 2014 at a redemption price of 100% of the principal amount plus accrued and unpaid interest.

        On February 22, 2012, we entered into an incremental amendment to our Senior Secured Credit Facility pursuant to which we borrowed the Term Loan due 2018, the proceeds of which, together with cash on hand, were used to fund the cash tender offer and redemption of the Notes due 2014 and to repay our existing Term Loan due 2013. The Term Loan due 2018 was issued under the Senior Secured Credit Facility for $300,000,000 aggregate principal amount and net proceeds received were $297,000,000. The Term Loan due 2018 requires repayments of principal of 1% per annum and the remaining principal payable upon maturity on February 22, 2018. The Term Loan due 2018 bears interest at 4.25% as of March 29, 2012 which is based on LIBOR plus 3.25% and subject to a 1.00%

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minimum LIBOR rate. On February 22, 2012, we redeemed the outstanding Term Loan due 2013 at a redemption price of 100% of the then outstanding aggregate principal balance of $140,657,000. The Term Loan due 2013 bore interest at 2.0205% on February 22, 2012 which was based on LIBOR plus 1.75%. We recorded a loss on extinguishment of the Term Loan due 2013 of $383,000, during the fifty-two weeks ended March 29, 2012.

        On December 29, 2011, we reviewed the fair value of our investment in RealD Inc. common stock, which is accounted for as an equity security, available for sale, and is recorded in the Consolidated Balance Sheets in other long-term assets at fair value (Level 1). Our investment in RealD Inc. common stock had been in an unrealized loss position for approximately six months at December 29, 2011. We reviewed the unrealized loss for a possible other-than-temporary impairment and determined that the loss as of December 29, 2011 was other-than-temporary. The impairment analysis requires significant judgment to identify events or circumstances that would likely have a significant adverse effect on the future value of the investment. On December 29, 2011, we recognized an impairment loss of $17,751,000 within investment loss (income), related to unrealized losses previously recorded in accumulated other comprehensive loss, as we have determined the decline in fair value below historical cost to be other than temporary at December 29, 2011. Consideration was given to the financial condition and near-term prospects of the issuer, the length of time and extent to which the fair value has been less than cost and our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value.

        We used cash on hand to pay a dividend distribution of $109,581,000 on December 6, 2011 to our stockholder, Parent, which was treated as a reduction of additional paid-in capital. Parent used the available funds to pay corporate overhead expenses incurred in the ordinary course of business, and on January 25, 2012, to redeem its Term Loan Facility due June 2012, plus accrued and unpaid interest.

        On April 1, 2011, we fully launched AMC Stubs, a guest frequency program which allows members to earn rewards, including $10 for each $100 spent, redeemable on future purchases at AMC locations. The portion of the admissions and concessions revenues attributed to the rewards is deferred as a reduction of admissions and concessions revenues, based on member redemptions. Rewards must be redeemed no later than 90 days from the date of issuance. Upon redemption, deferred rewards are recognized as revenues along with associated cost of goods. Rewards not redeemed within 90 days are forfeited and recognized as admissions or concessions revenues based on original point of sale. Progress rewards (member spend toward earned rewards) for expired memberships are forfeited upon expiration of the membership and recognized as admissions or concessions revenues based on original point of sale. The program's annual membership fee is deferred, net of estimated refunds, and is recognized ratably over the one-year membership period.

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        During our launch of AMC Stubs in the prior fiscal year, admissions and concessions revenues were reduced due to the ramp up in membership, causing more rewards to be earned than redeemed. AMC Stubs membership has stabilized during the current fiscal year, resulting in a much less pronounced impact on admissions and concessions revenues. The following tables reflect AMC Stubs activity during the Transition Period and the thirty-nine weeks ended December 29, 2011:

 
   
   
  AMC Stubs Revenue for
Transition Period Ended December 31, 2012
 
(In thousands)
  Deferred
Membership
Fees
  Deferred
Rewards
  Other Theatre
Revenues
(Membership
Fees)
  Admissions
Revenues
  Concessions
Revenues
 

Balance, March 29, 2012

  $ 13,693   $ 20,961                    

Membership fees received

    15,085       $   $   $  

Rewards accumulated, net of expirations:

                               

Admissions

        4,528         (4,528 )    

Concessions

        25,907             (25,907 )

Rewards redeemed:

                               

Admissions

        (11,553 )       11,553      

Concessions

        (24,024 )           24,024  

Amortization of deferred revenue

    (18,182 )       18,182          
                       

For the period ended or balance as of December 31, 2012

  $ 10,596   $ 15,819   $ 18,182   $ 7,025   $ (1,883 )
                       

 

 
   
   
  AMC Stubs Revenue for
Thirty-nine Weeks Ended December 29, 2011
 
(In thousands)
  Deferred
Membership
Fees
  Deferred
Rewards
  Other Theatre
Revenues
(Membership
Fees)
  Admissions
Revenues
  Concessions
Revenues
 

Balance, March 31, 2011

  $ 858   $ 579                    

Membership fees received

    20,060       $   $   $  

Rewards accumulated, net of expirations:

                               

Admissions

        12,773         (12,773 )    

Concessions

        22,252             (22,252 )

Rewards redeemed:

                               

Admissions

        (6,774 )       6,774      

Concessions

        (10,368 )           10,368  

Amortization of deferred revenue

    (8,696 )       8,696          
                       

For the period ended or balance as of December 29, 2011

  $ 12,222   $ 18,462   $ 8,696   $ (5,999 ) $ (11,884 )
                       

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        The following table reflects AMC Stubs activity during the fiscal year ended March 29, 2012:

 
   
   
  AMC Stubs Revenue for
Fifty-Two Weeks Ended March 29, 2012
 
(In thousands)
  Deferred
Membership
Fees
  Deferred
Rewards
  Other Theatre
Revenues
(Membership
Fees)
  Admissions
Revenues
  Concessions
Revenues
 

Balance, March 31, 2011

  $ 858   $ 579                    

Membership fees received

    27,477       $   $   $  

Rewards accumulated, net of expirations:

                               

Admissions

        16,752         (16,752 )    

Concessions

        32,209             (32,209 )

Rewards redeemed:

                               

Admissions

        (10,819 )       10,819      

Concessions

        (17,760 )           17,760  

Amortization of deferred revenue

    (14,642 )       14,642          
                       

For the period ended or balance as of March 29, 2012

  $ 13,693   $ 20,961   $ 14,642   $ (5,933 ) $ (14,449 )
                       

        On March 31, 2011, Marquee Holdings Inc., a direct, wholly-owned subsidiary of Parent and a holding company, the sole asset of which consisted of the capital stock of AMCE, was merged with and into Parent, with Parent continuing as the surviving entity. As a result of the merger, AMCE became a direct subsidiary of Parent.

        During the fourth quarter of our fiscal year ending March 31, 2011, we evaluated excess capacity and vacant and under-utilized retail space throughout our theatre circuit. On March 28, 2011, management decided to permanently close 73 underperforming screens and auditoriums in six theatre locations in the United States and Canada while continuing to operate 89 screens at these locations. The permanently closed screens were physically segregated from the screens that remained in operation and access to the closed space was restricted. Additionally, management decided to discontinue development of and cease use of (including for storage) certain vacant and under-utilized retail space at four other theatres in the United States and the United Kingdom. As a result of closing the screens and auditoriums and discontinuing the development and use of the other spaces, we recorded a charge of $55,015,000 for theatre and other closure expense, which is included in operating expense in the Consolidated Statements of Operations during the fiscal year ending March 31, 2011. The charge to theatre and other closure expense reflects the discounted contractual amounts of the existing lease obligations of $53,561,000 for the remaining 7 to 13 year terms of the leases as well as expenses incurred for related asset removal and shutdown costs of $1,454,000. A significant portion of each of the affected properties was closed and is no longer used. The charges to theatre and other closure expense do not result in any new, increased or accelerated obligations for cash payments related to the underlying long-term operating lease agreements.

        In addition to the auditorium closures, we permanently closed 22 theatres with 144 screens in the U.S. during the fifty-two weeks ended March 31, 2011 prior to the expiration of the lease term. We recorded $5,748,000 for theatre and other closure expense, which is included in operating expense in the Consolidated Statements of Operations, due primarily to the remaining lease terms of 5 theatre closures and accretion of the closure liability related to theatres closed during prior periods. Of the theatre closures in fiscal 2011, 9 theatres with 35 screens were owned properties with no related lease obligation; 7 theatres with 67 screens had leases that were allowed to expire; a single screen theatre with a management agreement was allowed to expire; and 5 theatres with 41 screens were closed with remaining lease terms in excess of one month. Reserves for leases that have not been terminated are recorded at the present value of the future contractual commitments for the base rents, taxes and common area maintenance.

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        On December 15, 2010, we completed the offering of $600,000,000 aggregate principal amount of our 9.75% Senior Subordinated Notes due 2020 (the "Notes due 2020"). Concurrently with the offering of the Notes due 2020 offering, we launched a cash tender offer and consent solicitation for any and all of our then outstanding $325,000,000 aggregate principal amount 11% Senior Subordinated Notes due 2016 ("Notes due 2016") at a purchase price of $1,031 plus a $30 consent fee for each $1,000 of principal amount of currently outstanding Notes due 2016 validly tendered and accepted by us on or before the early tender date (the "Cash Tender Offer"). We used the net proceeds from the issuance of the Notes due 2020 to pay the consideration for the Cash Tender Offer plus accrued and unpaid interest on $95,098,000 principal amount of Notes due 2016 validly tendered. We recorded a loss on extinguishment related to the Cash Tender Offer of $7,631,000 in Other expense during the fifty-two weeks ended March 31, 2011, which included previously capitalized deferred financing fees of $1,681,000, a tender offer and consent fee paid to the holders of $5,801,000 and other expenses of $149,000. We redeemed the remaining $229,902,000 aggregate principal amount outstanding Notes due 2016 at a price of $1,055 per $1,000 principal amount on February 1, 2011 in accordance with the terms of the indenture. We recorded a loss on extinguishment related to the Cash Tender Offer of $16,701,000 in Other expense during the fifty-two weeks ended March 31, 2011, which included previously capitalized deferred financing fees of $3,958,000, a tender offer and consent fee paid to the holders of $12,644,000 and other expenses of $99,000.

        Concurrently with the Notes due 2020 offering on December 15, 2010, Holdings launched a cash tender offer and consent solicitation for any and all of its outstanding $240,795,000 aggregate principal amount (accreted value) of its 12% Senior Discount Notes due 2014 ("Discount Notes due 2014") at a purchase price of $797 plus a $30 consent fee for each $1,000 face amount (or $792.09 accreted value) of currently outstanding Discount Notes due 2014 validly tendered and accepted by Holdings. We used cash on hand to make a dividend payment of $185,034,000 on December 15, 2010 to our stockholder, Holdings, which was treated as a reduction of additional paid-in capital. Holdings used the funds received from us to pay the consideration for the Discount Notes due 2014 cash tender offer plus accrued and unpaid interest on $170,684,000 principal amount (accreted value) of the Discount Notes due 2014 validly tendered. Holdings redeemed the remaining $70,111,000 (accreted value) outstanding Discount Notes due 2014 at a price of $823.77 per $1,000 face amount (or $792.09 accreted value) on January 3, 2011 using funds from an additional dividend received from us of $76,141,000.

        On December 15, 2010, we entered into a third amendment to our Senior Secured Credit Agreement dated as of January 26, 2006 to, among other things: (i) extend the maturity of the term loans held by accepting lenders of $476,597,000 aggregate principal amount of term loans from January 26, 2013 to December 15, 2016 and to increase the interest rate with respect to such term loans, (ii) replace our existing revolving credit facility with a new five-year revolving credit facility (with higher interest rates and a longer maturity than the existing revolving credit facility), and (iii) amend certain of our existing covenants therein. We recorded a loss on the modification of our Senior Secured Credit Agreement of $3,656,000 in Other expense during the fifty-two weeks ended March 31, 2011, which included third party modification fees and other expenses of $3,289,000 and previously capitalized deferred financing fees related to the revolving credit facility of $367,000.

        All of our NCM membership units are redeemable for, at the option of NCM, cash or shares of common stock of NCM, Inc. on a share-for-share basis. On August 18, 2010, we sold 6,500,000 shares of common stock of NCM, Inc., in an underwritten public offering for $16.00 per share and reduced our related investment in NCM by $36,709,000, the carrying amount of all shares sold. Net proceeds received on this sale were $99,840,000, after deducting related underwriting fees and professional and consulting costs of $4,160,000, resulting in a gain on sale of $63,131,000. In addition, on September 8, 2010, we sold 155,193 shares of NCM, Inc. to the underwriters to cover over allotments for $16.00 per share and reduced our related investment in NCM by $867,000, the carrying amount of all shares sold.

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Net proceeds received on this sale were $2,384,000, after deducting related underwriting fees and professional and consulting costs of $99,000, resulting in a gain on sale of $1,517,000.

        On March 17, 2011, NCM, Inc., as sole manager of NCM, disclosed the changes in ownership interest in NCM pursuant to the Common Unit Adjustment Agreement dated as of February 13, 2007 ("2010 Common Unit Adjustment"). This agreement provides for a mechanism for adjusting membership units based on increases or decreases in attendance associated with theatre additions and dispositions. Prior to the 2010 Common Unit Adjustment, we held 18,803,420 units, or a 16.98% ownership interest, in NCM as of December 30, 2010. As a result of theatre closings and dispositions and a related decline in attendance, we elected to surrender 1,479,638 common membership units to satisfy the 2010 Common Unit Adjustment, leaving us with 17,323,782 units, or a 15.66% ownership interest, in NCM as of March 31, 2011. We recorded the surrendered common units as a reduction to deferred revenues for exhibitor services agreement at fair value of $25,361,000, based on a price per share of NCM, Inc. of $17.14 on March 17, 2011, and recorded the reduction of the Company's NCM investment at weighted average cost for Tranche 2 Investments of $25,568,000, resulting in a loss on the surrender of the units of $207,000. The gain from the NCM, Inc. stock sales and the loss from the surrendered NCM common units are reported as Gain on NCM transactions on the Consolidated Statements of Operations. As a result of theatre closings and a related decline in attendance, the NCM Common Unit Adjustment for calendar 2011 called for a reduction in common units. We elected to pay NCM $214,000 to retain 16,717 common units effective March 16, 2012. The amount paid to retain the units decreased the deferred revenues for exhibitor services agreement available for amortization to advertising income for future periods.

        The Company's investment in common membership units (Tranche 1 Investment) was carried at zero cost through the date of the Merger on August 30, 2012. Subsequent to the date of the Merger, the Company's investment in NCM consisted of a single investment tranche consisting of 17,323,782 membership units recorded at fair value (Level 1) on August 30, 2012.

        On May 24, 2010, we completed the acquisition of 92 theatres and 928 screens from Kerasotes Showplace Theatres, LLC ("Kerasotes"). Kerasotes operated 95 theatres and 972 screens in mid-sized, suburban and metropolitan markets, primarily in the Midwest. More than three quarters of the Kerasotes theatres feature stadium seating and almost 90 percent have been built since 1994. The purchase price for the Kerasotes theatres paid in cash at closing, was $276,798,000, net of cash acquired, and was subject to working capital and other purchase price adjustments. We paid working capital and other purchase price adjustments of $3,808,000 during the second quarter of fiscal 2011, based on the final closing date working capital and deferred revenue amounts, and have included this amount as part of the total purchase price. The acquisition of Kerasotes significantly increased our size. Accordingly, results of operations for the fifty-two weeks ended March 29, 2012, which include fifty-two weeks of operations of the theatres we acquired, are not comparable to our results for the fifty-two weeks ended March 31, 2011, which include forty-four weeks of the operations we acquired, and are not comparable to our results for the fifty-two weeks ended April 1, 2010, which did not include any results of operations for the theatres we acquired. For additional information about the Kerasotes acquisition, see Note 3—Acquisition to our Consolidated Financial Statements under Part II Item 8. of this Transition Report on Form 10-K.

        In December of 2008, the Company sold all of its interests in Cinemex, which then operated 44 theatres with 493 screens primarily in the Mexico City Metropolitan Area, to Entretenimiento GM de Mexico S.A. de C.V. ("Entretenimiento"). As of December 31, 2012, the Company estimates that it is contractually entitled to receive an additional $6,275,000 of the purchase price related to tax payments and refunds. While the Company believes it is entitled to these amounts from Cinemex, the collection will require litigation, which was initiated by the Company on April 30, 2010 and is still pending. Resolution could take place over a prolonged period. In fiscal 2010, as a result of the litigation, the Company established an allowance for doubtful accounts related to this receivable and directly charged

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off the receivable amount as uncollectible. The Company does not have any significant continuing involvement in the operations of the Cinemex theatres after the disposition. Any purchase price tax collections received or legal fees paid related to the sale of the Cinemex theatres have been classified as discontinued operations for all periods presented.

        We do not operate any other theatres in Mexico and have divested of the majority of our other investments in international theatres in Canada, UK, Japan, Hong Kong, Spain, Portugal, France, Argentina, Brazil, Chile, and Uruguay over the past several years as part of our overall business strategy.

Critical Accounting Estimates

        Our Consolidated Financial Statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates, and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our Consolidated Financial Statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

        Our significant accounting policies are discussed in Note 1 to our Consolidated Financial Statements included elsewhere in this Transition Report on Form 10-K for further information. A listing of some of the more critical accounting estimates that we believe merit additional discussion and aid in better understanding and evaluating our reported financial results are as follows.

        Impairments.    We evaluate goodwill and other indefinite lived intangible assets for impairment annually or more frequently as specific events or circumstances dictate. Impairment for other long-lived assets (including finite lived intangibles) is done whenever events or changes in circumstances indicate that these assets may not be fully recoverable. We have invested material amounts of capital in goodwill and other intangible assets in addition to other long-lived assets. We operate in a very competitive business environment and our revenues are highly dependent on movie content supplied by film producers. In addition, it is not uncommon for us to closely monitor certain locations where operating performance may not meet our expectations. Because of these and other reasons, over the past three years we have recorded material impairment charges primarily related to long-lived assets. For the last three periods, impairment charges were $0 during the Transition Period, $20,778,000 in fiscal 2012 and $21,604,000 in fiscal 2011. There are a number of estimates and significant judgments that are made by management in performing these impairment evaluations. Such judgments and estimates include estimates of future revenues, cash flows, capital expenditures, and the cost of capital, among others. We believe we have used reasonable and appropriate business judgments. There is considerable management judgment with respect to cash flow estimates and appropriate multiples and discount rates to be used in determining fair value, and, accordingly, actual results could vary significantly from such estimates, which fall under Level 3 within the fair value measurement hierarchy. These estimates determine whether an impairment has been incurred and also quantify the amount of any related impairment charge. Given the nature of our business and our recent history, future impairments are possible and they may be material, based upon business conditions that are constantly changing. See Note 1—The Company and Significant Accounting Policies included elsewhere in this Transition Report on Form 10-K for further information.

        Our recorded goodwill was $2,219,833,000 and $1,923,667,000 as of December 31, 2012 and March 29, 2012, respectively. We evaluate goodwill and our trademarks for impairment annually during

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our fourth fiscal quarter and any time an event occurs or circumstances change that would more likely than not reduce the fair value for a reporting unit below its carrying amount. Our goodwill is recorded in our Theatrical Exhibition operating segment, which is also the reporting unit for purposes of evaluating recorded goodwill for impairment. If the carrying value of the reporting unit exceeds its fair value, we are required to reallocate the fair value of the reporting unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit.

        During the Transition Period and fiscal 2012, we assessed qualitative factors and reached a determination that it is not more likely than not that the fair value of our reporting unit is less than its carrying value and therefore the two step method, as described in ASC 350-20, is not necessary. Factors considered in determining this conclusion include but are not limited to recent improvements in industry box office results; increases in the market value of our long-term debt; our estimated fair value exceeded our carrying value as of December 31, 2012; our operating results including revenues, cash flows from operating activities and Adjusted EBITDA improved significantly from fiscal 2012; and the equity values of our publicly traded peer competitors increased during the Transition Period and in fiscal 2012.

        There was no goodwill impairment during the Transition Period or during fiscal 2012.

        Film Exhibition Costs.    We have agreements with film companies who provide the content we make available to our customers. We are required to routinely make estimates and judgments about box office receipts for certain films and for films provided by specific film distributors in closing our books each period. These estimates are subject to adjustments based upon final settlements and determinations of final amounts due to our content providers that are typically based on a film's box office receipts and how well it performs. In certain instances this evaluation is done on a film by film basis or in the aggregate by film production suppliers. We rely upon our industry experience and professional judgment in determining amounts to fairly record these obligations at any given point in time. The accruals made for film costs have historically been material and we expect they will continue to be so into the future. During the Transition Period and fiscal years 2012 and 2011 our film exhibition costs totaled $728,100,000, $916,054,000, and $860,470,000, respectively.

        Income and operating taxes.    Income and operating taxes are inherently difficult to estimate and record. This is due to the complex nature of the U.S. tax code and also because our returns are routinely subject to examination by government tax authorities, including federal, state and local officials. Most of these examinations take place a few years after we have filed our tax returns. Our tax audits in many instances raise questions regarding our tax filing positions, the timing and amount of deductions claimed and the allocation of income among various tax jurisdictions. Our federal and state tax operating loss carry forward of approximately $671,879,000 and $544,244,000, respectively at December 31, 2012, require us to estimate the amount of carry forward losses that we can reasonably be expected to realize using feasible and prudent tax planning strategies that are available to us. Future changes in conditions and in the tax code may change these strategies and thus change the amount of carry forward losses that we expect to realize and the amount of valuation allowances we have recorded. Accordingly future reported results could be materially impacted by changes in tax matters, positions, rules and estimates and these changes could be material.

        Theatre and Other Closure Expense.    Theatre and other closure expense is primarily related to payments made or received or expected to be made or received to or from landlords to terminate leases on certain of our closed theatres, other vacant space and theatres where development has been discontinued. Theatre and other closure expense is recognized at the time the theatre or auditorium closes, space becomes vacant or development is discontinued. Expected payments to or from landlords are based on actual or discounted contractual amounts. We estimate theatre closure expense based on contractual lease terms and our estimates of taxes and utilities. The discount rate we use to estimate

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theatre and other closure expense is based on estimates of our borrowing costs at the time of closing. Our theatre and other closure liabilities have been measured using a discount rate of approximately 7.55% to 9.0%. During the fourth quarter of our fiscal year ending March 31, 2011, we permanently closed 73 underperforming screens and auditoriums in six theatre locations while continuing to operate the remaining 89 screens, and discontinued the development of and ceased use of certain vacant and under-utilized retail space at four other theatres. As a result of closing the screens and auditoriums and discontinuing the development and use of the other spaces, we recorded a charge of $55,015,000 for theatre and other closure expense. We have recorded theatre and other closure expense, which is included in operating expense in the Consolidated Statements of Operations, of $6,572,000, $7,449,000, and $60,763,000 during the Transition Period and the fiscal years ended March 29, 2012, and March 31, 2011, respectively.

        Gift card and packaged ticket breakage.    As noted in our significant accounting policies for revenue, we defer 100% of these items and recognize these amounts as they are redeemed by customers or breakage income is recognized. A vast majority of gift cards are used or partially used. However a portion of the gift cards and packaged ticket sales we sell to our customers are not redeemed and not used in whole or in part. Non-redeemed or partially redeemed cards or packaged tickets are known as "breakage" in our industry. We are required to estimate breakage and do so based upon our historical redemption patterns. Our history indicates that if a card or packaged ticket is not used for 18 months or longer, its likelihood of being used past this 18 month period is remote. In the fourth quarter of fiscal 2012, we changed our accounting method for estimating gift card breakage income. Prior to the fourth quarter of fiscal 2012, we recognized breakage income when gift card redemptions were deemed remote and the Company determined that there was no legal obligation to remit the unredeemed gift cards to the relevant tax jurisdiction ("Remote Method"), which based on historical information we concluded to be 18 months after the gift card was issued. In the fourth quarter of fiscal 2012, we accumulated a sufficient level of historical data from a large pool of homogeneous transactions to allow management to reasonably and objectively determine an estimated gift card breakage rate and the pattern of actual gift card redemptions. Accordingly, we changed our method for recognizing gift card breakage income to recognize breakage income and derecognize the gift card liability for unredeemed gift cards in proportion to actual redemptions of gift cards ("Proportional Method"). Breakage for packaged tickets continues to be recognized as the redemption of these items is determined to be remote, that is if a ticket has not been used within 18 months after being purchased. As a result of fair value accounting with the Merger, we will not recognize any breakage income on package tickets until 18 months after the date of the Merger. Additionally, concurrent with the accounting change discussed above, the Company changed the presentation of gift card breakage income from other income to other theatre revenues during fiscal 2012, with conforming changes made for all prior periods presented. During fiscal 2012, we recognized $32,633,000 of net gift card breakage income, of which $14,969,000 represented the adjustment related to the change from the Remote Method to the Proportional Method. Refer to Note 1 to the Consolidated Financial Statements for the impact to our Consolidated Financial Statements.

Pro Forma Operating Results

        As a result of the August 30, 2012 Merger described above, our Predecessor does not have financial results for the period August 31, 2012 through December 31, 2012. In order to present Management's Discussion and Analysis in a way that offers investors a meaningful period to period comparison, we have combined the current year Predecessor with current year Successor operating information, on an unaudited pro forma combined basis. The unaudited pro forma combined data consist of unaudited Predecessor information for the twenty-two weeks ended August 30, 2012 and unaudited Successor information for the period August 31, 2012 through December 31, 2012. The pro forma information for the period March 30, 2012 through December 31, 2012 does not purport to represent what our consolidated results of operations would have been if the Successor had actually been formed on March 30, 2012, nor have we made any attempt to either include or exclude expenses or income that would have resulted had the acquisition actually occurred on March 30, 2012.

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        The following table sets forth our revenues, costs and expenses attributable to our operations. Reference is made to Note 17—Operating Segment to the Consolidated Financial Statements included elsewhere in this Transition Report on Form 10-K for additional information therein.

(In thousands)
  From Inception
August 31, 2012
through
December 31,
2012
(restated)
  March 30, 2012
through
August 30,
2012
  Pro Forma
Transition
Period Ended
December 31,
2012
  (Unaudited)
Thirty-nine
Weeks Ended
December 29,
2011
  % Change  
 
  (Successor)
  (Predecessor)
   
  (Predecessor)
   
 

Revenues

                               

Theatrical exhibition

                               

Admissions

  $ 548,632   $ 816,031   $ 1,364,663   $ 1,295,469     5.3 %

Concessions

    229,739     342,130     571,869     518,081     10.4 %

Other theatre

    33,121     47,911     81,032     71,984     12.6 %
                       

Total revenues

    811,492     1,206,072     2,017,564     1,885,534     7.0 %
                       

Operating Costs and Expenses

                               

Theatrical exhibition

                               

Film exhibition costs

    291,561     436,539     728,100     694,863     4.8 %

Concession costs

    30,545     47,326     77,871     70,961     9.7 %

Operating expense

    230,434     297,328     527,762     525,431     0.4 %

Rent

    143,374     189,086     332,460     334,607     -0.6 %

General and administrative expense:

                               

Merger, acquisition and transaction costs

    3,366     172     3,538     1,179     * %

Management Fee

        2,500     2,500     3,750     -33.3 %

Other

    29,110     27,025     56,135     36,065     55.6 %

Depreciation and amortization

    71,633     80,971     152,604     155,970     -2.2 %
                       

Operating costs and expenses

    800,023     1,080,947     1,880,970     1,822,826     3.2 %
                       

Operating income

    11,469     125,125     136,594     62,708     * %

Other expense (income)

                               

Other expense

    49     960     1,009     377     * %

Interest expense:

                               

Corporate borrowings

    45,259     67,614     112,873     120,265     -6.1 %

Capital and financing lease obligations

    1,873     2,390     4,263     4,480     -4.8 %

Equity in (earnings) losses of non-consolidated entities

    2,480     (7,545 )   (5,065 )   (1,864 )   * %

Investment expense (income)

    290     (41 )   249     17,666     -98.6 %
                       

Total other expense

    49,951     63,378     113,329     140,924     -19.6 %
                       

Earnings (loss) from continuing operations before income taxes

    (38,482 )   61,747     23,265     (78,216 )   * %

Income tax provision

    3,500     2,500     6,000     1,510     -68.2 %
                       

Earnings (loss) from continuing operations

    (41,982 )   59,247     17,265     (79,726 )   * %

Earnings (loss) from discontinued operations, net of income taxes

    (688 )   35,153     34,465     (2,989 )   * %
                       

Net earnings (loss)

  $ (42,670 ) $ 94,400   $ 51,730   $ (82,715 )   * %
                       

*
Percentage change in excess of 100%

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  From Inception
August 31, 2012
through
December 31,
2012
  March 30, 2012
through
August 30,
2012
  Pro Forma
Transition
Period Ended
September 27,
2012
  (Unaudited)
39 Weeks
Ended
December 29,
2011
 
 
  (Successor)
  (Predecessor)
   
  (Predecessor)
 

Operating Data—Continuing Operations:

                         

New theatre screens

    22     13     35     26  

Screens acquired

    166         166      

Screen closures

    19     62     81     106  

Average screens—continuing operations(1)

    4,732     4,742     4,739     4,823  

Number of screens operated

    4,988     4,819     4,988     4,882  

Number of theatres operated

    344     333     344     339  

Screens per theatre

    15     15     15     14  

Attendance (in thousands)—continuing operations(1)

    60,336     90,616     150,952     146,123  

(1)
Includes consolidated theatres only, excludes 8 theatres with 166 screens sold in July and August of 2012 and included in discontinued operations.

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(In thousands)
  Fifty-two
Weeks Ended
March 29, 2012
  Fifty-two
Weeks Ended
March 31, 2011
  % Change  
 
  (Predecessor)
  (Predecessor)
   
 

Revenues

                   

Theatrical exhibition

                   

Admissions

  $ 1,721,295   $ 1,644,837     4.6 %

Concessions

    689,680     644,997     6.9 %

Other theatre

    111,002     72,704     52.7 %
               

Total revenues

    2,521,977     2,362,538     6.7 %
               

Operating Costs and Expenses

                   

Theatrical exhibition

                   

Film exhibition costs

    916,054     860,470     6.5 %

Concession costs

    93,581     79,763     17.3 %

Operating expense

    696,783     691,264     0.8 %

Rent

    445,326     451,874     -1.4 %

General and administrative expense:

                   

Merger, acquisition and transaction costs

    2,622     14,085     -81.4 %

Management Fee

    5,000     5,000     %

Other

    51,776     58,136     -10.9 %

Depreciation and amortization

    212,817     211,444     0.6 %

Impairment of long-lived assets

    285     12,779     -97.8 %
               

Operating costs and expenses

    2,424,244     2,384,815     1.7 %
               

Operating income (loss)

    97,733     (22,277 )   * %

Other expense (income)

                   

Other expense

    1,402     27,847     -95.0 %

Interest expense:

                   

Corporate borrowings

    161,645     143,522     12.6 %

Capital and financing lease obligations

    5,968     6,198     -3.7 %

Equity in earnings of non-consolidated entities

    (12,559 )   (17,178 )   -26.9 %

Gain on NCM transactions

        (64,441 )   -100 %

Investment expense (income)

    17,641     (384 )   * %
               

Total other expense

    174,097     95,564     82.2 %
               

Loss from continuing operations before income taxes

    (76,364 )   (117,841 )   -35.2 %

Income tax provision

    2,015     1,950     3.3 %
               

Loss from continuing operations

    (78,379 )   (119,791 )   -34.6 %

Loss from discontinued operations, net of income taxes

    (3,609 )   (3,062 )   17.9 %
               

Net loss

  $ (81,988 ) $ (122,853 )   -33.3 %
               

*
Percentage change in excess of 100%

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  Fifty-two
Weeks Ended
March 29, 2012
  Fifty-two
Weeks Ended
March 31, 2011
 
 
  (Predecessor)
  (Predecessor)
 

Operating Data—Continuing Operations:

             

New theatre screens

    26     6  

Screens acquired

        960  

Screen closures

    120     400  

Average screens—continuing operations(1)

    4,811     4,920  

Number of screens operated

    4,868     4,962  

Number of theatres operated

    338     352  

Screens per theatre

    14     14  

Attendance (in thousands)—continuing operations(1)

    194,205     188,810  

(1)
Includes consolidated theatres only, excludes 8 theatres with 166 screens sold in July and August of 2012 and included in discontinued operations.

        We present Adjusted EBITDA as a supplemental measure of our performance that is commonly used in our industry. We define Adjusted EBITDA as earnings (loss) from continuing operations plus (i) income tax provisions (benefit), (ii) interest expense and (iii) depreciation and amortization, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance and to include any cash distributions of earnings from our equity method investees. These further adjustments are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

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Reconciliation of Adjusted EBITDA
(unaudited)

(In thousands)
  Pro forma
Transition Period
Ended
December 31, 2012
  Thirty-nine Weeks
Ended
December 29, 2011
  Fifty-two Weeks
Ended
March 29, 2012
  Fifty-two Weeks
Ended
March 31, 2011
 

Earnings (loss) from continuing operations

  $ 17,265   $ (79,726 ) $ (78,379 ) $ (119,791 )

Plus:

                         

Income tax provision

    6,000     1,510     2,015     1,950  

Interest expense

    117,136     124,745     167,613     149,720  

Depreciation and amortization

    152,604     155,970     212,817     211,444  

Impairment of long-lived assets

            285     12,779  

Certain operating expenses(1)

    13,533     13,112     16,275     57,267  

Equity in earnings of non-consolidated entities

    (5,065 )   (1,864 )   (12,559 )   (17,178 )

Cash distributions from non-consolidated entities(2)

    17,277     20,595     33,112     35,893  

Gain on NCM transactions

                (64,441 )

Investment expense (income)

    249     17,666     17,641     (384 )

Other expense(3)

    1,346     389     1,414     27,988  

General and administrative expense—unallocated:

                         

Merger, acquisition and transaction costs          

    3,538     1,179     2,622     14,085  

Management fee

    2,500     3,750     5,000     5,000  

Stock-based compensation expense

    830     1,471     1,962     1,526  
                   

Adjusted EBITDA(2)(4)

  $ 327,213   $ 258,797   $ 369,818   $ 315,858  
                   

(1)
Amounts represent preopening expense, theatre and other closure expense, deferred digital equipment rent expense, and disposition of assets and other gains included in operating expenses.

(2)
Cash distributions from non-consolidated entities are included in our Adjusted EBITDA presentation with conforming reclassification made for the current and prior year presentation. The presentation reclassification reflects how our management evaluates our Adjusted EBITDA performance and is consistent with treatment in our various debt covenant calculations.

(3)
Other expense for the pro forma Transition Period is comprised primarily of expenses on extinguishment of indebtedness related to the redemption of our Notes due 2014 and modification of our Senior Secured Credit Facility. Other expense for fiscal 2012 is primarily comprised of the purchase and redemption of Senior Subordinated Notes due 2014 of $640,000 and expenses related to the modification of the Senior Secured Credit Facility. Other expense for fiscal 2011 is primarily comprised of the loss on extinguishment of indebtedness related to the redemption of our 11% Senior Subordinated Notes due 2016 of $24,332,000 and expense related to the modification of the Senior Secured Credit Facility of $3,656,000.

(4)
The additional 4 days included in the Transition Period contributed approximately $25,000,000 in Adjusted EBITDA. The acquisition of Kerasotes contributed approximately $34,600,000 during the fifty-two weeks ended March 29, 2012 in Adjusted EBITDA compared to $31,600,000 during the forty-four week period of May 24, 2010 to March 31, 2011.

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        Adjusted EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net earnings (loss) as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with GAAP). Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. We have included Adjusted EBITDA because we believe it provides management and investors with additional information to measure our performance and liquidity, estimate our value and evaluate our ability to service debt.

        Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. For example, Adjusted EBITDA:

    does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments;

    does not reflect changes in, or cash requirements for, our working capital needs;

    does not reflect the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt;

    excludes income tax payments that represent a reduction in cash available to us;

    does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; and

    does not reflect management fees that were paid to our former sponsors.

Pro Forma Results of Operations for the Transition Period and the thirty-nine weeks ended December 29, 2011

        Revenues.    Our results of operations were positively impacted by the inclusion of 4 additional days during the Transition Period compared to the thirty-nine weeks ended December 29, 2011. Total revenues increased 7.0%, or $132,030,000, during the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011. Admissions revenues increased 5.3%, or $69,194,000, during the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011, primarily due to a 1.9% increase in average ticket prices and a 3.3% increase in attendance. Total admissions revenues were increased by rewards redeemed, net of deferrals, of $7,025,000 during the pro forma Transition Period related to rewards accumulated under AMC Stubs, and admissions revenues were reduced by deferrals, net of rewards redeemed, of $5,999,000 during the thirty-nine weeks ended December 29, 2011 related to awards accumulated under AMC Stubs. The rewards accumulated under AMC Stubs are deferred and recognized in future periods upon redemption or expiration of guest rewards. The increase in average ticket price was primarily due to an increase in ticket prices for standard 2D film and the impact of the decrease in net deferral of admission revenue related to AMC Stubs, partially offset by a decrease in attendance for premium format film product. Admissions revenues at comparable theatres (theatres opened on or before the first quarter of fiscal 2012) before giving effect to the net deferral of admissions revenues due to the AMC Stubs guest frequency program increased 4.9%, or $62,647,000, during the pro forma Transition Period from the comparable period last year, due to increases in average ticket prices, increases in attendance and the additional four days included in the Transition Period. Concessions revenues increased 10.4%, or $53,788,000, during the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011, due to a 6.8% increase in average concessions per patron, the decrease in net deferral of concession revenues related to the AMC Stubs guest frequency program and the increase in attendance. The increase in concessions per patron includes the impact of the decrease in net deferral of concession revenue related to AMC Stubs, concession price increases and the success of our food and beverage strategic initiatives. Total concessions revenues were decreased by a net amount of $1,883,000 during the pro

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forma Transition Period and were decreased by a net amount of $11,884,000 during the thirty-nine weeks ended December 29, 2011 related to rewards accumulated under AMC Stubs and deferred to be recognized in future periods upon redemption or expiration of guest rewards. Other theatre revenues increased by 12.6%, or $9,048,000, during the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011, primarily due to increases in membership fees earned through the AMC Stubs guest frequency program, advertising revenue and internet ticket fees, partially offset by declines in gift card breakage income recognized under the Proportional Method and declines in package ticket breakage. See Note 1—The Company and Significant Accounting Policies to our Consolidated Financial Statements included elsewhere in this Transition Report on Form 10-K for further information regarding methods used to recognize gift card breakage income.

        Operating Costs and Expenses.    Operating costs and expenses increased 3.2%, or $58,144,000, during the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011. Film exhibition costs increased 4.8%, or $33,237,000, during the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011 primarily due to the increase in admissions revenues, partially offset by the decrease in film exhibition costs as a percentage of admission revenues. As a percentage of admissions revenues, film exhibition costs were 53.4% in the current period and 53.6% in the prior period. Concession costs increased 9.7%, or $6,910,000, during the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011, due to the increase in concession revenues, partially offset by the decrease in concession costs as a percentage of concession revenues. As a percentage of concessions revenues, concession costs were 13.6% in the current period compared with 13.7% in the prior period. As a percentage of revenues, operating expense was 26.2% in the current period as compared to 27.9% in the prior period, primarily due to decreases in theatre salary costs, RealD license fees, utilities and property taxes, partially offset by increases in IMAX expense. Rent expense decreased 0.6%, or $2,147,000, during the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011, primarily due to the closure of theatres.

General and Administrative Expense:

        Merger, Acquisition and Transaction Costs.    Merger, acquisition and transaction costs were $3,538,000 during the pro forma Transition Period compared to $1,179,000 during the thirty-nine weeks ended December 29, 2011 primarily due to the Merger.

        Management Fees.    Management fees decreased $1,250,000 during the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011. Management fees of $1,250,000 were paid quarterly, in advance, to our Sponsors in exchange for consulting and other services through the date of the Merger. Subsequent to the Merger these management fees have ceased.

        Other.    Other general and administrative expense increased 55.6%, or $20,070,000, during the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011 due primarily to increases in annual and long-term incentive compensation expense related to improvements in net earnings.

        Depreciation and Amortization.    Depreciation and amortization decreased 2.2%, or $3,366,000, during the pro forma Transition Period compared to the prior period resulting from theatre closures and the declining net book value of theatre assets.

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        Other Expense.    Other expense for the pro forma Transition Period is comprised of expenses on extinguishment of indebtedness related primarily to the redemption of our Notes due 2014 of $1,346,000, partially offset by business interruption insurance recoveries of $337,000. Other expense for the thirty-nine weeks ended December 29, 2011 is comprised of expenses related primarily to the modification of the Senior Secured Credit Facility of $389,000, partially offset by business interruption insurance recoveries of $12,000.

        Interest Expense.    Interest expense declined by $7,609,000 for the pro forma Transition Period compared to the thirty-nine weeks ended December 29, 2011 primarily due to the redemptions of Notes due 2014 during the pro forma Transition Period and the accretion of premiums recorded as a result of the Merger, partially offset by increases in indebtedness and the related interest expense due to the issuance of our Term Loan due 2018 on February 22, 2012.

        Equity in (Earnings) Losses of Non-Consolidated Entities.    Equity in (earnings) losses of non-consolidated entities were $(5,065,000) for the pro forma Transition Period compared to equity in earnings of $(1,864,000) for the thirty-nine weeks ended December 29, 2011. The increase in equity in earnings of non-consolidated entities was primarily due to increases in earnings from DCIP partially offset by declines in earnings from NCM. See Note 7—Investments to our Consolidated Financial Statements included elsewhere in this Transition Report on Form 10-K for further information.

        Income Tax Provision.    The income tax provision from continuing operations was a provision of $6,000,000 for the pro forma Transition Period and $1,510,000 for the thirty-nine weeks ended December 29, 2011. See Note 11—Income Taxes to our Consolidated Financial Statements included elsewhere in this Transition Report on Form 10-K for further information.

        Earnings from Discontinued Operations, Net.    In July and August of 2012, we sold or closed 7 of the 8 theatres located in Canada and sold one theatre with 12 screens in the UK. In addition, on December 29, 2008, we sold our operations in Mexico, including 44 theatres and 493 screens. The results of operations of the 7 Canada theatres, the one UK theatre and the Cinemex theatres have been classified as discontinued operations for all periods presented. Gains, net of lease termination expense, on the sales and closure of these theatres of approximately $39,000,000 are included in discontinued operations and reflect the write off of long-term lease liabilities extinguished in connection with the sales and closure. See Note 4—Discontinued Operations to our Consolidated Financial Statements included elsewhere in this Transition Report on Form 10-K for further information.

        Investment Loss.    Investment loss was $249,000 for the pro forma Transition Period compared to a loss of $17,666,000 for the thirty-nine weeks ended December 29, 2011. During the thirty-nine weeks ended December 29, 2011, we recognized an impairment loss of $17,751,000 related to unrealized losses previously recorded in accumulated other comprehensive loss on marketable securities related to our investment in RealD Inc. common stock when we determined the decline in fair value below historical cost to be other-than-temporary.

        Net Earnings (Loss).    Net earnings (loss) were $51,730,000 and ($82,715,000) for the pro forma Transition Period and thirty-nine weeks ended December, 29, 2011, respectively. Net earnings during the pro forma Transition Period were positively impacted by the gains, net of lease termination expense recorded on the disposition of the Canada and UK theatres recorded in discontinued operations, lower interest expense and investment losses as well as the improvement in admissions and concessions revenues during the pro forma Transition Period from the thirty-nine weeks ended December 29, 2011 due to the success of our food and beverage strategic initiatives, the timing of rewards accumulated and redeemed related to AMC Stubs and the additional four days included in the Transition Period.

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Results of Operations for the Fiscal Years Ended March 29, 2012 and March 31, 2011

        Revenues.    Total revenues increased 6.7%, or $159,439,000, during the year ended March 29, 2012 compared to the year ended March 31, 2011. The increase in total revenues included $48,100,000 resulting from the acquisition of Kerasotes. (Fiscal 2012 reflects 52 weeks of operations of Kerasotes compared with 44 weeks in fiscal 2011.) Admissions revenues increased $76,458,000, during the fifty-two weeks ended March 29, 2012 compared to the year ended March 31, 2011, primarily due to a 2.9% increase in attendance and a 1.7% increase in average ticket price. The increase in total admissions revenues included the additional attendance and admissions revenues resulting from the acquisition of Kerasotes of approximately $32,100,000. Total admissions revenues were reduced by deferrals, net of rewards redeemed, of $5,933,000 during the year ended March 29, 2012, related to rewards accumulated under AMC Stubs. The rewards accumulated under AMC Stubs are deferred and recognized in future periods upon redemption or expiration of guest rewards. The increase in average ticket price was primarily due to an increase in ticket prices for standard 2D film. Admissions revenues at comparable theatres (theatres opened on or before fiscal 2011 and before giving effect to the net deferral of admissions revenues due to the new AMC Stubs guest frequency program) increased $63,109,000, during the year ended March 29, 2012 from the comparable period last year, primarily due to an increase in attendance and an increase in average ticket prices. Concessions revenues increased 6.9%, or $44,683,000, during the year ended March 29, 2012 compared to the year ended March 31, 2011, due to a 3.8% increase in average concessions per patron and the increase in attendance, partially offset by the net deferral of concession revenues due to the new AMC Stubs guest frequency program. The increase in concession revenues included approximately $15,400,000 resulting from the acquisition of Kerasotes. The increase in concessions per patron includes the impact of concession price and size increases placed in effect during the second and third quarters of fiscal 2011, and a shift in product mix to higher priced items, including our dine-in theatres and premium food and beverage products. Total concessions revenues were reduced by a net amount of $14,449,000 during the year ended March 29, 2012, related to rewards accumulated under AMC Stubs and deferred to be recognized in future periods upon redemption or expiration of guest rewards. Other theatre revenues increased 52.7%, or $38,298,000, during the year ended March 29, 2012 compared to the year ended March 31, 2011, primarily due to a change in accounting for gift card breakage of $14,969,000 (see Note 1—Accounting Changes included elsewhere in this Transition Report on Form 10-K for further information), increases in membership fees earned through the AMC Stubs guest frequency program of $14,608,000, advertising revenues, and breakage income from gift card and package ticket sales.

        Operating costs and expenses.    Operating costs and expenses increased 1.7%, or $39,429,000, during the year ended March 29, 2012 compared to the year ended March 31, 2011. The increase in operating costs and expenses included approximately $36,100,000 resulting from the acquisition of Kerasotes. Film exhibition costs increased 6.5%, or $55,584,000, during the year ended March 29, 2012 compared to the year ended March 31, 2011 primarily due the increase in admissions revenues and the increase in film exhibition costs as a percentage of admissions revenues. As a percentage of admissions revenues, film exhibition costs were 53.2% in the current period and 52.3% in the prior period. Film exhibition costs as a percentage of admissions revenues increased primarily due to the net deferral of admissions revenues of $5,933,000 during the year ended March 29, 2012, related to the new AMC Stubs guest frequency program. Concession costs increased 17.3%, or $13,818,000, during the year ended March 29, 2012 compared to the year ended March 31, 2011 due the increase in concession costs as a percentage of concession revenues and the increase concession revenues. As a percentage of concessions revenues, concession costs were 13.6% in the current period compared with 12.4% in the prior period, primarily due to the concession price and size increases, a shift in product mix to items that generate higher sales but lower percentage margins, and the net deferral of concessions revenues of $14,449,000 during the year ended March 29, 2012, related to the new AMC Stubs guest frequency program. As a percentage of revenues, operating expense was 27.6% in the current period as compared to 29.3% in the prior period. During the year ended March 31, 2011, we evaluated excess capacity and

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vacant and under-utilized retail space throughout our theatre circuit and recorded charges to theatre and other closure expense of $60,763,000, which caused our operating expense to increase. See Note 15—Theatre and Other Closure and Disposition of Assets included elsewhere in this Transition Report on Form 10-K for further information. Gains were recorded on disposition of assets during the year ended March 31, 2011 which reduced operating expenses by approximately $9,719,000, primarily due to the sale of a divested AMC theatre in conjunction with the acquisition of Kerasotes. Rent expense decreased 1.4%, or $6,548,000, during the year ended March 29, 2012 compared to the year ended March 31, 2011, primarily due to decreases in rent from the closure of screens and lower renewal rentals negotiated with landlords at the end of the base lease term, partially offset by increased rent as a result of the acquisition of Kerasotes on May 24, 2010.

General and Administrative Expense:

        Merger, acquisition and transaction costs.    Merger, acquisition and transaction costs decreased $11,463,000 during the year ended March 29, 2012 compared to the year ended March 31, 2011. Prior year costs primarily consisted of costs related to the acquisition of Kerasotes.

        Management fees.    Management fees were unchanged during the year ended March 29, 2012. Management fees of $1,250,000 are paid quarterly, in advance, to our Sponsors in exchange for consulting and other services.

        Other.    Other general and administrative expense decreased 10.9%, or $6,360,000, during the year ended March 29, 2012 compared to the year ended March 31, 2011, due primarily to decreases related to a union-sponsored pension plan and decreases in professional and consulting expenses partially offset by increases in incentive compensation expense related to improvements in operating performance. During the year ended March 31, 2011, we recorded $3,040,000 of expense related to our complete withdrawal from a union-sponsored pension plan.

        Depreciation and amortization.    Depreciation and amortization was essentially unchanged during the year ended March 29, 2012 and March 31, 2011, respectively.

        Other expense.    During the year ended March 29, 2012 other expense includes loss on extinguishment related to redemption of our Term Loan due 2013 of $383,000 and a loss of $640,000 in connection with the cash tender offer and redemption of our Notes due 2014. During the year ended March 31, 2011, other expense includes a loss on extinguishment of indebtedness related to the redemption of our 11% Senior Subordinated Notes due 2016 of $24,332,000 and expense related to the modification of our Senior Secured Credit Facility Term Loan due 2013 of $3,289,000, and of our Senior Secured Credit Facility Revolver of $367,000.

        Interest expense.    Interest expense increased 12.0%, or $17,893,000, during the year ended March 29, 2012 compared to the year ended March 31, 2011, primarily due to increases in indebtedness and related interest expense due to the $600,000,000 issuance of our Notes due 2020 on December 15, 2010 and the increases in interest expense related to the modification of our Senior Secured Credit Facility on December 15, 2010, partially offset by the extinguishment of $325,000,000 of our 11% Senior Subordinated Notes due 2016 redeemed with payments made on December 15, 2010 and February 1, 2011. The issuance of our $300,000,000 Term Loan due 2018 on February 22, 2012, the redemption of our $140,657,000 Term Loan due 2013 on February 22, 2012 and the purchase and redemptions of $58,063,000 of our Notes due 2014 on February 22, 2012, $50,902,000 of our Notes due 2014 on March 7, 2012 and $51,035,000 of our Notes due 2014 on April 6, 2012 did not significantly impact interest expense during the fiscal year ended March 29, 2012.

        Equity in earnings of non-consolidated entities.    Equity in earnings of non-consolidated entities were $12,559,000 in the current period compared to equity in earnings of $17,178,000 in the prior

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period. The decrease in equity in earnings of non-consolidated entities was primarily due to the equity in losses related to our investment in Open Road Releasing, LLC of $14,726,000, due primarily to advertising expenses related to current and upcoming film releases and also the decrease in earnings and distributions received from NCM, partially offset by a decrease in equity in losses related to our investments in DCIP and Midland Empire Partners, LLC. We recognized an impairment loss of $8,825,000 related to an equity method investment through Midland Empire Partners, LLC during the year ended March 31, 2011. See Note 7—Investments for further information.

        Gain on NCM transactions.    The gain on NCM, Inc. shares of common stock sold during the year ended March 31, 2011 was $64,648,000. We also recorded a loss of $207,000 from the surrender of 1,479,638 ownership units in NCM as part of the 2010 Common Unit Adjustment. See Note 7—Investments for further information.

        Investment loss (income).    Investment loss (income) was an expense of $17,641,000 for the year ended March 29, 2012 compared to income of $384,000 for the year ended March 31, 2011. During the year ended March 29, 2012, we recognized an impairment loss of $17,751,000 related to unrealized losses previously recorded in accumulated other comprehensive loss on marketable securities related to our investment in RealD Inc. common stock when we determined the decline in fair value below historical cost to be other-than-temporary.

        Income tax provision.    The income tax provision from continuing operations was $2,015,000 for the year ended March 29, 2012 and $1,950,000 for the year ended March 31, 2011. See Note 11—Income Taxes for further information.

        Earnings from discontinued operations, Net.    On December 29, 2008, we sold our operations in Mexico, including 44 theatres and 493 screens. The results of operations of the Cinemex theatres have been classified as discontinued operations for all periods presented.

        Net Loss.    Net loss was $(81,988,000) and $(122,853,000) for the year ended March 29, 2012 and March 31, 2011, respectively. Net loss during the year ended March 29, 2012 was impacted by, the impairment charge of $17,751,000 on RealD Inc. common stock, the increased interest expense of $17,893,000, the reduced admissions and concessions revenues of $20,382,000 during the year ended March 29, 2012 related to the new AMC Stubs guest frequency program, and the $4,619,000 decline in equity in earnings offset by the increase in attendance. Net loss during the year ended March 31, 2011 was primarily due to theatre and other closure expense of $60,763,000, loss on extinguishment and modification of indebtedness of $27,988,000, increased interest expense of $17,610,000, impairment charges of $21,604,000, increased merger and acquisition costs of approximately $11,805,000 primarily due to the acquisition of Kerasotes, and the decrease in attendance, partially offset by the gain on NCM transactions of $64,441,000 and a gain on disposition of assets of approximately $9,719,000.

Liquidity and Capital Resources

        Our consolidated revenues are primarily collected in cash, principally through box office admissions and theatre concessions sales. We have an operating "float" which partially finances our operations and which generally permits us 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 20 to 45 days following receipt of box office admissions revenues. Film distributors generally release the films which they anticipate will be the most successful during the summer and year-end holiday seasons. Consequently, we typically generate higher revenues during such periods.

        On June 22, 2012, we announced we had received the requisite consents from holders of each of our Notes due 2019 and our Notes due 2020, (collectively, the "Notes") for (i) a waiver of the requirement for us to comply with the "change of control" covenant in each of the Indenture governing

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the Notes due 2019 and the Indenture governing the Notes due 2020 (collectively 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. We 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.

        On July 2, 2012, we entered into a waiver and fourth amendment to our 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 us to change our 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, 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.

        Upon the consummation of a change of control transaction or an initial public offering, each of the Sponsors were entitled to receive, in lieu of quarterly payments of the annual management fee, a fee equal to the net present value of the aggregate annual management fee that would have been payable to the Sponsors during the remainder of the term of the fee agreement (assuming a twelve year term from the date of the original fee agreement), calculated using the treasury rate having a final maturity date that is closest to the twelfth anniversary of the date of the original fee agreement date. The Sponsors waived their right to the payment described above that was triggered by the Merger. As a result of the Merger, the Company ceased paying the annual management fee of $5,000,000 to the Sponsors.

        We have the ability to borrow against our Senior Secured Credit Facility to meet obligations as they come due (subject to limitations on the incurrence of indebtedness in our various debt instruments) and had approximately $180,937,000 under our Senior Secured Revolving Credit Facility available to meet these obligations as of December 31, 2012. Reference is made to Note 9—Corporate Borrowings and Capital and Financing Lease Obligations to the Consolidated Financial Statements included elsewhere in this Transition Report on Form 10-K for information about our outstanding indebtedness. We believe that cash generated from operations and existing cash and equivalents will be sufficient to fund operations and planned capital expenditures and acquisitions currently and for at least the next 12 months and enable us to maintain compliance with covenants related to the Senior Secured Credit Facility and our Notes due 2019 and Notes due 2020. We are considering various options with respect to the utilization of cash and equivalents on hand in excess of our anticipated operating needs. Such options might include, but are not limited to, acquisition of theatres or theatre companies and repayment of corporate borrowings.

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Cash Flows from Operating Activities

        Cash flows provided by operating activities, as reflected in the Consolidated Statements of Cash Flows, were $153,389,000, $197,327,000, and $92,072,000 during the pro forma Transition Period and fiscal years March 29, 2012 and March 31, 2011, respectively. The decrease in operating cash flows provided by operating activities during the Transition Period compared to the fiscal year ended March 29, 2012 was primarily due to the change in our fiscal year. The increase in cash flows provided by operating activities during the year ended March 29, 2012 was primarily due to the decrease in net loss and increase in attendance and also higher amounts of accounts payables and accrued expenses and other liabilities associated with higher levels of business volume. We had working capital deficit as of December 31, 2012 and March 29, 2012 of $268,245,000 and $177,720,000, respectively. Working capital includes $171,122,000 and $174,355,000 of deferred revenue as of December 31, 2012 and March 29, 2012, respectively.

Cash Flows from Investing Activities

        Cash used in investing activities, as reflected in the Consolidated Statement of Cash Flows, were $189,929,000, $163,714,000, and $250,037,000 during the Transition Period and the fiscal years ended March 29, 2012 and March 31, 2011, respectively. Cash outflows from investing activities include capital expenditures during the Transition Period and the fiscal years ended March 29, 2012 and March 31, 2011 of $112,890,000, $139,359,000, and $129,347,000, respectively. Our capital expenditures primarily consisted of maintaining our theatre circuit, technology upgrades, strategic initiatives and remodels. We expect that our gross capital expenditures in calendar 2013 will be approximately $240,000,000 to $270,000,000.

        During the pro forma Transition Period we paid $87,555,000 for the purchase of the Rave theatres, net of cash acquired. The purchase included working capital and other purchase price adjustments.

        We made partnership investments in non-consolidated entities accounted for under the equity method of approximately $26,880,000 during the year ended March 29, 2012.

        During the year ended March 31, 2011, we paid $280,606,000 for the purchase of Kerasotes theatres at closing, net of cash acquired. The purchase included working capital and other purchase price adjustments as described in the Unit Purchase Agreement.

        During the year ended March 31, 2011, we received net proceeds of $102,224,000 from the sale of 6,655,193 shares of common stock of NCM, Inc. for $16.00 per share and reduced our related investment in NCM by $37,576,000, the carrying amount of the shares sold.

        We received $57,400,000 in cash proceeds from the sale of certain theatres required to be divested in connection with the Kerasotes acquisition during the year ended March 31, 2011 and received $991,000 for the sale of real estate acquired from Kerasotes.

        We have received an additional $1,840,000 of purchase price from Cinemex related to tax payments and refunds and a working capital calculation and post-closing adjustments during the fiscal year ended March 31, 2011.

        We fund the costs of constructing, maintaining and remodeling new theatres through existing cash balances, cash generated from operations, capital contributions from Wanda or borrowed funds, as necessary. We generally lease our theatres pursuant to long-term non-cancelable operating leases which may require the developer, who owns the property, to reimburse us for the construction costs. We 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.

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Cash Flows from Financing Activities

        Cash flows used in financing activities, as reflected in the Consolidated Statement of Cash Flows, were $104,678,000, $62,990,000, and $35,122,000 during the pro forma Transition Period and the fiscal years ended March 29, 2012 and March 31, 2011, respectively.

        During the pro forma Transition Period we made principal payments of $191,035,000 related to our Notes due 2014. During the pro forma Transition Period, we received $100,000,000 in additional capital contributions from Wanda subsequent to the Merger.

        During the year ended March 29, 2012, proceeds from the issuance of Term Loans due 2018 were $297,000,000 and deferred financing costs paid related to the issuance of the Term Loans due 2018 were $5,335,000.

        During the year ended March 29, 2012 we repaid the remaining principal balance due on our Term Loans due 2013 of $140,657,000 and made payments to repurchase our Notes due 2014 of $108,965,000.

        Proceeds from the issuance of the Notes due 2020 were $600,000,000 and deferred financing costs paid related to the issuance of the Notes due 2020 were $12,699,000 during the year ended March 31, 2011. In addition, deferred financing costs paid related to the Senior Secured Credit Facility were $1,943,000.

        During the year ended March 31, 2011, we made principal payments of $325,000,000 to repurchase our Notes due 2016. In addition, we made payments for tender offer and consent consideration of $18,446,000 for our Notes due 2016.

        During fiscal 2012, we used cash on hand to make dividend distributions to Parent in an aggregate amount of $109,581,000. Parent used the available funds to pay corporate overhead expenses incurred in the ordinary course of business and, on January 25, 2012, to redeem its Term Loan Facility due June 2012, plus accrued and unpaid interest. During fiscal 2011, we used cash on hand to pay four dividend distributions to Holdings in an aggregate amount of $278,258,000. Holdings used the available funds to make cash payments to extinguish the Discount Notes due 2014 and the related cash interest payments and to pay corporate overhead expenses incurred in the ordinary course of business and to pay a dividend to Parent.

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Commitments and Contingencies

        Minimum annual cash payments required under existing capital and financing lease obligations, maturities of corporate borrowings, future minimum rental payments under existing operating leases, furniture, fixtures, and equipment and leasehold purchase provisions, ADA related betterments and pension funding that have initial or remaining non-cancelable terms in excess of one year as of December 31, 2012 are as follows:

(In thousands)
Calendar Year
  Minimum
Capital and
Financing
Lease
Payments
  Principal
Amount of
Corporate
Borrowings(1)
  Interest
Payments on
Corporate
Borrowings(2)
  Minimum
Operating
Lease
Payments
  Capital
Related
Betterments(3)
  Pension
Funding(4)
  Total
Commitments
 

2013

  $ 16,750   $ 8,004   $ 144,751   $ 397,631   $ 40,303   $ 2,469   $ 609,908  

2014

    16,839     8,004     144,396     408,209             577,448  

2015

    16,972     8,004     144,041     399,584             568,601  

2016

    16,983     453,328     142,895     382,745             995,951  

2017

    16,998     3,000     124,484     361,082             505,564  

Thereafter

    113,860     1,481,999     252,445     1,661,501             3,509,805  
                               

Total

  $ 198,402   $ 1,962,339   $ 953,012   $ 3,610,752   $ 40,303   $ 2,469   $ 6,767,277  
                               

(1)
Represents cash requirements for the payment of principal on corporate borrowings. Total amount does not equal carrying amount due to unamortized premiums.

(2)
Interest expense on the term loan portion of our Senior Secured Credit Facility was estimated at 4.25% for the Term Loan due 2016 and 4.75% for the Term Loan due 2018 based upon the interest rate in effect as of December 31, 2012.

(3)
Includes committed capital expenditures, investments, and betterments to our circuit. Does not include planned, but non-committed capital expenditures.

(4)
We fund our pension plan such that the plan is in compliance with Employee Retirement Income Security Act ("ERISA") and the plan is not considered "at risk" as defined by ERISA guidelines. The plan has been frozen effective December 31, 2006. The retiree health plan is not funded.

        As discussed in Note 11—Income Taxes to the Consolidated Financial Statements included elsewhere in this Transition Report on Form 10-K, we adopted accounting for uncertainty in income taxes per the guidance in ASC 740, Income Taxes, ("ASC 740"). As of December 31, 2012, our recorded obligation for unrecognized benefits is $21,900,000. There are currently unrecognized tax benefits which we anticipate will be resolved in the next 12 months; however, we are unable at this time to estimate what the impact on our effective tax rate will be. Any amounts related to these items are not included in the table above.

Investment in NCM

        We hold an investment of 15.47% in NCM accounted for following the equity method as of December 31, 2012. The fair market value of these units is approximately $244,785,000 as of December 31, 2012, based upon the closing price of NCM, Inc. common stock. We have little tax basis in these units; therefore, the sale of all these units would require us to report taxable income of approximately $398,958,000, including distributions received from NCM that were previously deferred. Our investment in NCM is a source of liquidity for us and we expect that any sales we may make of NCM units would be made in such a manner to most efficiently manage any related tax liability. We have available net operating loss carryforwards which could reduce any related tax liability.

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Impact of Inflation

        Historically, the principal impact of inflation and changing prices upon us has been to increase the costs of the construction of new theatres, the purchase of theatre equipment, rent and the utility and labor costs incurred in connection with continuing theatre operations. Film exhibition costs, our largest cost of operations, are customarily paid as a percentage of admissions revenues and hence, while the film exhibition costs may increase on an absolute basis, the percentage of admissions revenues represented by such expense is not directly affected by inflation. Except as set forth above, inflation and changing prices have not had a significant impact on our total revenues and results of operations.

Off-Balance Sheet Arrangements

        Other than the operating leases detailed above in this Form 10-K, under the heading "Commitments and Contingencies," we have no other off-balance sheet arrangements.

New Accounting Pronouncements

        See Note 1—The Company and Significant Accounting Policies to the Consolidated Financial Statements included elsewhere in this Transition Report on Form 10-K for information regarding recently issued accounting standards.

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Item 8.    Financial Statements and Supplementary Data

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

AMC Entertainment Inc.

TO THE STOCKHOLDER OF AMC ENTERTAINMENT INC.

        Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 12a-15(f) of the Exchange Act. With our participation, an evaluation of the effectiveness of internal control over financial reporting was conducted as of December 31, 2012, based on the framework and criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2012.


GRAPHIC
   
Chief Executive Officer and President    


GRAPHIC

 

 
Executive Vice President and
Chief Financial Officer
   

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder
AMC Entertainment Inc.:

        We have audited the accompanying consolidated balance sheets of AMC Entertainment Inc. (the Company) as of December 31, 2012 and March 29, 2012, and the related consolidated statements of operations, comprehensive earnings (loss), stockholder's equity, and cash flows for the August 31, 2012 to December 31, 2012 period, the 22-week period ended August 30, 2012, and each of the 52-week periods ended March 29, 2012 and March 31, 2011. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AMC Entertainment Inc. as of December 31, 2012 and March 29, 2012, and the results of its operations and its cash flows for the August 31, 2012 to December 31, 2012 period, the 22-week period ended August 30, 2012, and each of the 52-week periods ended March 29, 2012 and March 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

        As discussed in note 2 to the consolidated financial statements, effective August 30, 2012, the Company had a change of controlling ownership. As a result of this change of control, the consolidated financial information after August 30, 2012 is presented on a different cost basis than that for the period before the change of control and, therefore, is not comparable.

/s/ KPMG LLP

Kansas City, Missouri
March 13, 2013 (except for the Prior Period Adjustments disclosed in note 1, as to which the date is December 26, 2013)

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AMC ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 
  Transition Period    
   
 
 
  From Inception
August 31, 2012
through
December 31, 2012
(restated)
   
   
  Fiscal 2012   Fiscal 2011  
(In thousands)
   
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
   
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Revenues

                             

Admissions

  $ 548,632       $ 816,031   $ 1,721,295   $ 1,644,837  

Concessions

    229,739         342,130     689,680     644,997  

Other theatre

    33,121         47,911     111,002     72,704  
                       

Total revenues

    811,492         1,206,072     2,521,977     2,362,538  
                       

Operating costs and expenses

                             

Film exhibition costs

    291,561         436,539     916,054     860,470  

Concession costs

    30,545         47,326     93,581     79,763  

Operating expense

    230,434         297,328     696,783     691,264  

Rent

    143,374         189,086     445,326     451,874  

General and administrative:

                             

Merger, acquisition and transaction costs          

    3,366         172     2,622     14,085  

Management fee

            2,500     5,000     5,000  

Other

    29,110         27,025     51,776     58,136  

Depreciation and amortization

    71,633         80,971     212,817     211,444  

Impairment of long-lived assets

                285     12,779  
                       

Operating costs and expenses

    800,023         1,080,947     2,424,244     2,384,815  
                       

Operating income (loss)

    11,469         125,125     97,733     (22,277 )

Other expense (income)

                             

Other expense

    49         960     1,402     27,847  

Interest expense:

                             

Corporate borrowings

    45,259         67,614     161,645     143,522  

Capital and financing lease obligations          

    1,873         2,390     5,968     6,198  

Equity in (earnings) losses of non-consolidated entities

    2,480         (7,545 )   (12,559 )   (17,178 )

Gain on NCM transactions

                    (64,441 )

Investment expense (income)

    290         (41 )   17,641     (384 )
                       

Total other expense

    49,951         63,378     174,097     95,564  
                       

Earnings (loss) from continuing operations before income taxes

    (38,482 )       61,747     (76,364 )   (117,841 )

Income tax provision (benefit)

    3,500         2,500     2,015     1,950  
                       

Earnings (loss) from continuing operations

    (41,982 )       59,247     (78,379 )   (119,791 )

Earnings (loss) from discontinued operations, net of income taxes

    (688 )       35,153     (3,609 )   (3,062 )
                       

Net earnings (loss)

  $ (42,670 )     $ 94,400   $ (81,988 ) $ (122,853 )
                       

   

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)

 
  Transition Period    
   
 
 
  From Inception
August 31, 2012
through
December 31, 2012
(restated)
   
   
  Fiscal 2012   Fiscal 2011  
(In thousands)
   
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
   
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Net earnings (loss)

  $ (42,670 )     $ 94,400   $ (81,988 ) $ (122,853 )

Foreign currency translation adjustment, net of tax

    (530 )       11,935     2,465     (5,678 )

Pension and other benefit adjustments:

                             

Net gain (loss) arising during the period, net of tax

    7,279             (18,939 )   (664 )

Prior service credit arising during the period, net of tax

            771     1,035     283  

Amortization of net loss included in net periodic benefit costs, net of tax

            987     5     137  

Amortization of prior service credit included in net periodic benefit costs, net of tax

            (448 )   (984 )   (865 )

Settlement, net of tax

    (15 )                

Unrealized gain (loss) on marketable securities:

                             

Unrealized holding gain (loss) arising during the period, net of tax

    1,915         (4,167 )   (17,490 )   5,972  

Less: reclassification adjustment for gains (loss) included in investment expense (income), net of tax

    (2 )       (44 )   17,696      

Unrealized gain from equity method investee's cash flow hedge, net of tax

    797                  
                       

Other comprehensive earnings (loss)

    9,444         9,034     (16,212 )   (815 )
                       

Total comprehensive earnings (loss)

  $ (33,226 )     $ 103,434   $ (98,200 ) $ (123,668 )
                       

   

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)
  December 31, 2012
(restated)
   
  March 29, 2012  
 
  (Successor)
   
  (Predecessor)
 

ASSETS

                 

Current assets:

                 

Cash and equivalents

  $ 130,928       $ 272,337  

Receivables, net

    97,108         43,550  

Other current assets

    70,627         87,866  
               

Total current assets

    298,663         403,753  

Property, net

    1,147,959         883,697  

Intangible assets, net

    243,180         135,024  

Goodwill

    2,251,296         1,923,667  

Other long-term assets

    332,740         291,851  
               

Total assets

  $ 4,273,838       $ 3,637,992  
               

LIABILITIES AND STOCKHOLDER'S EQUITY

                 

Current liabilities:

                 

Accounts payable

  $ 226,220       $ 195,938  

Accrued expenses and other liabilities

    155,286         149,334  

Deferred revenues and income

    171,122         174,355  

Current maturities of corporate borrowings and capital and financing lease obligations

    14,280         61,846  
               

Total current liabilities

    566,908         581,473  

Corporate borrowings

    2,070,671         2,087,495  

Capital and financing lease obligations

    116,369         59,413  

Deferred revenues—for exhibitor services agreement

    318,154         328,442  

Other long-term liabilities

    433,151         426,829  
               

Total liabilities

    3,505,253         3,483,652  
               

Commitments and contingencies

                 

Stockholder's equity:

                 

Common Stock, 1 share issued with 1¢ par value

             

Additional paid-in capital

    801,811         444,336  

Accumulated other comprehensive income (loss)

    9,444         (20,203 )

Accumulated deficit

    (42,670 )       (269,793 )
               

Total stockholder's equity

    768,585         154,340  
               

Total liabilities and stockholder's equity

  $ 4,273,838       $ 3,637,992  
               

   

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
  Transition Period    
   
 
 
  From Inception
August 31, 2012
through
December 31, 2012
(restated)
   
   
  Fiscal 2012   Fiscal 2011  
(In thousands)
   
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
   
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Cash flows from operating activities:

                             

Net earnings (loss)

  $ (42,670 )     $ 94,400   $ (81,988 ) $ (122,853 )

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

                             

Depreciation and amortization

    71,633         81,234     214,029     212,413  

Deferred income taxes

    3,020                  

Impairment of assets

                285     12,779  

Loss on extinguishment and modification of debt

                538     11,806  

Gain on NCM transactions

                    (64,441 )

Impairment of RealD Inc. investment

                17,751      

Theatre and other closure expense

    2,381         11,753     7,449     60,763  

(Gain) loss on dispositions

    73         (48,245 )   (580 )   (9,719 )

Equity in earnings and losses from non-consolidated entities, net of distributions

    12,707         (495 )   20,553     18,715  

Change in assets and liabilities:

                             

Receivables

    (66,615 )       11,766     (18,937 )   4,261  

Other assets

    (35,138 )       36,770     (4,693 )   671  

Accounts payable

    69,029         (58,027 )   26,747     (30,487 )

Accrued expenses and other liabilities

    63,288         (50,473 )   22,589     (538 )

Other, net

    (3,816 )       814     (6,416 )   (1,298 )
                       

Net cash provided by operating activities

    73,892         79,497     197,327     92,072  
                       

Cash flows from investing activities:

                             

Capital expenditures

    (72,774 )       (40,116 )   (139,359 )   (129,347 )

Merger

    3,110                  

Acquisition of Rave theatres, net of cash acquired

    (87,555 )                

Acquisition of Kerasotes, net of cash acquired

                    (280,606 )

Proceeds from NCM, Inc. stock sale

                    102,224  

Proceeds from disposition of long-term assets

    90         7,291     1,474     58,391  

Investments in non-consolidated entities, net

    (1,194 )       1,589     (26,880 )   (1,619 )

Proceeds from sale/leaseback of digital projection equipment

                953     4,905  

Proceeds from disposition of Cinemex, net of cash disposed

                    1,840  

Other, net

    (575 )       205     98     (5,825 )
                       

Net cash used in investing activities

    (158,898 )       (31,031 )   (163,714 )   (250,037 )
                       

Cash flows from financing activities:

                             

Proceeds from issuance of Senior Subordinated Notes due 2020

                    600,000  

Proceeds from issuance of Term Loan due 2018

                297,000      

Repurchase of Senior Subordinated Notes due 2016

                    (325,000 )

Payment of tender offer and consent solicitation consideration on Senior Subordinated Notes due 2016

                    (5,801 )

Repayment of Term Loan due 2013

                (140,657 )    

Repurchase of Senior Subordinated Notes due 2014

            (191,035 )   (108,965 )    

Principal payments under Term Loan

    (4,002 )       (4,002 )   (4,875 )   (6,500 )

Principal payments under capital and financing lease obligations

    (875 )       (1,298 )   (3,422 )   (4,194 )

Capital contribution

    100,000                  

Deferred financing costs

            (2,378 )   (6,002 )   (14,642 )

Change in construction payables

    22,487         (23,575 )   13,512     (727 )

Dividends paid to Parent

                (109,581 )   (278,258 )
                       

Net cash provided by (used in) financing activities

    117,610         (222,288 )   (62,990 )   (35,122 )

Effect of exchange rate changes on cash and equivalents

    (207 )       16     556     (1,098 )
                       

Net increase (decrease) in cash and equivalents

    32,397         (173,806 )   (28,821 )   (194,185 )

Cash and equivalents at beginning of period

    98,531         272,337     301,158     495,343  
                       

Cash and equivalents at end of period

  $ 130,928       $ 98,531   $ 272,337   $ 301,158  
                       

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

                             

Cash paid (refunded) during the period for:

                             

Interest (including amounts capitalized of $0, $14, $58 and $64)

  $ 68,794       $ 78,789   $ 159,527   $ 150,618  

Income taxes, net

    10,088         828     807     729  

Schedule of non-cash investing and financing activities:

                             

Investment in NCM (See Note 7—Investments)

  $       $   $   $ 86,159  

Investment in RealD Inc. (See Note 7—Investments)

                    27,586  

See Note 2—Acquisition for non-cash activities related to acquisition

                             

   

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

 
  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  

Predecessor

                                     

Balance April 1, 2010

    1   $   $ 828,687   $ (3,176 ) $ (64,952 ) $ 760,559  

Net loss

                    (122,853 )   (122,853 )

Comprehensive loss

                (815 )       (815 )

Stock-based compensation

            1,526             1,526  

Dividends to Marquee Holdings Inc. 

            (278,258 )           (278,258 )
                           

Balance March 31, 2011

    1         551,955     (3,991 )   (187,805 )   360,159  

Net loss

                    (81,988 )   (81,988 )

Comprehensive loss

                (16,212 )       (16,212 )

Stock-based compensation

            1,962             1,962  

Dividends to Parent

            (109,581 )           (109,581 )
                           

Balance March 29, 2012

    1         444,336     (20,203 )   (269,793 )   154,340  

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 (restated)

                                     

Balance August 30, 2012

    1   $   $   $   $   $  

Net loss

                    (42,670 )   (42,670 )

Comprehensive earnings

                9,444         9,444  

Merger consideration

            701,811             701,811  

Capital contributions

            100,000             100,000  
                           

Balance December 31, 2012

    1   $   $ 801,811   $ 9,444   $ (42,670 ) $ 768,585  
                           

   

See Notes to Consolidated Financial Statements

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

        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"). A change of control of the Company occurred pursuant to the Merger. Prior to the Merger, Parent was owned by J.P. Morgan Partners, LLC and certain related investment funds ("JPMP"), Apollo Management, L.P. and certain related investment funds ("Apollo"), affiliates of Bain Capital Partners ("Bain"), The Carlyle Group ("Carlyle") and Spectrum Equity Investors ("Spectrum") (collectively the "Sponsors"). The merger consideration totaled $701,811,000, with $700,000,000 invested by Wanda and $1,811,000 invested by members of management. The estimated transaction value was approximately $2,748,018,000. Wanda acquired cash, corporate borrowings and capital and financing lease obligations in connection with the Merger. Funding for the merger consideration was obtained by Merger Subsidiary pursuant to bank borrowings and cash contributed by Wanda.

        In connection with the change of control discussed above, 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 its inception on August 31, 2012 through December 31, 2012, 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.

        On March 31, 2011, Marquee Holdings Inc. ("Holdings"), a direct, wholly-owned subsidiary of Parent and a holding company, the sole asset of which consisted of the capital stock of AMCE, was merged with and into Parent, with Parent continuing as the surviving entity. As a result of the merger, AMCE became a direct subsidiary of Parent.

        Use of Estimates:    The preparation of financial statements in conformity with generally accepted accounting principles 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

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

exhibition costs, (3) Income and operating taxes, (4) Theatre and Other Closure Expense (Income), (5) Gift card and packaged ticket breakage, and (6) Estimates of fair value for assets and liabilities recorded in connection with the application of "push down" accounting. Actual results could differ from those estimates.

        Principles of Consolidation:    The consolidated financial statements include the accounts of AMCE and all subsidiaries, as discussed above. All significant intercompany balances and transactions have been eliminated in consolidation. There are no noncontrolling (minority) interests in the Company's consolidated subsidiaries; consequently, all of its stockholder's equity, net earnings (loss) and comprehensive earnings (loss) for the periods presented are attributable to controlling interests.

        Fiscal Year:    On November 15, 2012, the Company changed its fiscal year to a calendar year ending on December 31st 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 fifty-two week fiscal year, which ended on the Thursday closest to the last day of March. This Form 10-K covers the transition period of March 30, 2012 through December 31, 2012 ("Transition Period").

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

        For comparative purposes, the Consolidated Statements of Operations for the period April 1, 2011 through December 29, 2011 are presented as follows:

(In thousands)
  (Unaudited)
39 Weeks
Ended
December 29, 2011
 
 
  (Predecessor)
 

Revenues

       

Admissions

  $ 1,295,469  

Concessions

    518,081  

Other theatre

    71,984  
       

Total revenues

    1,885,534  
       

Operating costs and expenses

       

Film exhibition costs

    694,863  

Concession costs

    70,961  

Operating expense

    525,431  

Rent

    334,607  

General and administrative:

       

Merger, acquisition and transaction costs

    1,179  

Management fee

    3,750  

Other

    36,065  

Depreciation and amortization

    155,970  
       

Operating costs and expenses

    1,822,826  
       

Operating income

    62,708  

Other expense (income)

       

Other expense

    377  

Interest expense:

       

Corporate borrowings

    120,265  

Capital and financing lease obligations

    4,480  

Equity in earnings of non-consolidated entities

    (1,864 )

Investment expense

    17,666  
       

Total other expense

    140,924  
       

Loss from continuing operations before income taxes

    (78,216 )

Income tax provision

    1,510  
       

Loss from continuing operations

    (79,726 )

Loss from discontinued operations, net of income taxes

    (2,989 )
       

Net loss

  $ (82,715 )
       

        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

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

operations for each period presented within the Company's Consolidated Statements of Operations. See Note 4—Discontinued Operations.

        Revenues:    Revenues are recognized when admissions and concessions sales are received at the theatres. The Company defers 100% of the revenue associated with the sales of gift cards and packaged tickets until such time as the items are redeemed or breakage income is recorded. In the fourth quarter of fiscal 2012, the Company changed its accounting method for recognizing gift card breakage income. Prior to the fourth quarter of fiscal 2012, the Company recognized breakage income when gift card redemptions were deemed remote and the Company determined that there was no legal obligation to remit the unredeemed gift cards to the relevant tax jurisdiction ("Remote Method"), which based on historical information was 18 months after the gift card was issued. In the fourth quarter of fiscal 2012, the Company accumulated a sufficient level of historical data from a large pool of homogeneous transactions to allow management to reasonably and objectively determine an estimated gift card breakage rate and the pattern of actual gift card redemptions. Accordingly during fiscal 2012, the Company changed its method for recording gift card breakage income to recognize breakage income and derecognize the gift card liability for unredeemed gift cards in proportion to actual redemptions of gift cards ("Proportional Method"). Breakage for packaged tickets continues to be recognized as the redemption of these items is determined to be remote, that is if a ticket has not been used within 18 months after being purchased. During fiscal 2012, the Company recognized $32,633,000 of net gift card breakage income, of which $14,969,000 represented the adjustment related to the change from the Remote Method to the Proportional Method. Additionally, concurrent with the accounting change discussed above, the Company changed the presentation of gift card breakage income from other income to other theatre revenues during fiscal 2012, with conforming changes made for all prior periods presented. During the Successor period August 31, 2012 through December 31, 2012, the Predecessor period March 30, 2012 through August 30, 2012, and the fiscal years ended March 29, 2012 and March 31, 2011, the Company recognized $3,483,000, $7,776,000, $32,633,000 and $14,131,000 of income, respectively, related to the derecognition of gift card liabilities which was recorded in other theatre revenues in the Consolidated Statements of Operations. Refer to Note 1—The Company and Significant Accounting Policies to the consolidated financial statements for further information.

        Film Exhibition Costs:    Film exhibition costs are accrued based on the applicable box office receipts and estimates of the final settlement to the film licenses. Film exhibition costs include certain advertising costs. As of December 31, 2012 and March 29, 2012, the Company recorded film payables of $120,650,000 and $76,997,000, respectively, which are included in accounts payable in the accompanying Consolidated Balance Sheets.

        Concession Costs:    The Company records payments from vendors as a reduction of concession costs when earned.

        Screen Advertising:    On March 29, 2005, the Company and Regal Entertainment Group ("Regal") combined their respective cinema screen advertising businesses into a joint venture company called National CineMedia, LLC ("NCM") and on July 15, 2005, Cinemark Holdings, Inc. ("Cinemark") joined NCM, as one of the founding members. NCM engages in the marketing and sale of cinema advertising and promotions products, business communications and training services and the

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

distribution of digital alternative content. The Company records its share of on-screen advertising revenues generated by NCM in other theatre revenues.

        Guest Frequency Program:    On April 1, 2011, the Company fully launched AMC Stubs, a guest frequency program which allows members to earn rewards, including $10 for each $100 spent, redeemable on future purchases at AMC locations. The portion of the admissions and concessions revenues attributed to the rewards is deferred as a reduction of admissions and concessions revenues, based on member redemptions. Rewards must be redeemed no later than 90 days from the date of issuance. Upon redemption, deferred rewards are recognized as revenues along with associated cost of goods. Rewards not redeemed within 90 days are forfeited and recognized as admissions or concessions revenues based on original point of sale. Progress rewards (member spend toward earned rewards) for expired membership are forfeited upon expiration of the membership and recognized as admissions or concessions revenues based on original point of sale. The program's annual membership fee is deferred, net of estimated refunds, and is recognized ratably over the one-year membership period.

        Advertising Costs:    The Company expenses advertising costs as incurred and does not have any direct-response advertising recorded as assets. Advertising costs were $4,137,000, $3,603,000, $10,118,000 and $6,561,000 for the Successor period August 31, 2012 through December 31, 2012, the Predecessor period March 30, 2012 through August 30, 2012, and the fiscal years ended March 29, 2012 and March 31, 2011, respectively, and are recorded in operating expense in the accompanying Consolidated Statements of Operations.

        Cash and Equivalents:    All highly liquid debt instruments and investments purchased with an original maturity of three months or less are classified as cash equivalents.

        Intangible Assets:    Intangible assets are recorded at cost or fair value, in the case of intangible assets resulting from the Merger and acquisitions, and are comprised of amounts assigned to theatre leases acquired under favorable terms, management contracts, a contract with an equity method investee, and a non-compete agreement, each of which are being amortized on a straight-line basis over the estimated remaining useful lives of the assets, and trademark and trade names, which are considered indefinite lived intangible assets and therefore are not amortized but rather evaluated for impairment annually.

        The Company elected to early adopt Accounting Standards Update ("ASU") No. 2012-02, Intangibles—Goodwill and Other (Topic 350)—Testing Indefinite-Lived Intangible Assets for Impairment, ("ASU 2012-02") in the last quarter of the Transition Period. Under this amendment, the Company has an option to first assess the qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not the fair vale of an indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative impairment test. During both the Transition Period and fiscal 2012, no impairment charges were incurred. In fiscal 2011, the Company impaired favorable lease intangible assets in the amount of $1,334,000.

        Investments:    The Company accounts for its investments in non-consolidated entities using either the cost or equity methods of accounting as appropriate, and has recorded the investments within other long-term assets in its Consolidated Balance Sheets. Equity earnings and losses are recorded when our

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

ownership interest provides the Company with significant influence. The Company follows the guidance in ASC 323-30-35-3, which prescribes the use of the equity method for investments where the Company has significant influence. The Company classifies gains and losses on sales of and changes of interest in equity method investments within equity in earnings of non-consolidated entities or in separate line items on the face of the Consolidated Statements of Operations when material, and classifies gains and losses on sales of investments accounted for using the cost method in investment income. Gains and losses on cash sales are recorded using the weighted average cost of all interests in the investments. Gains and losses related to non-cash negative common unit adjustments are recorded using the weighted average cost of those units accounted for as Tranche 2 Investments in NCM which were received in connection with prior common unit adjustments. Subsequent to the date of the Merger, the Company's investment in NCM consists of a single investment tranche consisting of 17,323,782 membership units recorded at fair value (Level 1) on August 30, 2012. See Note 7—Investments for further discussion of the Company's investments in NCM. As of December 31, 2012, the Company holds equity method investments comprised of a 15.47% interest in NCM, a joint venture that markets and sells cinema advertising and promotions; a 29% interest in Digital Cinema Implementation Partners LLC, a joint venture charged with implementing digital cinema in the Company's theatres; and a 50% ownership interest in two U.S. motion picture theatres and one IMAX screen. During fiscal 2011, the Company formed a motion picture distribution company, Open Road Films, and holds a 50% ownership interest. At December 31, 2012, the Company's recorded investments are less than its proportional ownership of the underlying equity in these entities by approximately $18,966,000, excluding NCM. Included in equity in earnings of non-consolidated entities for the fifty-two weeks ended March 29, 2012 is an impairment charge of $2,742,000 related to a joint venture investment that was considered to be other than a temporary decline in value. Included in equity in earnings of non-consolidated entities for the fifty-two weeks ended March 31, 2011 is an impairment charge of $8,825,000 related to a joint venture investment in Midland Empire Partners, LLC. The decline in the fair market value of the investment was considered other than temporary due to inadequate projected future cash flows.

        The Company's investment in RealD Inc. is an available-for-sale marketable equity security and is carried at fair value (Level 1). Unrealized gains and losses on available-for-sale securities are included in the Company's Consolidated Balance Sheets as a component of accumulated other comprehensive loss. See Note 7—Investments for further discussion of the Company's investment in RealD Inc.

        Goodwill:    Goodwill represents the excess of purchase price over fair value of net tangible and identifiable intangible assets related to the Merger and subsequent acquisitions. The Company is not required to amortize goodwill as a charge to earnings; however, the Company is required to conduct an annual review of goodwill for impairment.

        The Company's recorded goodwill was $2,251,296,000 and $1,923,667,000 as of December 31, 2012 and March 29, 2012, respectively. The Company evaluates goodwill and its trademark and trade names for impairment annually as of the beginning of the fourth quarter or more frequently as specific events or circumstances dictate. The Company's goodwill is recorded in its Theatrical Exhibition operating segment, which is also the reporting unit for purposes of evaluating recorded goodwill for impairment.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

        The Company performed its annual impairment analysis during both the last quarter of the Transition Period and the fourth quarter of fiscal 2012 and reached a determination that there was no goodwill or trademark and trade name impairment.

        During fiscal 2011, the Company determined fair value by using an enterprise valuation methodology determined by applying multiples to cash flow estimates less net indebtedness, which the Company believes is an appropriate method to estimate fair value. There is considerable management judgment with respect to cash flow estimates and appropriate multiples and discount rates to be used in determining fair value and such management estimates fall under Level 3 within the fair value measurement hierarchy, see Note 16—Fair Value Measurements. There was no goodwill or trademark and trade name impairment.

        Other Long-term Assets:    Other long-term assets are comprised principally of investments in partnerships and joint ventures and capitalized computer software, which is amortized over the estimated useful life of the software.

        Accounts Payable:    Under the Company's cash management system, checks issued but not presented to banks frequently result in book overdraft balances for accounting purposes and are classified within accounts payable in the balance sheet. The change in book overdrafts are reported as a component of operating cash flows for accounts payable as they do not represent bank overdrafts. The amount of these checks included in accounts payable as of December 31, 2012 and March 29, 2012 was $64,573,000 and $49,338,000, respectively.

        Leases:    The majority of the Company's operations are conducted in premises occupied under lease agreements with initial base terms ranging generally from 15 to 20 years, with certain leases containing options to extend the leases for up to an additional 20 years. The Company does not believe that exercise of the renewal options are reasonably assured at the inception of the lease agreements and, therefore, considers the initial base term as the lease term. Lease terms vary but generally the leases provide for fixed and escalating rentals, contingent escalating rentals based on the Consumer Price Index not to exceed certain specified amounts and contingent rentals based on revenues with a guaranteed minimum.

        The Company records rent expense for its operating leases on a straight-line basis over the initial base lease term commencing with the date the Company has "control and access" to the leased premises, which is generally a date prior to the "lease commencement date" in the lease agreement. Rent expense related to any "rent holiday" is recorded as operating expense, until construction of the leased premises is complete and the premises are ready for their intended use. Rent charges upon completion of the leased premises subsequent to the theatre opening date are expensed as a component of rent expense.

        Occasionally, the Company will receive amounts from developers in excess of the costs incurred related to the construction of the leased premises. The Company records the excess amounts received from developers as deferred rent and amortizes the balance as a reduction to rent expense over the base term of the lease agreement.

        The Company evaluates the classification of its leases following the guidance in ASC 840-10-25. Leases that qualify as capital leases are recorded at the present value of the future minimum rentals

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

over the base term of the lease using the Company's incremental borrowing rate. Capital lease assets are assigned an estimated useful life at the inception of the lease that generally corresponds with the base term of the lease.

        Occasionally, the Company is responsible for the construction of leased theatres and for paying project costs that are in excess of an agreed upon amount to be reimbursed from the developer. ASC 840-40-05-5 requires the Company to be considered the owner (for accounting purposes) of these types of projects during the construction period and therefore it is required to account for these projects as sale and leaseback transactions. As a result, the Company has recorded $90,772,000 and $40,655,000 as financing lease obligations for failed sale leaseback transactions on its Consolidated Balance Sheets related to these types of projects as of December 31, 2012 and March 29, 2012, respectively.

        Sale and Leaseback Transactions:    The Company accounts for the sale and leaseback of real estate assets in accordance with ASC 840-40. Losses on sale leaseback transactions are recognized at the time of sale if the fair value of the property sold is less than the net book value of the property. Gains on sale and leaseback transactions are deferred and amortized over the remaining lease term.

        Impairment of Long-lived Assets:    The Company reviews long-lived assets, including definite-lived intangibles, investments in non-consolidated subsidiaries accounted for under the equity method, marketable equity securities and internal use software for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company identifies impairments related to internal use software when management determines that the remaining carrying value of the software will not be realized through future use. The Company reviews internal management reports on a quarterly basis as well as monitors current and potential future competition in the markets where it operates for indicators of triggering events or circumstances that indicate potential impairment of individual theatre assets. The Company evaluates theatres using historical and projected data of theatre level cash flow as its primary indicator of potential impairment and considers the seasonality of its business when making these evaluations. The Company performs impairment analysis during the last quarter of the year. Under these analyses, if the sum of the estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount of the asset, an impairment loss is recognized in the amount by which the carrying value of the asset exceeds its estimated fair value. Assets are evaluated for impairment on an individual theatre basis, which management believes is the lowest level for which there are identifiable cash flows. The impairment evaluation is based on the estimated cash flows from continuing use until the expected disposal date for the fair value of furniture, fixtures and equipment. The expected disposal date does not exceed the remaining lease period unless it is probable the lease period will be extended and may be less than the remaining lease period when the Company does not expect to operate the theatre to the end of its lease term. The fair value of assets is determined as either the expected selling price less selling costs (where appropriate) or the present value of the estimated future cash flows. The fair value of furniture, fixtures and equipment has been determined using similar asset sales, in some instances with the assistance of third party valuation studies and using management judgment.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

        There is considerable management judgment necessary to determine the estimated future cash flows and fair values of the Company's theatres and other long-lived assets, and, accordingly, actual results could vary significantly from such estimates, which fall under Level 3 within the fair value measurement hierarchy, see Note 16—Fair Value Measurements. There were no impairments during the Transition Period. During fiscal 2012, the Company recognized non-cash impairment losses of $20,788,000 related to long-term assets. The Company recognized an impairment loss of $285,000 on three theatres with 33 screens (in Arkansas, Maryland and Utah), which was related to property, net. The Company adjusted the carrying value of a joint venture investment, resulting in an impairment charge of $2,742,000 and adjusted the carrying value of a common stock investment in RealD Inc., resulting in an impairment charge of $17,751,000 when it was determined that it was more likely than not than an impairment had been incurred on these investments.

        Impairment losses in the Consolidated Statements of Operations are included in the following captions:

(In thousands)
  From Inception
August 31,
2012
Through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 weeks
Ended
March 29,
2012
  52 weeks
Ended
March 31,
2011
 

Impairment of long-lived assets

  $   $   $ 285   $ 12,779  

Equity in (earnings) losses of non-consolidated entities

            2,742     8,825  

Investment expense (income)

            17,751      
                   

Total impairment losses

  $   $   $ 20,778   $ 21,604  
                   

        Foreign Currency Translation:    Operations outside the United States are generally measured using the local currency as the functional currency. Assets and liabilities are translated at the rates of exchange at the balance sheet date. Income and expense items are translated at average rates of exchange. The resultant translation adjustments are included in foreign currency translation adjustment, a separate component of accumulated other comprehensive income. Gains and losses from foreign currency transactions, except those intercompany transactions of a long-term investment nature, are included in net earnings (loss). If the Company substantially liquidates its investment in a foreign entity, any gain or loss on currency translation balance recorded in accumulated other comprehensive income is recognized as part of a gain or loss on disposition.

        Income and Operating Taxes:    The Company accounts for income taxes in accordance with ASC 740-10. Under ASC 740-10, deferred income tax effects of transactions reported in different periods for financial reporting and income tax return purposes are recorded by the asset and liability method. This method gives consideration to the future tax consequences of deferred income or expense items and recognizes changes in income tax laws in the period of enactment. The statement of operations effect is generally derived from changes in deferred income taxes on the balance sheet.

        The Company and Parent file a consolidated federal income tax return and combined income tax returns in certain state jurisdictions. Income taxes are allocated based on separate Company computations of income or loss. Tax sharing arrangements are in place and utilized when tax benefits

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

from affiliates in the consolidated group are used to offset what would otherwise be taxable income generated by the Parent or another affiliate.

        Casualty Insurance:    The Company is self-insured for general liability up to $1,000,000 per occurrence and carries a $500,000 deductible limit per occurrence for workers compensation claims. The Company utilizes actuarial projections of its ultimate losses to calculate its reserves and expense. The actuarial method includes an allowance for adverse developments on known claims and an allowance for claims which have been incurred but which have not yet been reported. As of December 31, 2012 and March 29, 2012, the Company had recorded casualty insurance reserves of $14,980,000 and $15,163,000, respectively, net of estimated insurance recoveries. The Company recorded expenses related to general liability and workers compensation claims of $3,913,000, $5,732,000, $12,705,000 and $12,206,000 for the Successor period August 31, 2012 through December 31, 2012, the Predecessor period March 30, 2012 through August 30, 2012, and the fiscal years ended March 29, 2012 and March 31, 2011, respectively.

        Other Expense:    The following table sets forth the components of other expense:

(In thousands)
  From
Inception
August 31,
2012
Through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 weeks
Ended
March 29,
2012
  52 weeks
Ended
March 31,
2011
 

Loss on redemption of 11% Senior Subordinated Notes due 2016

  $   $   $   $ 24,332  

Loss on redemption and modification of Senior Secured Credit Facility

            383     3,656  

Loss on redemption of 8% Senior Subordinated Notes due 2014

        1,297     640      

Other expense (income)

    49     (337 )   379     (141 )
                   

Other expense

  $ 49   $ 960   $ 1,402   $ 27,847  
                   

        New Accounting Pronouncements:    In March 2013, the Financial Accounting Standards Board ("FASB") issued ASU No. 2013-05, Foreign Currency Matters (Topic 830)—Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, ("ASU 2013-05"). This amendment clarifies the applicable guidance for the release of cumulative translation adjustment into net earnings. When an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity, the entity is required to apply the guidance in ASC 830-30 to release any related cumulative translation adjustment into net earnings. Accordingly, the cumulative translation adjustment should be released into net earnings only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. ASU 2013-05 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. Early adoption is permitted as of the beginning of the entity's fiscal year. The Company will adopt ASU 2013-05 as of the beginning of calendar 2014 and does not expect

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

the adoption of ASU 2013-05 to have a material impact on the Company's consolidated financial position, cash flows, or results of operations.

        In July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (Topic 350)—Testing Indefinite-Lived Intangible Assets for Impairment, ("ASU 2012-02"). Under this amendment, an entity will have an option to first assess the qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not the fair value of an indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative impairment test. ASU 2012-02 will be effective for the indefinite-lived intangible asset impairment test performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The Company adopted ASU 2012-02 in the last quarter of the Transition Period and the adoption of ASU 2012-02 did not have a material impact on the Company's consolidated financial position, cash flows, or results of operations. For further information, see Goodwill within Note 1—The Company and Significant Accounting Policies.

        In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220)—Presentation of Comprehensive Income, ("ASU 2011-05"). This ASU provides companies with an option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two-separate but consecutive statements. This ASU eliminated the option of presenting the components of other comprehensive income as part of the statement of changes in stockholder's equity. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220)—Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standard Update No. 2011-05, ("ASU 2011-12"), which defers the requirement within ASU 2011-05 to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. During the deferral entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect prior to the issuance of ASU 2011-05. ASU 2011-05 and the deferrals in ASU 2011-12 will be effective for fiscal years and interim periods within those years, beginning after December 15, 2011 with retrospective application required. The Company adopted these accounting standard updates as of the beginning of the Transition Period and included the presentation requirements in its consolidated financial statements as of the first quarter of the Transition Period.

        In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, ("ASU 2013-02"). Under this amendment, an entity is required to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. ASU 2013-02 will be effective prospectively for reporting periods

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 1—THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

beginning after December 15, 2012. Early adoption is permitted. The Company will adopt ASU 2013-02 in the first quarter of calendar 2013 and does not expect the adoption of ASU 2013-02 to have a material impact on the Company's consolidated financial position, cash flows, or results of operations.

        In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurements (Topic 820)—Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs, ("ASU 2011-04"). This ASU requires disclosures regarding transfers between Level 1 and Level 2 of the fair value hierarchy, disclosures about the sensitivity of a fair value measurement categorized within Level 3 of the fair value hierarchy, and the categorization by level of the fair value hierarchy for items that are not measured at fair value in the statement of financial position, but for which the fair value of such items is required to be disclosed. ASU 2011-04 became effective during interim and annual periods beginning after December 15, 2011 and was effective for the Company as of the beginning of the Transition Period. See Note 16—Fair Value Measurements for the required disclosures.

        Prior 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 $30,300,000 and increased other long-term liabilities by $1,163,000 as of December 31, 2012. The Company has restated its December 31, 2012 balance sheet from amounts previously reported to reflect these adjustments.

        Management also determined that during the successor period from August 31, 2012 through December 31, 2012, 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.

        The prior period adjustment for the period noted above has been recorded during 2012. The Company adjusted for the cumulative effect in the carrying amount of other long-term liabilities for the error related to the successor period from August 31, 2012 through December 31, 2012 of $5,520,000 with an offsetting adjustment to the income tax provision during the fourth quarter of 2012.

        The impact of the item noted above on 2012. Other long-term liabilities and Accumulated deficit as of December 31, 2012 is presented below:

(in thousands)
  Income Tax
Provision
 

Cumulative increase in Other long-term liabilities

  $ 5,520  

Cumulative increase in Accumulated deficit

  $ 5,520  

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 2—MERGER

        Parent and Wanda, a Chinese private conglomerate, completed a Merger on August 30, 2012 in which Wanda indirectly 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 valuation assessment performed by a third party appraiser. The appraisal measurements included a combination of income, replacement cost and market approaches and represents managements' best estimate of fair value at August 30, 2012, the acquisition date. Management has finalized its purchase price allocation except for amounts assigned provisionally to certain leasehold improvements and furniture, fixtures and equipment included in Property, net. Management expects to finalize the fair values for these assets upon completing their final value analysis prior to filing Form 10-Q for the period ended March 31, 2013 in May of 2013. Amounts assigned provisionally to these assets may change when this evaluation is completed. Adjustments made since the initial allocation decreased recorded goodwill by approximately $20,000,000. Other current assets increased by approximately $17,000,000 due to changes in deferred tax assets; intangible assets increased by approximately $6,000,000 primarily due to final determinations of fair values assigned to favorable leases and a contract with an equity method investee; Other long-term assets decreased by approximately $106,000,000 primarily due to final determinations of fair values assigned to equity method investments and changes in deferred tax assets; and Other long-term liabilities declined by approximately $100,000,000 due to changes in deferred tax liabilities. The items

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 2—MERGER (Continued)

mentioned above represent the most significant adjustments to the initial allocation of purchase price for the Merger. The following is a summary of the allocation of the Merger consideration:

(In thousands)
  Total  

Cash

  $ 101,641  

Receivables, net

    29,775  

Other current assets

    34,840  

Property, net(1)

    1,063,028  

Intangible assets, net(2)

    246,507  

Goodwill(3)

    2,172,272  

Other long-term assets(4)

    342,533  

Accounts payable

    (134,186 )

Accrued expenses and other liabilities

    (138,535 )

Credit card, package tickets, and loyalty program liability(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)

    (427,755 )
       

Total Merger consideration

  $ 701,811  
       

Corporate borrowings

    2,086,926  

Capital and financing lease obligations

    60,922  

Less: cash

    (101,641 )
       

Total 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 trademark and trade names, a non-compete agreement, management contracts, a contract with an equity method investee, and favorable leases. See Note 6—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 are not expected to 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 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.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 2—MERGER (Continued)

(5)
Represents a liability related to the sales of gift cards, packaged tickets and AMC Stubs memberships and rewards outstanding at August 30, 2012 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 obligation pursuant to an arrangement with NCM to provide advertising services on terms favorable to NCM.

(8)
Other long-term liabilities consist of certain theatre leases that have been identified as unfavorable, adjustments to reset deferred rent related to future escalations of minimum rentals to zero, 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 equity securities available for sale including RealD Inc. common stock (Level 1).

        During the period of August 31, 2012 through December 31, 2012, the Company incurred Merger-related costs of approximately $2,500,000, which are included in general and administrative expense: merger, acquisition and transaction costs in the Consolidated Statements of Operations.

        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

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 2—MERGER (Continued)

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.

(In thousands)
  Pro forma
March 30, 2012
through
December 31, 2012
  Pro forma
39 Weeks Ended
December 29, 2011
 
 
  (unaudited)
  (unaudited)
 

Revenues

             

Admissions

  $ 1,364,663   $ 1,295,469  

Concessions

    571,869     518,081  

Other theatre

    72,574     54,436  
           

Total revenues

    2,009,106     1,867,986  
           

Operating Costs and Expenses

             

Film exhibition costs

    728,100     694,863  

Concession costs

    77,871     70,961  

Operating expense

    529,235     528,404  

Rent

    331,397     332,210  

General and administrative:

             

Merger, acquisition and transaction costs

    3,538     1,179  

Management fee

         

Other

    55,596     36,710  

Depreciation and amortization

    150,234     150,976  
           

Operating costs and expenses

    1,875,971     1,815,303  
           

Operating income

    133,135     52,683  

Other expense (income)

             

Other expense

    1,009     377  

Interest expense

             

Corporate borrowings

    103,429     106,351  

Capital and financing lease obligations

    4,263     4,480  

Equity in earnings of non-consolidated entities

    (7,499 )   (56 )

Investment expense

    578     17,799  
           

Total other expense

    101,780     128,951  
           

Earnings (loss) from continuing operations before income taxes

    31,355     (76,268 )

Income tax provision

    9,000     2,210  
           

Earnings (loss) from continuing operations

    22,355     (78,478 )

Earnings (loss) from discontinued operations

    34,465     (2,989 )
           

Net earnings (loss)

  $ 56,820   $ (81,467 )
           

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 2—MERGER (Continued)

        The Merger on August 30, 2012 triggered the payment of an aggregate of $31,462,000 for success fees to financial advisors, bond amendment consent fees, payments for cancellation of stock based compensation and management success bonuses that were contingent on the consummation of the Merger. The Company determined that its accounting policy for any cost triggered by the consummation of the Merger was to recognize the cost when the Merger was 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.

        The following is a summary of the contingent costs:

(in thousands)
   
   
 

Financial advisor fees

  $ 18,129     (a )

Management transaction bonuses

    6,000     (b )

Bond amendment fees

    3,946     (c )

Unrecognized stock compensation expense

    3,177     (d )

Other contingent transaction costs

    210        
             

  $ 31,462        
             

(a)
These represent non-exclusive arrangements made with multi-parties to provide advice and assistance related to the sale of AMC. Payment terms were contingent upon consummation of a sale. Each agreement was entered into by Predecessor entities when the Company was under previous ownership.

(b)
Management bonuses were approved by the Predecessor entities and previous ownership group to help incent key AMCE management team members to use their best efforts to help facilitate the sale of the Company. Payments were contingent on the consummation of a transaction.

(c)
Consent fees were paid pursuant to a consent solicitation to amend indentures relating to our outstanding notes and permit the sale of the Company without triggering change of control payments. The payments were only made upon closing the Wanda transaction.

(d)
Unrecognized stock compensation for previously existing awards that became payable due to change of control provisions and only upon consummation of a sale transaction.

NOTE 3—ACQUISITION

        In December 2012, the Company completed the acquisition of 4 theatres and 61 screens from Rave Reviews Cinemas, LLC and 6 theatres and 95 screens from Rave Digital Media, LLC, (and together "Rave"). The purchase price for the Rave theatres, paid in cash at closing, was $87,555,000, net of cash acquired, and is subject to working capital and other purchase price adjustments.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 3—ACQUISITION (Continued)

        The acquisitions are being treated as a purchase in accordance with Accounting Standards Codification, ("ASC") 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. The allocation of purchase price is based on management's judgment after evaluating several factors, including bid prices from potential buyers and a preliminary valuation assessment. The allocation of purchase price is subject to changes as an appraisal of assets and liabilities is finalized and additional information becomes available. The following is a summary of a preliminary allocation of the purchase price:

(In thousands)
  Total  

Cash

  $ 3,896  

Receivables, net(1)

    631  

Other current assets

    757  

Property, net

    80,478  

Goodwill(2)

    79,024  

Accrued expenses and other liabilities

    (6,732 )

Capital and financing lease obligations

    (62,598 )

Other long-term liabilities

    (3,690 )
       

Total estimated purchase price

  $ 91,766  
       

(1)
Receivables consist of trade receivables recorded at estimated fair value. The Company did not acquire any other class of receivables as a result of the acquisition of the Rave theatres.

(2)
Goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations. Amounts recorded for goodwill are not subject to amortization, but are expected to be deductible for tax purposes.

        During the period of August 31, 2012 through December 31, 2012, the Company incurred acquisition-related costs for the Rave theatres of approximately $157,000, which are included in general and administrative expense: merger, acquisition and transaction costs in the Consolidated Statements of Operations. The Company's operating results for the Transition Period were not materially impacted by this December acquisition. Approximately $315,000 of the estimated purchase price was accrued but not paid as of December 31, 2012.

NOTE 4—DISCONTINUED OPERATIONS

        In August of 2012, the Company closed one theatre with 20 screens located in Canada. The Company paid the landlord $7,562,000 to terminate the lease agreement. Also, the Company sold one theatre with 12 screens located in the United Kingdom in August of 2012. The proceeds received from the sale was $395,000, and is subject to working capital and other purchase price adjustments as described in the asset purchase agreement.

        In July of 2012, the Company sold six theatres with 134 screens located in Canada. The aggregate gross proceeds from the sales were approximately $1,472,000, and are subject to working capital and purchase price adjustments.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 4—DISCONTINUED OPERATIONS (Continued)

        The Company recorded gains, net of lease termination expense, on the disposition of the seven Canada theatres and the one United Kingdom theatre of approximately $39,000,000, primarily due to the write-off of long-term lease liabilities extinguished in connection with the sales and closure. The Company does not have any significant continuing involvement in the operations of these theatres after the disposition. The results of operations of these theatres have been classified as discontinued operations, and information presented for all periods reflects the classification.

        In December of 2008, the Company sold all of its interests in Cinemex, which then operated 44 theatres with 493 screens primarily in the Mexico City Metropolitan Area, to Entretenimiento GM de Mexico S.A. de C.V. ("Entretenimiento"). As of December 31, 2012, the Company estimates that it is contractually entitled to receive an additional $6,275,000 of the purchase price related to tax payments and refunds. While the Company believes it is entitled to these amounts from Cinemex, the collection will require litigation, which was initiated by the Company on April 30, 2010 and is still pending. Resolution is expected to take place over a prolonged period. In fiscal 2010, as a result of the litigation, the Company established an allowance for doubtful accounts related to this receivable and directly charged off the receivable amount as uncollectible. The Company does not have any significant continuing involvement in the operations of the Cinemex theatres after the disposition. Any purchase price tax collections received or legal fees paid related to the sale of the Cinemex theatres have been classified as discontinued operations for all periods presented.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 4—DISCONTINUED OPERATIONS (Continued)

        Components of amounts reflected as (earnings) loss from discontinued operations in the Company's Consolidated Statements of Operations are presented in the following table:

 
  Transition Period    
   
 
 
  Fiscal 2012   Fiscal 2011  
 
  From Inception
August 31, 2012
through
December 31, 2012
   
 
(In thousands)
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Revenues

                         

Admissions

  $   $ 16,389   $ 56,172   $ 53,021  

Concessions

        6,099     20,192     19,111  

Other theatre

        548     2,253     2,429  
                   

Total revenues

        23,036     78,617     74,561  
                   

Operating costs and expenses

                         

Film exhibition costs

        8,706     28,958     27,288  

Concession costs

    66     1,252     3,655     3,424  

Operating expense

    439     15,592     24,643     22,582  

Rent

        7,322     23,497     23,936  

General and administrative costs

    221     511     248      

Depreciation and amortization

        263     1,212     969  

(Gain) loss on disposition

    (37 )   (46,951 )   25     (569 )
                   

Operating costs and expenses

    689     (13,305 )   82,238     77,630  
                   

Operating income (loss)

    (689 )   36,341     (3,621 )   (3,069 )

Investment income

    (1 )   (12 )   (12 )   (7 )
                   

Total other expense

    (1 )   (12 )   (12 )   (7 )
                   

Earnings (loss) before income taxes

    (688 )   36,353     (3,609 )   (3,062 )

Income tax provision

        1,200          
                   

Net earnings (loss)

  $ (688 ) $ 35,153   $ (3,609 ) $ (3,062 )
                   

NOTE 5—PROPERTY

        A summary of property is as follows:

(In thousands)
  December 31, 2012   March 29, 2012  

Property owned:

             

Land

  $ 46,148   $ 50,134  

Buildings and improvements

    202,338     216,923  

Leasehold improvements

    460,850     898,916  

Furniture, fixtures and equipment

    501,550     1,309,969  
           

    1,210,886     2,475,942  

Less-accumulated depreciation and amortization

    62,927     1,592,245  
           

  $ 1,147,959   $ 883,697  
           

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 5—PROPERTY (Continued)

        Property is recorded at cost or fair value, in the case of property resulting from acquisitions. The Company uses the straight-line method in computing depreciation and amortization for financial reporting purposes. The estimated useful lives for leasehold improvements reflect the shorter of the expected useful lives of the assets or the base terms of the corresponding lease agreements plus renewal options expected to be exercised for these leases. The estimated useful lives are as follows:

Buildings and improvements

    5 to 40 years  

Leasehold improvements

    1 to 20 years  

Furniture, fixtures and equipment

    1 to 10 years  

        Expenditures for additions (including interest during construction) and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred. The cost of assets retired or otherwise disposed of and the related accumulated depreciation and amortization are eliminated from the accounts in the year of disposal. Gains or losses resulting from property disposals are included in operating expense in the accompanying Consolidated Statements of Operations.

        Depreciation expense was $63,472,000, 70,715,000, $184,935,000 and $181,970,000 for the period August 31, 2012 through December 31, 2012, the period March 30, 2012 through August 30, 2012, and fiscal years ended March 29, 2012 and March 31, 2011, respectively.

NOTE 6—GOODWILL AND OTHER INTANGIBLE ASSETS

        Activity of goodwill is presented below:

(In thousands)
  Total  

Balance as a result of Merger on August 30, 2012

  $ 2,172,272  

Increase in Goodwill from the acquisition of Rave theatres

    79,024  
       

Balance as of December 31, 2012

  $ 2,251,296  
       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 6—GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

        Detail of other intangible assets is presented below:

 
   
  December 31, 2012   March 29, 2012  
(In thousands)
  Remaining
Useful Life
  Gross
Carrying
Amount
  Accumulated
Amortization
  Gross
Carrying
Amount
  Accumulated
Amortization
 

Amortizable Intangible Assets:

                             

Favorable leases

  1 to 46 years   $ 112,496   $ (2,158 ) $ 108,177   $ (63,683 )

Guest frequency program

              46,000     (44,206 )

Loews' trade name

              2,300     (2,300 )

Management contracts

  1 to 8 years     4,690     (278 )   35,400     (29,931 )

Non-compete agreement

  3 years     3,800     (404 )   6,406     (2,365 )

NCM tax receivable agreement

  24 years     20,900     (266 )        

Other intangible assets

              13,309     (13,139 )
                       

Total, amortizable

      $ 141,886   $ (3,106 ) $ 211,592   $ (155,624 )
                       

Unamortized Intangible Assets:

                             

AMC trademark

      $ 104,400         $ 74,000        

Kerasotes trade names

                  5,056        
                           

Total, unamortizable

      $ 104,400         $ 79,056        
                           

        Amortization expense associated with the intangible assets noted above is as follows:

(In thousands)
  From Inception
August 31, 2012
through
December 31, 2012
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Recorded amortization

  $ 3,106   $ 5,016   $ 14,469   $ 14,652  

        Estimated annual amortization for the next five calendar years for intangible assets is projected below:

(In thousands)
  2013   2014   2015   2016   2017  

Projected annual amortization

  $ 8,917   $ 8,783   $ 8,379   $ 7,516   $ 7,402  

NOTE 7—INVESTMENTS

        Investments in non-consolidated affiliates and certain other investments accounted for under the equity method generally include all entities in which the Company or its subsidiaries have significant influence, but not more than 50% voting control. Investments in non-consolidated affiliates as of December 31, 2012, include a 15.47% interest in National CineMedia, LLC ("NCM"), a 50% interest in two U.S. motion picture theatres and one IMAX screen, a 29% interest in Digital Cinema Implementation Partners, LLC ("DCIP") and a 50% interest in Open Road Releasing, LLC, operator of Open Road Films, LLC ("ORF"). The Company sold its 50% interest in Midland Empire

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)

Partners, LLC in June 2012. Indebtedness held by equity method investees is non-recourse to the Company.

RealD Inc. Common Stock

        The Company holds an investment in RealD Inc. common stock, which is accounted for as an equity security, available for sale, and is recorded in the Consolidated Balance Sheets in other long-term assets at fair value (Level 1). Under its RealD Inc. motion picture license agreement, the Company received a ten-year option to purchase 1,222,780 shares of RealD Inc. common stock at approximately $0.00667 per share. The stock options vested in 3 tranches upon the achievement of screen installation targets and were valued at the underlying stock price at the date of vesting. At the dates of exercise, the fair market value of the RealD Inc. common stock was recorded in other long-term assets with an offsetting entry recorded to other long-term liabilities as a deferred lease incentive. As a result of the Merger, the unamortized deferred lease incentive was recorded at fair value and is being amortized on a straight-line basis over the remaining contract life of approximately 9 years, to reduce RealD license expense recorded in the consolidated statements of operations under operating expense. For further information, see Note 2—Merger. As of December 31, 2012, the unamortized deferred lease incentive balance included in other long-term liabilities was $21,223,000. Fair value adjustments of RealD Inc. common stock are recorded to other long-term assets with an offsetting entry to accumulated other comprehensive income.

        At December 29, 2011, the Company evaluated its investment in RealD Inc. common stock for a possible other-than-temporary impairment given market prices for RealD Inc. common stock and determined that the loss as of December 29, 2011 was other-than-temporary and recognized an impairment loss of $17,751,000 within investment expense (income), related to unrealized losses previously recorded in accumulated other comprehensive loss, as the Company determined the decline in fair value below historical cost to be other-than-temporary. Consideration was given to the financial condition and near-term prospects of the issuer, the length of time and extent to which the fair value had been less than cost and the Company's intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value.

DCIP Transactions

        On March 10, 2010, DCIP completed its financing of $660.0 million for the deployment of digital projection systems to nearly 14,000 movie theatre screens across North America, including screens operated or managed by the Company, Cinemark and Regal. At closing the Company contributed 342 projection systems that it owned to DCIP, which were recorded at estimated fair value as part of an additional investment in DCIP of $21,768,000. The Company also made cash investments in DCIP of $840,000 at closing and DCIP made a distribution of excess cash to the Company after the closing date and prior to fiscal 2010 year-end of $1,262,000. The Company recorded a loss on contribution of the 342 projection systems of $563,000, based on the difference between estimated fair value and the carrying value on the date of contribution. On March 26, 2010, the Company acquired 117 digital projectors from third party lessors for $6,784,000 and sold them together with seven digital projectors that it owned to DCIP for $6,570,000. The Company recorded a loss on the sale of these 124 systems to DCIP of $697,000. On September 20, 2010, the Company sold 29 digital projectors in a sale and

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)

lease back to DCIP from its Canadian theatres for $1,655,000 and incurred a loss of $110,000. On October 29, 2010, the Company sold 57 digital projectors from Kerasotes theatres in a sale and leaseback to DCIP for $3,250,000, with no gain or loss recorded on the projectors. On March 31, 2011, DCIP completed additional financing of $220.0 million, which is expected to complete the deployment of nearly 15,000 digital projection systems in the U.S. and Canada, including screens owned or managed by the Company.

        The digital projection systems leased from DCIP and its affiliates replaced most of the Company's existing 35 millimeter projection systems. The Company adjusted its estimated depreciable lives for its existing equipment that will be replaced and has accelerated the depreciation of these existing 35 millimeter projection systems, based on the estimated digital projection system deployment timeframe. The projector systems scheduled to be replaced will be fully depreciated in calendar 2013.

NCM Transactions

        On March 29, 2005, the Company along with Regal combined their screen advertising operations to form NCM. On July 15, 2005, Cinemark joined the NCM joint venture by contributing its screen advertising business. On February 13, 2007, National CineMedia, Inc. ("NCM, Inc."), a newly formed entity that now serves as the sole manager of NCM, closed its initial public offering, or IPO, of 42,000,000 shares of its common stock at a price of $21.00 per share.

        In connection with the completion of NCM, Inc.'s IPO, on February 13, 2007, the Company entered into the Third Amended and Restated Limited Liability Company Operating Agreement (the "NCM Operating Agreement") among the Company, Regal and Cinemark (the "Founding Members") and NCM, Inc. Pursuant to the NCM Operating Agreement, the members are granted a redemption right to exchange common units of NCM for, at the option of NCM, Inc., NCM, Inc. shares of common stock on a one-for-one basis, or a cash payment equal to the market price of one share of NCM, Inc.'s common stock. Upon execution of the NCM Operating Agreement, each existing preferred unit of NCM held by the Founding Members was redeemed in exchange for $13.7782 per unit, resulting in the cancellation of each preferred unit. NCM used the proceeds of a new $725,000,000 term loan facility and $59,800,000 of net proceeds from the NCM, Inc. IPO to redeem the outstanding preferred units. The Company received approximately $259,347,000 in the aggregate for the redemption of all its preferred units in NCM. The Company received approximately $26,467,000 from selling common units in NCM to NCM, Inc. in connection with the exercise of the underwriters' over-allotment option in the NCM, Inc. IPO.

        Also in connection with the completion of NCM, Inc.'s IPO, the Company agreed to modify NCM's payment obligations under the prior Exhibitor Services Agreement ("ESA") in exchange for approximately $231,308,000. The ESA provides a term of 30 years for advertising and approximately five year terms (with automatic renewal provisions) for meeting event and digital programming services, and provides NCM with a five year right of first refusal for the services beginning one year prior to the end of the term. The ESA also changed the basis upon which the Company is paid by NCM from a percentage of revenues associated with advertising contracts entered into by NCM to a monthly theatre access fee. The theatre access fee is now composed of a fixed payment per patron and a fixed payment per digital screen, which increases by 8% every five years starting at the end of fiscal 2011 for payments per patron and by 5% annually starting at the end of fiscal 2007 for payments per digital screen. The

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)

theatre access fee paid in the aggregate to the Founding Members will not be less than 12% of NCM's aggregate advertising revenue, or it will be adjusted upward to meet this minimum payment. Additionally, the Company entered into the First Amended and Restated Loews Screen Integration Agreement with NCM on February 13, 2007, pursuant to which the Company paid NCM an amount that approximated the EBITDA that NCM would have generated if it had been able to sell advertising in the Loews Cineplex Entertainment Corporation ("Loews") theatre chain on an exclusive basis commencing upon the completion of NCM, Inc.'s IPO, and NCM issued to AMC common membership units in NCM, increasing the Company's ownership interest to approximately 33.7%; such Loews payments were made quarterly until the former screen advertising agreements expired in fiscal 2009. The Loews Screen Integration payments totaling $15,982,000 were paid in full in fiscal 2010. The Company is also required to purchase from NCM any on-screen advertising time provided to the Company's beverage concessionaire at a negotiated rate. In addition, the Company expects to receive mandatory quarterly distributions of excess cash from NCM. Immediately following the NCM, Inc. IPO, the Company held an 18.6% interest in NCM.

        As a result of NCM, Inc.'s IPO and debt financing, the Company recorded a change of interest gain of $132,622,000 and received distributions in excess of its investment in NCM related to the redemption of preferred and common units of $106,188,000. The Company reduced its investment in NCM to zero and recognized the change of interest gain and the excess distribution in earnings as it has not guaranteed any obligations of NCM and is not otherwise committed to provide further financial support for NCM.

        Annual adjustments to the common membership units are made pursuant to the Common Unit Adjustment Agreement dated as of February 13, 2007 between NCM, Inc. and the Founding Members. The Common Unit Adjustment Agreement was created to account for changes in the number of theatre screens operated by each of the Founding Members. Prior to fiscal 2011, each of the Founding Members had increased the number of screens it operates through acquisitions and newly built theatres. Since these incremental screens and increased attendance in turn provide for additional advertising revenues to NCM, NCM agreed to compensate the Founding Members by issuing additional common membership units to the Founding Members in consideration for their increased attendance and overall contribution to the joint venture. The Common Unit Adjustment Agreement also provides protection to NCM in that the Founding Members may be required to transfer or surrender common units to NCM based on certain limited events, including declines in attendance and the number of screens operated. As a result, each Founding Member's equity ownership interests are proportionately adjusted to reflect the risks and rewards relative to their contributions to the joint venture.

        The Common Unit Adjustment Agreement provides that transfers of common units are solely between the Founding Members and NCM. There are no transfers of units among the Founding Members. In addition, there are no circumstances under which common units would be surrendered by the Company to NCM in the event of an acquisition by one of the Founding Members. However, adjustments to the common units owned by one of the Founding Members will result in an adjustment to the Company's equity ownership interest percentage in NCM.

        Pursuant to the Company's Common Unit Adjustment Agreement, from time to time common units of NCM held by the Founding Members will be adjusted up or down through a formula ("Common Unit Adjustment"), primarily based on increases or decreases in the number of theatre

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)

screens operated and theatre attendance generated by each Founding Member. The common unit adjustment is computed annually, except that an earlier common unit adjustment will occur for a Founding Member if its acquisition or disposition of theatres, in a single transaction or cumulatively since the most recent common unit adjustment, will cause a change of 2% or more in the total annual attendance of all of the Founding Members. In the event that a common unit adjustment is determined to be a negative number, the Founding Member shall cause, at its election, either (a) the transfer and surrender to NCM of a number of common units equal to all or part of such Founding Member's common unit adjustment or (b) pay to NCM an amount equal to such Founding Member's common unit adjustment calculated in accordance with the Common Unit Adjustment Agreement.

        Effective March 27, 2008, the Company received 939,853 common membership units of NCM as a result of the Common Unit Adjustment, increasing the Company's interest in NCM to 19.1%. The Company recorded the additional units received as a result of the Common Unit Adjustment at a fair value of $21,598,000, based on a price for shares of NCM, Inc. on March 26, 2008, of $22.98 per share, and as a new investment (Tranche 2 Investment), with an offsetting adjustment to deferred revenue. Effective May 29, 2008, NCM issued 2,913,754 common membership units to another Founding Member due to an acquisition, which caused a decrease in the Company's ownership share from 19.1% to 18.52%. Effective March 17, 2009, the Company received 406,371 common membership units of NCM as a result of the Common Unit Adjustment, increasing the Company's interest in NCM to 18.53%. The Company recorded these additional units at a fair value of $5,453,000, based on a price for shares of NCM, Inc. on March 17, 2009, of $13.42 per share, with an offsetting adjustment to deferred revenue. Effective March 17, 2010, the Company received 127,290 common membership units of NCM. As a result of the Common Unit Adjustment among the Founding Members, the Company's interest in NCM decreased to 18.23% as of April 1, 2010. The Company recorded the additional units received at a fair value of $2,290,000, based on a price for shares of NCM, Inc. on March 17, 2010, of $17.99 per share, with an offsetting adjustment to deferred revenue. Effective June 14, 2010 and with a settlement date of June 28, 2010, the Company received 6,510,209 common membership units in NCM as a result of an Extraordinary Common Unit Adjustment in connection with the Company's acquisition of Kerasotes. The Company recorded the additional units at a fair value of $111,520,000, based on a price for shares of NCM, Inc. on June 14, 2010, of $17.13 per share, with an offsetting adjustment to deferred revenue. As a result of the Extraordinary Common Unit Adjustment, the Company's interest in NCM increased to 23.05%.

        All of the Company's NCM membership units are redeemable for, at the option of NCM, Inc., cash or shares of common stock of NCM, Inc. on a share-for-share basis. On August 18, 2010, the Company sold 6,500,000 shares of common stock of NCM, Inc. in an underwritten public offering for $16.00 per share and reduced the Company's related investment in NCM by $36,709,000, the carrying amount of all shares sold. Net proceeds received on this sale were $99,840,000 after deducting related underwriting fees and professional and consulting costs of $4,160,000, resulting in a gain on sale of $63,131,000. In addition, on September 8, 2010, the Company sold 155,193 shares of NCM, Inc. to the underwriters to cover over-allotments for $16.00 per share and reduced the Company's related investment in NCM by $867,000, the carrying amount of all shares sold. Net proceeds received on this sale were $2,384,000 after deducting related underwriting fees and professional and consulting costs of $99,000, resulting in a gain on sale of $1,517,000. As a result of the membership unit conversions and sales, the Company's ownership interest in NCM was reduced to 17.02% as of September 30, 2010.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)

        Effective March 17, 2011, the Company was notified by NCM that its Common Unit Adjustment was determined to be a negative number. The Company elected to surrender 1,479,638 common membership units to satisfy the Common Unit Adjustment, leaving it with 17,323,782 units, or a 15.66% ownership interest in NCM as of March 31, 2011. The Company recorded the surrendered common units as a reduction to deferred revenues for exhibitor services agreement at fair value of $25,361,000, based on a price per share of NCM, Inc. of $17.14 on March 17, 2011, and recorded the reduction of the Company's NCM investment at weighted average cost for Tranche 2 Investments of $25,568,000, resulting in a loss on the surrender of the units of $207,000. The gain from the NCM, Inc. stock sales and the loss from the surrendered NCM common units are reported as Gain on NCM transactions on the Consolidated Statements of Operations. As a result of theatre closings and a related decline in attendance, the NCM Common Unit Adjustment for calendar 2011 called for a reduction in common units. The Company elected to pay NCM $214,000 to retain 16,717 common units effective March 16, 2012. The amount paid to retain the units decreased the deferred revenues for exhibitor services agreement available for amortization to advertising income for future periods.

        The NCM, Inc. IPO and related transactions have the effect of reducing the amounts NCM, Inc. would otherwise pay in the future to various tax authorities as a result of an increase in its proportionate share of tax basis in NCM's tangible and intangible assets. On the IPO date, NCM, Inc. and the Founding Members entered into a tax receivable agreement. Under the terms of this agreement, NCM, Inc. will make cash payments to the Founding Members in amounts equal to 90% of NCM, Inc.'s actual tax benefit realized from the tax amortization of the NCM intangible assets. For purposes of the tax receivable agreement, cash savings in income and franchise tax will be computed by comparing NCM, Inc.'s actual income and franchise tax liability to the amount of such taxes that NCM, Inc. would have been required to pay had there been no increase in NCM Inc.'s proportionate share of tax basis in NCM's tangible and intangible assets and had the tax receivable agreement not been entered into. The tax receivable agreement shall generally apply to NCM, Inc.'s taxable years up to and including the 30th anniversary date of the NCM, Inc. IPO and related transactions. Pursuant to the terms of the tax receivable agreement, in fiscal year 2009, the Company received payments of $3,796,000 from NCM, Inc. with respect to NCM, Inc.'s 2007 taxable year; in fiscal year 2010, the Company received payments of $8,788,000 with respect to NCM, Inc.'s 2008 and 2009 taxable year; and in fiscal year 2011, the Company received $6,637,000 with respect to NCM, Inc.'s 2008 and 2010 taxable years. In fiscal 2012, the Company received $6,248,000 with respect to NCM, Inc.'s 2009, 2010 and 2011 taxable years. Prior to the date of the Merger on August 30, 2012, distributions received under the tax receivable agreement from NCM, Inc. were recorded as additional proceeds received related to the Company's Tranche 1 or 2 Investments and were recorded in earnings in a similar fashion to the proceeds received from the NCM, Inc. IPO and the receipt of excess cash distributions. Following the date of the Merger, the Company recorded an intangible asset of $20,900,000 as the fair value of the tax receivable agreement. The tax receivable agreement intangible asset is amortized on a straight-line basis against investment income over the remaining life of the ESA. Cash receipts from NCM, Inc. for the tax receivable agreement are recorded to the investment income account.

        As of December 31, 2012, the Company owns a 15.47% interest in NCM. As a founding member, the Company has the ability to exercise significant influence over the governance of NCM, and, accordingly accounts for its investment following the equity method. The fair market value of the units

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)

in National CineMedia, LLC was approximately $244,785,000 based on a price for shares of NCM, Inc. on December 31, 2012 of $14.13 per share.

Transactions with Non-consolidated Affiliates

        As of December 31, 2012 and March 29, 2012, the Company has recorded $1,978,000 and $1,909,000, respectively, of amounts due from NCM related to on-screen advertising revenue. As of December 31, 2012 and March 29, 2012, the Company had recorded $2,021,000 and $1,823,000, respectively, of amounts due to NCM related to the ESA. The Company recorded revenues for advertising from NCM of $11,086,000, $11,731,000, $24,351,000 and $22,408,000 during the period August 31, 2012 through December 31, 2012, the period March 30, 2012 through August 30, 2012, and the fiscal years ended March 29, 2012, and March 31, 2011, respectively. The Company recorded expenses related to its beverage advertising agreement with NCM of $4,197,000, $6,326,000, $13,447,000 and $12,458,000 during the period August 31, 2012 through December 31, 2012, the period March 30, 2012 through August 30, 2012, and the fiscal years ended March 29, 2012, and March 31, 2011, respectively.

        As of December 31, 2012 and March 29, 2012, the Company has recorded $736,000 and $1,437,000, respectively, of amounts due from DCIP related to equipment purchases made on behalf of DCIP for the installation of digital projection systems. After the projectors are installed and the Company is reimbursed for its installation costs, the Company will make capital contributions to DCIP for projector and installation costs in excess of the cap ($68,000 per system for digital conversions and $44,000 for new build locations). The Company pays equipment rent monthly and records the equipment rental expense on a straight-line basis, including scheduled escalations of rent to commence after six and one-half years from the initial deployment date. The difference between the cash rent and straight-line rent is recorded to deferred rent, a long-term liability account. As of December 31, 2012 and March 29, 2012, the Company has recorded $1,810,000 and $5,003,000 of deferred rent, respectively. The Company recorded digital equipment rental expense of $3,338,000, $3,624,000 and $6,969,000 during the period August 31, 2012 through December 31, 2012, the period March 30, 2012 through August 30, 2012, and the fifty-two weeks ended March 29, 2012, respectively.

        As of December 31, 2012 and March 29, 2012, the Company has recorded $1,950,000 and $597,000, respectively, of amounts due from Open Road Films for promoted content and has recorded $326,000 and $1,843,000, respectively, of amounts payable for film rentals. The Company has incurred approximately $5,500,000, $1,550,000, and $7,000,000 in gross film exhibition costs on titles distributed by Open Road Films, partially offset by $807,000, $548,000, and $597,000 for promoted content earned during the period August 31, 2012 through December 31, 2012, the period March 30, 2012 through August 30, 2012, and the fifty-two weeks ended March 29, 2012.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)

Summary Financial Information

        Investments in non-consolidated affiliates accounted for under the equity method as of December 31, 2012, include interests in National CineMedia, LLC ("NCM"), two U.S. motion picture theatres and one IMAX screen, Digital Cinema Implementation Partners, LLC ("DCIP"), Open Road Films and other immaterial investments.

        Condensed financial information of the Company's non-consolidated equity method investments is shown below. Amounts are presented under U.S. GAAP for the periods of ownership by the Company.

        Financial Condition:

 
  December 31, 2012  
(In thousands)
  DCIP   ORF   NCM and
Other
  Total  

Current assets

  $ 56,322   $ 42,712   $ 104,447   $ 203,481  

Noncurrent assets

    1,153,610     7,352     351,058     1,512,020  

Total assets

    1,209,932     50,064     455,505     1,715,501  

Current liabilities

    54,211     67,402     84,576     206,189  

Noncurrent liabilities

    1,016,135     7,060     879,000     1,902,195  

Total liabilities

    1,070,346     74,462     963,576     2,108,384  

Stockholders' equity (deficit)

    139,586     (24,398 )   (508,071 )   (392,883 )

Liabilities and stockholders' equity (deficit)

    1,209,932     50,064     455,505     1,715,501  
                   

The Company's recorded investment(1)

  $ 25,234   $ (6,781 ) $ 248,969   $ 267,422  
                   

 

 
  March 29, 2012  
(In thousands)
  DCIP   ORF   NCM and
Other
  Total  

Current assets

  $ 43,273   $ 37,486   $ 105,098   $ 185,857  

Noncurrent assets

    1,122,938     10,507     377,296     1,510,741  

Total assets

    1,166,211     47,993     482,394     1,696,598  

Current liabilities

    47,203     35,477     65,254     147,934  

Noncurrent liabilities

    1,016,216     2,700     873,731     1,892,647  

Total liabilities

    1,063,419     38,177     938,985     2,040,581  

Stockholders' equity (deficit)

    102,792     9,816     (456,591 )   (343,983 )

Liabilities and stockholders' equity (deficit)

    1,166,211     47,993     482,394     1,696,598  
                   

The Company's recorded investment(1)

  $ 24,963   $ 4,908   $ 79,190   $ 109,061  
                   

(1)
Certain differences in the Company's recorded investments, and its proportional ownership share resulting from the Merger where the investments were recorded at fair

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)

    value, are amortized to equity in (earnings) or losses over the estimated useful lives the underlying assets and liabilities. Other non-amortizing differences are considered to represent goodwill and are evaluated for impairment annually.

            Operating Results:

 
  From Inception August 31, 2012 through
December 31, 2012
 
(In thousands)
  DCIP   ORF   NCM and
Other
  Total  

Revenues

  $ 56,851   $ 99,701   $ 187,228   $ 343,780  

Operating costs and expenses

    43,052     121,083     155,088     319,223  
                   

Net earnings (loss)

  $ 13,799   $ (21,382 ) $ 32,140   $ 24,557  
                   

 

 
  March 30, 2012 through August 30, 2012  
(In thousands)
  DCIP   ORF   NCM and
Other
  Total  

Revenues

  $ 71,560   $ 42,563   $ 246,280   $ 360,403  

Operating costs and expenses

    55,378     55,395     182,720     293,493  
                   

Net earnings (loss)

  $ 16,182   $ (12,832 ) $ 63,560   $ 66,910  
                   

 

 
  52 Weeks Ended March 29, 2012  
(In thousands)
  DCIP   ORF   NCM and
Other
  Total  

Revenues

  $ 134,640   $ 44,842   $ 479,458   $ 658,940  

Operating costs and expenses

    129,690     74,294     347,937     551,921  
                   

Net earnings (loss)

  $ 4,950   $ (29,452 ) $ 131,521   $ 107,019  
                   

 

 
  52 Weeks Ended March 31, 2011  
(In thousands)
  DCIP   ORF   NCM and
Other
  Total  

Revenues

  $ 52,140   $   $ 447,038   $ 499,178  

Operating costs and expenses

    70,803     732     317,524     389,059  
                   

Net earnings (loss)

  $ (18,663 ) $ (732 ) $ 129,514   $ 110,119  
                   

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)


(In thousands)
  From Inception
August 31, 2012
through
December 31, 2012
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

National CineMedia, LLC

  $ 4,271   $ 7,473   $ 28,489   $ 32,851  

Digital Cinema Implementation Partners, LLC

    4,436     4,941     1,726     (5,231 )

Open Road Releasing, LLC

    (10,691 )   (6,416 )   (14,726 )   (366 )

Other

    (496 )   1,547     (2,930 )   (10,076 )
                   

The Company's recorded equity in earnings (losses)

  $ (2,480 ) $ 7,545   $ 12,559   $ 17,178  
                   

            The Company reviews investments in non-consolidated subsidiaries accounted for under the equity method for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be fully recoverable. The Company reviews unaudited financial statements on a quarterly basis and audited financial statements on an annual basis for indicators of triggering events or circumstances that indicate the potential impairment of these investments as well as current equity prices for its investment in NCM and discounted projections of cash flows for certain of its other investees. Additionally, the Company has quarterly discussions with the management of significant investees to assist in the identification of any factors that might indicate the potential for impairment. In order to determine whether the carrying value of investments may have experienced an "other-than-temporary" decline in value necessitating the write-down of the recorded investment, the Company considers the period of time during which the fair value of the investment remains substantially below the recorded amounts, the investees financial condition and quality of assets, the length of time the investee has been operating, the severity and nature of losses sustained in current and prior years, a reduction or cessation in the investee's dividend payments, suspension of trading in the security, qualifications in accountant's reports due to liquidity or going concern issues, investee announcement of adverse changes, downgrading of investee debt, regulatory actions, changes in reserves for product liability, loss of a principal customer, negative operating cash flows or working capital deficiencies and the recording of an impairment charge by the investee for goodwill, intangible or long-lived assets. Once a determination is made that an other-than-temporary impairment exists, the Company writes down its investment to fair value.

            Included in equity in earnings of non-consolidated entities for the fifty-two weeks ended March 31, 2011 is an impairment charge of $8,825,000 related to a joint venture investment. The decline in the fair market value of the investment was considered other than temporary due to inadequate projected cash flows, the nature of losses sustained in current and prior years, negative operating cash flows and the length of time the investee has been operating. The decline in the fair market value of the investment was considered other than temporary due to competitive theatre builds. The impairment charges related to joint venture investments are included within equity in earnings of non-consolidated entities on the Consolidated Statements of Operations.

            The Company recorded the following changes in the carrying amount of its investment in NCM and equity in earnings of NCM during the period August 31, 2012 through December 31, 2012, the

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)

    period March 30, 2012 through August 30, 2012, and the fifty-two weeks ended March 29, 2012 and March 31, 2011.

(In thousands)
  Investment in
NCM(1)
  Deferred
Revenue(2)
  Other
Comprehensive
(Income)
  Cash
Received
(Paid)
  Equity in
(Earnings)
Losses
  Advertising
(Revenue)
  (Gain) on
NCM
Transactions
 

Ending balance April 1, 2010

  $ 28,826   $ (252,322 ) $   $   $   $   $  

Receipt of Common Units(3)

    111,520     (111,520 )                    

Exchange and sale of NCM stock(5)

    (37,576 )           102,224             (64,648 )

Surrender of Common Units(6)

    (25,568 )   25,361                     207  

Receipt of excess cash distributions

    (8,592 )           28,843     (20,251 )        

Receipt under Tax Receivable Agreement(7)

    (1,815 )           6,637     (4,822 )        

Receipt of tax credits

    (7 )           22     (15 )        

Amortization of deferred revenue

        4,689                 (4,689 )    

Equity in earnings(4)

    7,763                 (7,763 )        
                               

Ending balance March 31, 2011

  $ 74,551   $ (333,792 ) $   $ 137,726   $ (32,851 ) $ (4,689 ) $ (64,441 )
                               

Receipt of excess cash distributions

  $ (6,444 ) $   $   $ 25,275   $ (18,831 ) $   $  

Receipt under Tax Receivable Agreement(7)

    (1,840 )           6,248     (4,408 )        

Payment to retain Common Units(8)

        214         (214 )            

Amortization of deferred revenue

        5,136                 (5,136 )    

Equity in earnings(4)

    5,250                 (5,250 )        
                               

Ending balance March 29, 2012

  $ 71,517   $ (328,442 ) $   $ 31,309   $ (28,489 ) $ (5,136 ) $  
                               

Receipt of excess cash distributions

  $ (1,701 ) $   $   $ 6,667   $ (4,966 ) $   $  

Change in interest loss

    (16 )               16          

Amortization of deferred revenue

        2,367                 (2,367 )    

Equity in earnings(3)

    2,523                 (2,523 )        
                               

Ending balance August 30, 2012

  $ 72,323   $ (326,075 ) $   $ 6,667   $ (7,473 ) $ (2,367 ) $  
                               

Purchase Price Fair Value Adjustment

    177,832     3,453                      

Receipt of excess cash distributions

    (10,176 )           10,176              

Amortization of deferred revenue

        4,468                 (4,468 )    

Unrealized gain from cash flow hedge

    797         (797 )                

Equity in earnings(3)

    4,271                 (4,271 )        
                               

Ending balance December 31, 2012

  $ 245,047   $ (318,154 ) $ (797 ) $ 10,176   $ (4,271 ) $ (4,468 ) $  
                               

(1)
Represents AMC's investment through the date of the Merger on August 30, 2012 in 519,979 common membership units originally valued at March 27, 2008, 224,828 common membership units originally valued at March 17, 2009,

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 7—INVESTMENTS (Continued)

    70,424 common membership units originally valued at March 17, 2010, and 3,601,811 common membership units originally valued at June 14, 2010 received under the Common Unit Adjustment Agreement dated as of February 13, 2007 (Tranche 2 Investments). AMC's investment in 12,906,740 common membership units (Tranche 1 Investment) is carried at zero cost through the date of the Merger on August 30, 2012. Subsequent to the date of the Merger, AMC's investment in NCM consisted of a single investment tranche consisting of 17,323,782 membership units recorded at fair value (Level 1) on August 30, 2012.

(2)
Represents the unamortized portion of the Exhibitors Services Agreement (ESA) modification payments received from NCM. Such amounts are being amortized to "Other theatre revenues" over a 30 year period ending in 2036, using a units-of-revenue method, as described in ASC 470-10-35 (formerly EITF 88-18, Sales of Future Revenues). In connection with the Merger on August 30, 2012, the deferred revenue amounts related to the ESA were adjusted to estimated fair value.

(3)
Represents equity in earnings on the Tranche 2 investments only through August 30, 2012. Subsequent to August 30, 2012, AMC has one investment tranche in NCM which consisted of 17,323,782 membership units recorded at fair value (Level 1) at August 30, 2012 in connection with the Merger.

(4)
Represents equity in earnings on the Tranche 2 Investments only.

(5)
All of the Company's NCM membership units are redeemable for, at the option of NCM, cash or shares of common stock of NCM, Inc. on a share-for-share basis. On August 18, 2010, the Company sold 6,500,000 shares of common stock of NCM, Inc. in an underwritten public offering for $16.00 per share and reduced the Company's related investment in NCM by $36,709,000, the carrying amount of all shares sold. Net proceeds received on this sale were $99,840,000 after deducting related underwriting fees and professional and consulting costs of $4,160,000, resulting in a gain on sale of $63,131,000. In addition, on September 8, 2010, the Company sold 155,193 shares of NCM, Inc. to the underwriters to cover over-allotments for $16.00 per share and reduced the Company's related investment in NCM by $867,000, the carrying amount of all shares sold. Net proceeds received on this sale were $2,384,000 after deducting related underwriting fees and professional and consulting costs of $99,000, resulting in a gain on sale of $1,517,000.

(6)
As a result of theatre dispositions and closings and a related decline in attendance, the NCM Common Unit Adjustment for calendar 2010 called for a reduction in common units. The Company elected to surrender 1,479,638 common units effective March 17, 2011 at a fair value of $25,361,000 and a weighted average cost basis for Tranche 2 Investments of $25,568,000, resulting in a loss of $207,000. The fair value of the units surrendered reduced the deferred revenues for exhibitor services agreement available for amortization to advertising income for future periods.

(7)
Distributions received under the Tax Receivable Agreement ("TRA") in fiscal 2011 and 2012, were allocated among the Tranche 1 Investment and the Tranche 2 Investments based on the ownership percentages as of the date of the related NCM, Inc. taxable year to which the distribution relates. Post Merger, the TRA was recorded at fair value as an Intangible Asset. Amortization of the TRA intangible asset and cash receipts are recorded to Investment Expense (Income).

(8)
As a result of theatre closings and a related decline in attendance, the NCM Common Unit Adjustment for calendar 2011 called for a reduction in common units. The Company elected to pay NCM $214,000 to retain 16,717 common units effective March 16, 2012. The amount paid to retain the units decreased the deferred revenues for exhibitor services agreement available for amortization to advertising income for future periods.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 8—SUPPLEMENTAL BALANCE SHEET INFORMATION

        Other assets and liabilities consist of the following:

(In thousands)
  December 31, 2012   March 29, 2012  

Other current assets:

             

Prepaid rent

  $ 35,551   $ 38,400  

Income taxes receivable

    5,805      

Prepaid insurance and other

    12,049     14,582  

Merchandise inventory

    8,859     11,771  

Deferred tax asset

        16,250  

Other

    8,363     6,863  
           

  $ 70,627   $ 87,866  
           

Other long-term assets:

             

Investments in real estate

  $ 14,800   $ 10,721  

Deferred financing costs

        32,347  

Investments in equity method investees

    267,422     109,061  

Computer software

    32,023     30,807  

Deferred tax asset

        55,750  

Due from Parent tax sharing arrangement

        32,500  

Investment in RealD Inc. common stock

    13,707     15,945  

Other

    4,788     4,720  
           

  $ 332,740   $ 291,851  
           

Accrued expenses and other liabilities:

             

Taxes other than income

  $ 42,990   $ 43,071  

Income taxes payable

        1,482  

Interest

    9,865     39,660  

Payroll and vacation

    18,799     10,326  

Current portion of casualty claims and premiums

    6,332     7,266  

Accrued bonus

    27,630     12,132  

Theatre and other closure

    6,258     6,332  

Accrued licensing and percentage rent

    13,390     11,688  

Current portion of pension and other benefits liabilities

    1,039     1,217  

Other

    28,983     16,160  
           

  $ 155,286   $ 149,334  
           

Other long-term liabilities:

             

Unfavorable lease obligations

  $ 211,329   $ 125,772  

Deferred rent

    10,318     126,224  

Pension and other benefits

    63,225     55,757  

Deferred gain

        14,423  

RealD deferred lease incentive

    21,223     23,768  

Deferred tax liability

    47,433      

Tax liability

        7,000  

Casualty claims and premiums

    10,254     10,344  

Theatre and other closure

    55,086     59,139  

Other

    14,283     4,402  
           

  $ 433,151   $ 426,829  
           

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 9—CORPORATE BORROWINGS AND CAPITAL AND FINANCING LEASE OBLIGATIONS

        A summary of the carrying value of corporate borrowings and capital and financing lease obligations is as follows:

(In thousands)
  December 31, 2012   March 29, 2012  

Senior Secured Credit Facility-Term Loan due 2016 (4.25% as of December 31, 2012)

  $ 465,878   $ 470,343  

Senior Secured Credit Facility-Term Loan due 2018 (4.75% as of December 31, 2012)

    297,000     297,050  

8% Senior Subordinated Notes due 2014

        190,775  

8.75% Senior Fixed Rate Notes due 2019

    654,692     588,366  

9.75% Senior Subordinated Notes due 2020

    661,105     600,000  

Capital and financing lease obligations, 8.25% - 11%

    122,645     62,220  
           

    2,201,320     2,208,754  

Less: current maturities

    (14,280 )   (61,846 )
           

  $ 2,187,040   $ 2,146,908  
           

        The carrying amount of corporate borrowings includes $116,336,000 of unamortized premiums as of December 31, 2012.

        Minimum annual payments required under existing capital and financing lease obligations (net present value thereof) and maturities of corporate borrowings as of December 31, 2012 are as follows:

 
  Capital and Financing Lease Obligations    
   
 
 
  Principal
Amount of
Corporate
Borrowings
   
 
(In thousands)
  Minimum
Lease
Payments
  Less Interest   Principal   Total  

2013

  $ 16,750   $ 10,475   $ 6,275   $ 8,004   $ 14,279  

2014

    16,839     9,881     6,958     8,004     14,962  

2015

    16,972     9,218     7,754     8,004     15,758  

2016

    16,983     8,484     8,499     453,328     461,827  

2017

    16,998     7,677     9,321     3,000     12,321  

Thereafter

    113,860     30,022     83,838     1,481,999     1,565,837  
                       

Total

  $ 198,402   $ 75,757   $ 122,645   $ 1,962,339   $ 2,084,984  
                       

Senior Secured Credit Facility

        The Senior Secured Credit Facility is with a syndicate of banks and other financial institutions and, prior to the third amendment on December 15, 2010, had provided the Company financing of up to $850,000,000, consisting of a $650,000,000 term loan facility with a maturity date of January 26, 2013 and a $200,000,000 revolving credit facility that matured in 2012. The revolving credit facility includes borrowing capacity available for letters of credit and for swingline borrowings on same-day notice.

        Third Amendment.    On December 15, 2010, the Company entered into a third amendment to its Senior Secured Credit Agreement dated as of January 26, 2006 to, among other things: (i) extend the

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 9—CORPORATE BORROWINGS AND CAPITAL AND FINANCING LEASE OBLIGATIONS (Continued)

maturity of the term loans held by accepting lenders and to increase the interest rate with respect to such term loans, (ii) replace the Company's existing revolving credit facility (with higher interest rates and a longer maturity than the existing revolving credit facility), and (iii) amend certain of the existing covenants therein. The following are key terms of the amendment:

    The term loan maturity was extended to December 15, 2016 (the "Term Loan due 2016") for the then aggregate principal amount of $476,597,000 held by lenders who consented to the amendment. The remaining then aggregate term loan principal amount of $142,528,000 (the "Term Loan due 2013") was scheduled to mature on January 26, 2013.

    The amended five-year revolving credit facility includes a borrowing capacity of $192,500,000 through December 15, 2015 and is available for letters of credit and for swingline borrowings on same-day notice. The applicable margin for borrowings under the revolving credit facility at December 31, 2012 was 2.25% with respect to base rate borrowings and 3.25% with respect to LIBOR borrowings. The Company is required to pay an unused commitment fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder at a rate equal to 0.50% per annum. It will also pay customary letter of credit fees. As of December 31, 2012, the Company had approximately $11,563,000 in outstanding letters of credit issued under the credit facility, leaving approximately $180,937,000 available to borrow against the revolving credit facility.

        The Company recorded a loss on the modification of the Senior Secured Credit Agreement of $3,656,000 in Other expense during the fifty-two weeks ended March 31, 2011, which included third party modification fees and other expenses of $3,289,000 and previously capitalized financing fees related to the revolving credit facility of $367,000. The Company capitalized deferred financing costs paid to creditors of $1,943,000 related to the modification of the Senior Secured Credit Agreement during the year ended March 31, 2011.

        Incremental Amendment.    On February 22, 2012, the Company entered into an amendment to its Senior Secured Credit Facility pursuant to which the Company borrowed term loans (the "Term Loan due 2018"), and used the proceeds, together with cash on hand, to fund the cash tender offer and redemption of the 8% Senior Subordinated Notes due 2014 and to repay the existing Term Loan due 2013. The Term Loan due 2018 was issued under the Senior Secured Credit Facility for $300,000,000 aggregate principal amount and the net proceeds received were $297,000,000. The 1% discount was amortized to interest expense over the term of the loan until the Merger date of August 30, 2012, when the debt was re-measured at fair value. The Term Loan due 2018 requires repayments of principal of 1% per annum and the remaining principal payable upon maturity on February 22, 2018. The Company capitalized deferred financing costs paid to creditors of $5,157,000 related to the issuance of the Term Loan due 2018 during the year ended March 29, 2012. Concurrently with the Term Loan due 2018 borrowings on February 22, 2012, the Company redeemed all outstanding Term Loan due 2013 at a redemption price of 100% of the then outstanding aggregate principal balance of $140,657,000, plus accrued and unpaid interest. The Company recorded a loss on extinguishment of the Term Loan due 2013 in Other expense, due to previously capitalized deferred financing fees of $383,000, during the fifty-two weeks ended March 29, 2012.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 9—CORPORATE BORROWINGS AND CAPITAL AND FINANCING LEASE OBLIGATIONS (Continued)

        Borrowings under the Senior Secured Credit Facility bear interest at a rate equal to an applicable margin plus, at the Company's option, either a base rate or LIBOR. Prior to extinguishment, the Term Loan due 2013 bore interest at 2.021% on February 22, 2012, which was based on LIBOR plus 1.75%. The Company will repay $5,003,648 of the Term Loan due 2016 per annum through September 30, 2016, with any remaining balance due on December 15, 2016. The Term Loan due 2018 requires repayments of principal of $3,000,000 per annum and the remaining principal payable upon maturity on February 22, 2018. The Company may voluntarily repay outstanding loans under the Senior Secured Credit Facility at any time without premium or penalty, other than customary "breakage" costs with respect to LIBOR loans.

        All obligations under the Senior Secured Credit Facility are guaranteed by each of the Company's wholly-owned domestic subsidiaries. All obligations under the Senior Secured Credit Facility, and the guarantees of those obligations (as well as cash management obligations), are secured by substantially all of AMC Entertainment's assets as well as those of each subsidiary guarantor.

        The Senior Secured Credit Facility contains a number of covenants that, among other things, restrict, subject to certain exceptions, the Company's ability, and the ability of its subsidiaries, to sell assets; incur additional indebtedness; prepay other indebtedness (including the notes); pay dividends and distributions or repurchase their capital stock; create liens on assets; make investments; make certain acquisitions; engage in mergers or consolidations; engage in certain transactions with affiliates; change of control of permitted holders, amend certain charter documents and material agreements governing subordinated indebtedness, including the 8.75% Senior Notes due 2019 and the 9.75% Senior Subordinated Notes due 2020; change the business conducted by it and its subsidiaries; and enter into agreements that restrict dividends from subsidiaries.

        In addition, the Senior Secured Credit Facility requires that the Company and its subsidiaries maintain a maximum net senior secured leverage ratio as long as the commitments under the revolving credit facility remain outstanding. The Senior Secured Credit Facility also contains certain customary affirmative covenants and events of default.

        The Company is restricted, in certain circumstances, from paying dividends to Parent by the terms of the indentures governing its outstanding senior and subordinated notes and its Senior Secured Credit Facility.

        Fourth Amendment.    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 the Company 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 Term Loan due 2016, and (v) provide for an interest rate of LIBOR plus 375 basis points to the Term Loan due 2018, from and only after, the completion of the Merger. The applicable margin at December 31, 2012 for borrowings under the Term Loan due 2016 was 4.25% with respect to LIBOR borrowings (3.25% margin plus 1.00% minimum LIBOR rate)

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 9—CORPORATE BORROWINGS AND CAPITAL AND FINANCING LEASE OBLIGATIONS (Continued)

and the applicable margin for borrowings under the Term Loan due 2018 was 4.75% (3.75% margin plus 1.00% minimum LIBOR rate).

Notes Due 2014

        On February 24, 2004, the Company sold $300,000,000 aggregate principal amount of 8% Senior Subordinated Notes due 2014 (the "Notes due 2014"). The interest rate for the Notes due 2014 was 8% per annum, payable in March and September. The Notes due 2014 were redeemable at the option of the Company, in whole or in part, at any time on or after March 1, 2009 at 104% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after March 1, 2012, plus in each case interest accrued to the redemption date.

        In connection with the merger in which the Company was acquired by Holdings in fiscal 2005, the carrying value of the Notes due 2014 was adjusted to fair value. As a result, a discount of $1,500,000 was recorded and was being amortized to interest expense over the remaining term of the notes.

        On February 7, 2012, the Company launched a cash tender offer to purchase up to $160,000,000 aggregate principal amount of its then outstanding $300,000,000 aggregate principal amount of the Notes due 2014. On February 21, 2012, holders of $108,955,000 aggregate principal amount of the Notes due 2014 tendered pursuant to the cash tender offer. On February 22, 2012, the Company accepted for purchase $58,063,000 aggregate principal amount, plus accrued and unpaid interest of the Notes due 2014, for total consideration equal to (i) $972.50 per $1,000 in principal amount of notes validly tendered plus (ii) $30 per $1,000 in principal amount of the notes validly tendered. On March 7, 2012, the Company accepted for purchase the remaining $50,892,000 aggregate principal amount, plus accrued and unpaid interest of the Notes due 2014 tendered on February 21, 2012, for total consideration equal to (i) $972.50 per $1,000 in principal amount of notes validly tendered plus (ii) $30 per $1,000 in principal amount of the notes validly tendered. In addition, the Company accepted for purchase $10,000 aggregate principal amount, plus accrued and unpaid interest of Notes due 2014 tendered after February 21, 2012, for total consideration equal to $972.50 per $1,000 in principal amount of the notes validly tendered. The Company recorded a loss on extinguishment related to the cash tender offer and redeemed its Notes due 2014 of $640,000 in Other expense during the fifty-two weeks ended March 29, 2012, which included tender offer and consent fees paid to the holders of $213,000, write-off of a non-cash discount of $155,000, and other expenses of $272,000. On March 7, 2012, the Company announced its intent to redeem $51,035,000 aggregate principal amount of the Notes due 2014 at a price of $1,000 per $1,000 principal amount such that an aggregate of $160,000,000 of Notes due 2014 would be retired through the tender offer and redemption. On April 6, 2012, the Company completed the redemption of $51,035,000 aggregate principal amount of Notes due 2014 at a redemption price of 100% of the principal amount plus accrued and unpaid interest.

        On April 6, 2012, the Company redeemed $51,035,000 aggregate principal amount of its 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 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 then remaining outstanding Notes due

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 9—CORPORATE BORROWINGS AND CAPITAL AND FINANCING LEASE OBLIGATIONS (Continued)

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 $1,297,000 prior to the Merger related to the extinguishment of the Notes due 2014.

Notes Due 2016

        Concurrently with the 9.75% Senior Subordinated Notes due 2020 ("Notes due 2020") offering on December 15, 2010, the Company launched a cash tender offer and consent solicitation for any and all of its then outstanding $325,000,000 aggregate principal amount of the 11% Senior Subordinated Notes due 2016 (the "Notes due 2016") at a purchase price of $1,031 plus a $30 consent fee for each $1,000 of principal amount of outstanding Notes due 2016 validly tendered and accepted by the Company on or before the early tender date (the "Cash Tender Offer"). The Company used the net proceeds from the issuance of the Notes due 2020 on December 15, 2010 to pay the consideration for the Cash Tender Offer plus accrued and unpaid interest on $95,098,000 principal amount of Notes due 2016 validly tendered. The Company recorded a loss on extinguishment related to the Cash Tender Offer of $7,631,000 in Other expense during the fifty-two weeks ended March 31, 2011, which included previously capitalized deferred financing fees of $1,681,000, a tender offer and consent fee paid to the holders of $5,801,000 and other expenses of $149,000. The Company redeemed the remaining $229,902,000 aggregate principal amount outstanding Notes due 2016 at a price of $1,055 per $1,000 principal amount on February 1, 2011 in accordance with the terms of the indenture. The Company recorded a loss on extinguishment related to the Cash Tender Offer of $16,701,000 in Other expense during the fifty-two weeks ended March 31, 2011, which included previously capitalized deferred financing fees of $3,958,000, a tender offer and consent fee paid to the holders of $12,644,000 and other expenses of $99,000.

Notes Due 2019

        On June 9, 2009, the Company issued $600,000,000 aggregate principal amount of 8.75% Senior Notes due 2019 (the "Notes due 2019") issued under an indenture with U.S. Bank, National Association, as trustee. The Notes due 2019 bear interest at a rate of 8.75% per annum, payable on June 1 and December 1 of each year (commencing on December 1, 2009), and have a maturity date of June 1, 2019. The Notes due 2019 are redeemable at the Company's option in whole or in part, at any time on or after June 1, 2014 at 104.375% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after June 1, 2017, plus accrued and unpaid interest to the redemption date. The Company capitalized deferred financing costs of $16,259,000 related to the issuance of the Notes due 2019 during the year ended April 1, 2010.

        The Notes due 2019 are general unsecured senior obligations of the Company, fully and unconditionally guaranteed, jointly and severally, on a senior basis by each of the Company's existing and future domestic restricted subsidiaries that guarantee the Company's other indebtedness.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 9—CORPORATE BORROWINGS AND CAPITAL AND FINANCING LEASE OBLIGATIONS (Continued)

        The indenture governing the Notes due 2019 contains covenants limiting other indebtedness, dividends, purchases or redemptions of stock, transactions with affiliates and mergers and sales of assets. It also contains provisions subordinating the Company's obligations under the Notes due 2019 to the Company's obligations under its Senior Secured Credit Facility and other senior indebtedness. The Notes due 2019 were issued at a 2.418% discount which was amortized to interest expense following the interest method over the term of the notes until the Merger date of August 30, 2012, when the debt was re-measured at fair value.

        In connection with the Merger on August 30, 2012, the carrying value of the Notes due 2019 was adjusted to fair value. As a result, a premium of $57,000,000 was recorded and will be amortized to interest expense utilizing the interest rate method over the remaining term of the notes.

Notes Due 2020

        On December 15, 2010, the Company completed the offering of $600,000,000 aggregate principal amount of its Notes due 2020. The Notes due 2020 mature on December 1, 2020, pursuant to an indenture dated as of December 15, 2010, among the Company, the Guarantors named therein and U.S. Bank National Association, as trustee. The Company will pay interest on the Notes due 2020 at 9.75% per annum, semi-annually in arrears on June 1 and December 1, commencing on June 1, 2011. The Company may redeem some or all of the Notes due 2020 at any time on or after December 1, 2015 at 104.875% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after December 1, 2018, plus accrued and unpaid interest to the redemption date. The Company capitalized deferred financing costs of $12,699,000 related to the issuance of Notes due 2020 during the year ended March 31, 2011.

        The Indenture provides that the Notes due 2020 are general unsecured senior subordinated obligations of the Company and are fully and unconditionally guaranteed on a joint and several senior subordinated unsecured basis by all of its existing and future domestic restricted subsidiaries that guarantee its other indebtedness.

        The indenture governing the Notes due 2020 contains covenants limiting other indebtedness, dividends, purchases or redemptions of stock, transactions with affiliates and mergers and sales of assets.

        In connection with the Merger on August 30, 2012, the carrying value of the Notes due 2020 was adjusted to fair value. As a result, a premium of $63,000,000 was recorded and will be amortized to interest expense over the remaining term of the notes.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 9—CORPORATE BORROWINGS AND CAPITAL AND FINANCING LEASE OBLIGATIONS (Continued)

Consent Solicitation

        On June 22, 2012, the Company announced it had received the requisite consents from holders of each of its Notes due 2019 and its Notes due 2020 and, collectively with the Notes due 2019, the ("Notes") for (i) a waiver of the requirement for the Company to comply with the "change of control" covenant in each of the indentures governing the Notes due 2019 and the indenture governing the Notes due 2020 (collectively, 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 were $2,376,000. See Note 2—Merger for additional information regarding the recording of the consent fees.

Financial Covenants

        Each indenture relating to the Company's notes (Notes due 2019 and Notes due 2020) allows it to incur specified permitted indebtedness (as defined therein) without restriction. Each indenture also allows the Company to incur any amount of additional debt as long as it can satisfy the coverage ratio of each indenture, after giving effect to the event on a pro forma basis. Under the indenture for the Notes due 2019 (the Company's most restrictive indenture), the Company could borrow approximately $1,125,600,000 (assuming an interest rate of 7.0% per annum on the additional indebtedness) in addition to specified permitted indebtedness at December 31, 2012. If the Company cannot satisfy the coverage ratios of the indentures, generally the Company can borrow an additional amount under the Senior Secured Credit Facility.

        As of December 31, 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.

NOTE 10—STOCKHOLDER'S EQUITY

        AMCE has one share of Common Stock issued as of December 31, 2012 which is owned by Parent.

        During the Successor period of August 31, 2012 through December 31, 2012, the Company received capital contributions of $100,000,000 from Wanda.

        During fiscal 2012, AMCE used cash on hand to pay a dividend distribution to Parent in an aggregate amount of $109,581,000. Parent used the available funds to pay corporate overhead expenses incurred in the ordinary course of business and to redeem its Term Loan Facility due June 2012, plus accrued and unpaid interest of $219,405,000.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 10—STOCKHOLDER'S EQUITY (Continued)

        During fiscal 2011, AMCE made dividend distributions to Holdings in an aggregate amount of $278,258,000, and Holdings used the available funds to make a principal payment related to a tender offer for the Discount Notes due 2014, plus interest payments, and to make dividend distributions to its stockholder, Parent. Holdings and Parent used the available funds to pay corporate overhead expenses incurred in the ordinary course of business.

Stock-Based Compensation

        The Company has no stock-based compensation arrangements of its own at December 31, 2012, but prior to the Merger, Parent had adopted a stock-based compensation plan. The Company has recorded stock-based compensation expense of $830,000, $1,962,000 and $1,526,000 within general and administrative: other during the period March 30, 2012 through August 30, 2012, and the fiscal years ended March 29, 2012 and March 31, 2011, respectively. Upon the change of control as a result of the Merger, all of the stock options and restricted stock interests under both the amended and restated 2004 Stock Option Plan and the 2010 Equity Incentive Plan were cancelled and holders received payments aggregating approximately $7,035,000. See Note 2—Merger for additional information regarding the settlement of stock options and restricted stock interests.

2004 Stock Option Plan

        Prior to the Merger, Parent had adopted a stock-based compensation plan that permitted a maximum of 49,107.44681 options to be issued on Parent's stock under the 2004 Stock Option Plan. The stock options had a ten year term and generally step vested in equal amounts from one to three or five years from the date of the grant. Vesting could accelerate for a certain participant if there was a change of control (as defined in the employee agreement). All options were granted to employees of the Company.

        On July 8, 2010, the Board approved a grant of 1,023 non-qualified stock options to a certain employee of the Company under the amended and restated 2004 Stock Option Plan. These options vested ratably over 5 years with an exercise price of $752 per share. Expense for this award was recognized on a straight-line basis over the vesting period. The Company accounted for stock options using the fair value method of accounting and elected to use the simplified method for estimating the expected term of "plain vanilla" share option grants, as it did not have enough historical experience to provide a reasonable estimate. The estimated grant date fair value of the options granted on 1,023 shares was $300.91 per share, or $308,000, and was determined using the Black-Scholes option-pricing model. The option exercise price was $752 per share, and the estimated fair value of the shares was $752, resulting in $0 intrinsic value for the option grant. See 2010 Equity Incentive Plan below for further information regarding assumptions used in determining fair value.

        On July 23, 2010, the Board of Directors of Parent (the "Board") determined that the Company would no longer grant any awards of shares of common stock of Parent under the 2004 Stock Option Plan.

        The vested and unvested stock options under the 2004 Stock Option Plan were cancelled immediately prior to the closing of the Merger with Wanda. Holders of such options received payments

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 10—STOCKHOLDER'S EQUITY (Continued)

for each option equal to the difference (if any) between the per share consideration received in the Merger and the exercise price of their options.

2010 Equity Incentive Plan

        Prior to the Merger, the 2010 Equity Incentive Plan ("Plan") provided for grants of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, other stock-based awards or performance-based compensation awards. The aggregate number of shares of common stock of Parent that was available for delivery pursuant to awards granted under the plan was 39,312 shares. The Company accounted for stock options using the fair value method of accounting and had elected to use the simplified method for estimating the expected term of "plain vanilla" share option grants, as it did not have enough historical experience to provide a reasonable estimate.

        On July 8, 2010, the Board approved the grants of 5,399 non-qualified stock options, 5,399 restricted stock (time vesting), and 5,404 restricted stock (performance vesting) to certain of its employees. On February 1, 2011, the Board approved the grants of 137 non-qualified stock options, 137 restricted stock (time vesting), and 138 restricted stock (performance vesting) to certain of its employees. The estimated fair value of the stock at the grant date of July 8, 2010 was approximately $752 per share. The common stock value of $752 per share was based upon a contemporaneous valuation reflecting market conditions on July 8, 2010, which was prepared by an independent third party valuation specialist, and was used to estimate grants of 6,167 options and 6,431 shares of restricted stock granted in July 2010. The third party valuation was reviewed by management and provided to the Company's board of directors and the Compensation Committee of the board of directors. In determining the fair market value of the common stock, the board of directors and the Compensation Committee of the board of directors considered the valuation report and other qualitative and quantitative factors that they considered relevant. The common stock value of $752 per share was used to estimate the fair value of each of the remaining grants of options and shares of restricted stock granted on each of August 2, 2010, December 23, 2010, March 22, 2011, and April 6, 2011 as the Company believed at the time of grant that the valuation reflected current market conditions on each of such grant dates. The Company believes that market conditions had not changed significantly over the course of these grant dates.

        On June 22, 2011, the restricted stock (performance vesting) shares for fiscal 2012 were granted and the target was communicated following ASC 718-10-55-95. The grant date common stock value of $755 per share was based upon a contemporaneous valuation reflecting market conditions on June 22, 2011, which was prepared by an independent third party valuation specialist, and was used to estimate grant value of 1,346 shares of restricted stock (performance vesting) granted on June 22, 2011. The third party valuation was reviewed by management and provided to the Company's Board of Directors and the Compensation Committee of the Board of Directors. In determining the fair market value of the common stock, the Board of Directors and the Compensation Committee of the Board of Directors considered the valuation report and other qualitative and quantitative factors that they considered relevant.

        The award agreements, which consisted of grants of non-qualified stock options, restricted stock (time vesting), and restricted stock (performance vesting) to certain of the Company's employees under

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 10—STOCKHOLDER'S EQUITY (Continued)

the 2010 Equity Incentive Plan, generally had the following features, subject to discretionary approval by Parent's compensation committee:

    Non-Qualified Stock Option Award Agreement:  Twenty-five percent of the options were to vest on each of the first four anniversaries of the date of grant. The stock options had a ten year term from the date of grant. The vested and unvested stock options were cancelled immediately prior to the closing of the Merger with Wanda. Holders of such options received payments for each option equal to the difference (if any) between the per share consideration received in the Merger and the exercise price of their options.

    Restricted Stock Award Agreement (Time Vesting):  The restricted shares were to vest on the fourth anniversary of the date of grant. The restricted stock (time vesting) awards were cancelled immediately prior to the closing of the Merger with Wanda. Holders of such restricted stock (time vesting) received payments for each restricted share equal to the per share consideration received in the Merger.

    Restricted Stock Award Agreement (Performance Vesting):  In fiscal 2011, the Board approved the award of 5,542 shares of restricted stock (performance vesting), of which 1,346 shares and 1,372 shares were deemed granted in fiscal 2012 and fiscal 2011, respectively. Approximately one-fourth of the total restricted shares of 5,542 approved by the Board were to have been granted each year over a four-year period starting in fiscal 2011. Each grant had a vesting term of approximately one year conditioned upon the Company meeting certain pre-established annual performance targets. The fiscal 2013 and fiscal 2014 shares were not deemed granted per ASC 718-10-55-95 as the Compensation Committee did not approved the performance target for the restricted stock due to the Merger with Wanda. The unvested restricted stock (performance vesting) awards for fiscal 2013 and fiscal 2014 were cancelled immediately prior to the closing of the Merger. Holders of unvested restricted stock awards received payments for each restricted share equal to the per share consideration received in the Merger.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 10—STOCKHOLDER'S EQUITY (Continued)

Stock Option Activity

        A summary of Parent's stock option activity, prior to the Merger, under both the 2004 Option Plan and the 2010 Equity Incentive Plan is as follows:

 
  August 30, 2012   March 29, 2012   March 31, 2011  
 
  Number
of
Shares
  Weighted
Average
Exercise
Price Per
Share
  Number
of
Shares
  Weighted
Average
Exercise
Price Per
Share
  Number
of
Shares
  Weighted
Average
Exercise
Price Per
Share
 

Outstanding at beginning of year

    35,678.1680905   $ 449.88     35,684.1680905   $ 423.70     31,597.1680905   $ 383.58  

Granted(1)

            7.00000     752.00     6,507.00000     752.00  

Forfeited

            (13.00000 )   752.00     (1,615.40000 )   368.18  

Cancelled

    (35,678.1680905 )   449.88                  

Exercised

                    (804.60000 )   452.57  
                           

Outstanding at end of year and expected to vest(1)

      $     35,678.1680905   $ 449.88     35,684.1680905   $ 449.93  
                           

Exercisable at end of year

      $     22,594.5380903   $ 429.74     17,238.4980902   $ 423.70  
                           

Available for grant at end of year

              28,580.0000000           28,568.0000000        
                                 

(1)
The weighted average remaining contractual life for outstanding options was 6.0 years and 7.0 years for fiscal 2012 and 2011, respectively. During fiscal 2012, 7 options were granted at an exercise price of $752. The options granted were based on an estimated fair value of $752 of common stock, resulting in an intrinsic value for the options on the grant date of $0. During fiscal 2011, 6,507 options were granted at an exercise price of $752. The options granted were based on an estimated fair value of $752 of common stock, resulting in an intrinsic value for the options on the grant date of $0.

        For options exercised, intrinsic value is calculated as the difference between the market price on the date of exercise (determined using the most recent contemporaneous valuation prior to the exercise) and the exercise price of the options. The total intrinsic value of options exercised was $241,000 during fiscal 2011 and there were no options exercised during the period March 30, 2012 through August 30, 2012 and fiscal 2012. Parent received outstanding shares, instead of cash, from the exercise of stock options during fiscal 2011 to satisfy the aggregate strike price of approximately $364,000.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 10—STOCKHOLDER'S EQUITY (Continued)

Assumptions Used To Estimate Option Values

        The following table reflects the weighted average fair value per option granted during fiscal 2011 under the 2004 Option Plan and the 2010 Equity Incentive Plan, as well as the significant assumptions used in determining weighted average fair value using the Black-Scholes option-pricing model:

 
  March 31, 2011  
 
  2010 Plan   2004 Plan  

Weighted average fair value of options on grant date

  $ 293.72   $ 300.91  

Risk-free interest rate

    2.50 %   2.58 %

Expected life (years)

    6.25     6.50  

Expected volatility(1)

    35.0 %   35.0 %

Expected dividend yield

         

(1)
The Company uses share values of its publicly traded competitor peer group for purposes of calculating volatility.

Restricted Stock Activity

        The following table represents the unvested restricted stock (time vesting) and (performance vesting) activity:

 
  Shares of
Restricted
Stock
  Weighted
Average
Grant Date
Fair Value
 

Unvested at March 31, 2011

    5,372   $ 752.00  

Granted

    1,353     755.00  

Forfeited/cancelled(1)

    (1,359 )   755.00  
           

Unvested at March 29, 2012

    5,366     752.00  

Granted(2)

         

Cancelled

    (5,366 )   752.00  
           

Unvested at August 30, 2012

      $  
           

(1)
The Company did not meet its pre-established annual performance target for fiscal 2012, and therefore, the restricted stock (performance vesting) grant was canceled.

(2)
As discussed above, since there was not a grant of restricted stock (performance vesting) shares during fiscal 2013, there were no fiscal 2013 unvested restricted stock (performance vesting) shares reported in this table.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 11—INCOME TAXES

        The Income tax provision reflected in the Consolidated Statements of Operations consists of the following components during the period August 31, 2012 through December 31, 2012, the period March 30, 2012 through August 30, 2012, and the fiscal years ended March 29, 2012 and March 31, 2011:

(In thousands)
  From Inception
August 31, 2012
through
December 27, 2012
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Current:

                         

Federal

 
$

 
$

 
$

 
$

 

Foreign

                 

State

    480     3,700     2,015     1,950  
                   

Total current

    480     3,700     2,015     1,950  
                   

Deferred:

                         

Federal

    3,020              

Foreign

                 

State

                 
                   

Total deferred

    3,020              
                   

Total provision (benefit)

    3,500     3,700     2,015     1,950  

Tax provision from discontinued operations

        1,200          
                   

Total provision (benefit) from continuing operations

  $ 3,500   $ 2,500   $ 2,015   $ 1,950  
                   

        AMCE has recorded no alternative minimum taxes as the consolidated tax group for which AMCE is a member expects no alternative minimum tax liability, and pursuant to the tax sharing arrangement in place, AMCE has no liability.

        Pre-tax income (losses) consisted of the following:

(In thousands)
  From Inception
August 31, 2012
through
December 31, 2012
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Domestic

  $ (39,294 ) $ 98,093   $ (78,677 ) $ (121,243 )

Foreign

    124     7     (1,296 )   340  
                   

Total

  $ (39,170 ) $ 98,100   $ (79,973 ) $ (120,903 )
                   

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 11—INCOME TAXES (Continued)

        The difference between the effective tax rate on earnings (loss) from continuing operations before income taxes and the U.S. federal income tax statutory rate is as follows:

(In thousands)
  From Inception
August 31, 2012
through
December 31, 2012
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Income tax expense (benefit) at the federal statutory rate

  $ (13,470 ) $ 21,600   $ (26,730 ) $ (41,250 )

Effect of:

                         

State income taxes

    (1,930 )   2,500     2,015     1,950  

Change in ASC 740 (formerly FIN 48) reserve

            (5,400 )   (300 )

Permanent items

    20     100     825      

Valuation allowance

    18,880     (21,700 )   31,305     41,550  
                   

Income tax expense (benefit)

  $ 3,500   $ 2,500   $ 2,015   $ 1,950  
                   

Effective income tax rate

    (9.1 )%   4.0 %   (2.6 )%   (1.7 )%
                   

        The significant components of deferred income tax assets and liabilities as of December 31, 2012 and March 29, 2012 are as follows:

 
  December 31, 2012   March 29, 2012  
 
  Deferred Income Tax   Deferred Income Tax  
(In thousands)
  Assets   Liabilities   Assets   Liabilities  

Tangible assets

  $   $ (125,641 ) $ 76,855   $  

Accrued reserves

    35,359         34,684      

Intangible assets

        (76,430 )       (26,884 )

Receivables

        (1,632 )   1,949      

Investments

        (231,524 )       (136,704 )

Capital loss carryforwards

    2,077              

Pension postretirement and deferred compensation

    28,001         34,276      

Corporate borrowings

    50,558             (106 )

Deferred revenue

    136,350         144,444      

Lease liabilities

    86,417         92,385      

Capital and financing lease obligations

    40,102         22,759      

Alternative minimum tax and other credit carryovers

    15,083         15,056      

Charitable contributions

    1,051         1,757      

Net operating loss carryforward

    241,216         225,195      
                   

Total

  $ 636,214   $ (435,227 ) $ 649,360   $ (163,694 )

Less: Valuation allowance

    (248,420 )       (413,666 )    
                   

Total deferred income taxes(1)

  $ 387,794   $ (435,227 ) $ 235,694   $ (163,694 )
                   

(1)
See Note 8—Supplemental Balance Sheet Information for additional disclosures about net current deferred tax assets and net non-current deferred tax liabilities.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 11—INCOME TAXES (Continued)

        A rollforward of the Company's valuation allowance for deferred tax assets is as follows:

(In thousands)
  Balance at
Beginning of
Period
  Additions
Charged
(Credited) to
Revenues,
Costs and
Expenses
  Charged
(Credited)
to Goodwill
  Charged
(Credited)
to Other
Accounts(1)
  Balance at
End of
Period
 

From Inception August 31, 2012 through December 31, 2012

                               

Valuation allowance-deferred income tax assets

  $ 232,985     18,880     195     (3,640 ) $ 248,420  

March 30, 2012 through August 30, 2012

                               

Valuation allowance-deferred income tax assets

  $ 413,666     (21,700 )   (158,981 )     $ 232,985  

Fiscal Year 2012

                               

Valuation allowance-deferred income tax assets

  $ 329,221     32,560         51,885   $ 413,666  

Fiscal Year 2011

                               

Valuation allowance-deferred income tax assets

  $ 263,032     42,815         23,374   $ 329,221  

(1)
Primarily relates to amounts resulting from our tax sharing arrangement, changes in deferred tax assets and associated valuation allowance that are not related to income statement activity as well as amounts charged to other comprehensive income.

        The Company's federal income tax loss carryforward of $671,879,000 will begin to expire in 2017 and will completely expire in 2031 and will be limited annually due to certain change in ownership provisions of the Internal Revenue Code. The Company also has state income tax loss carryforwards of $544,244,000 which may be used over various periods ranging from 1 to 20 years.

        During fiscal 2010, management believed it was more likely than not that the Company had the ability to execute a feasible and prudent tax strategy that would provide for the realization of net operating losses by converting certain limited partnership units into common stock. At December 31, 2012, this tax strategy was estimated to preserve net operating losses that expire through 2019.

        The Company has recorded a valuation allowance against its remaining net deferred tax asset in U.S. and foreign jurisdictions of $248,420,000 as of December 31, 2012.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 11—INCOME TAXES (Continued)

        A reconciliation of the change in the amount of unrecognized tax benefits was as follows:

(In millions)
  From Inception
August 31, 2012
through
December 31, 2012
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 

Balance at beginning of period

  $ 22.4   $ 22.7   $ 28.2   $ 28.5  

Gross increases—current period tax positions

        0.6     0.7     0.7  

Favorable resolutions with authorities

            (1.0 )    

Expired attributes

            (5.2 )   (1.0 )

Cash settlements

    (0.5 )   (0.9 )        
                   

Balance at end of period

  $ 21.9   $ 22.4   $ 22.7   $ 28.2  
                   

        The Company's effective tax rate is not expected to be significantly impacted by the ultimate resolution of the uncertain tax positions because of the retention of a valuation allowance against most of its net operating loss carryforwards.

        The Company recognizes income tax-related interest expense and penalties as income tax expense and general and administrative expense, respectively. The liabilities increased for interest and penalties by $110,000 and $115,000, as of December 31, 2012 and March 29, 2012, respectively.

        There are currently unrecognized tax benefits which the Company anticipates will be resolved in the next 12 months; however, the Company is unable at this time to estimate what the impact on its unrecognized tax benefits will be.

        The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. An IRS examination of the tax years February 28, 2002 through December 31, 2003 of the former Loews Cineplex Entertainment Corporation and subsidiaries was concluded during fiscal 2007. An IRS examination for the tax years ended March 31, 2005 and March 30, 2006 was completed during 2009. Generally, tax years beginning after March 28, 2002 are still open to examination by various taxing authorities. Additionally, the Company has net operating loss ("NOL") carryforwards for tax years ended October 31, 2000 through March 28, 2002 in the U.S. and various state jurisdictions which have carryforwards of varying lengths of time. These NOLs are subject to adjustment based on the statute of limitations applicable to the return in which they are utilized, not the year in which they are generated. Various state, local and foreign income tax returns are also under examination by taxing authorities. The Company does not believe that the outcome of any examination will have a material impact on its financial statements.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 12—LEASES

        The following table sets forth the future minimum rental payments, by calendar year, required under existing operating leases and digital projector equipment leases payable to DCIP that have initial or remaining non-cancelable terms in excess of one year as of December 31, 2012:

(In thousands)
  Minimum operating
lease payments
 

2013

  $ 397,631  

2014

    408,209  

2015

    399,584  

2016

    382,745  

2017

    361,082  

Thereafter

    1,661,501  
       

Total minimum payments required

  $ 3,610,752  
       

        As of December 31, 2012, the Company has lease agreements for three theatres with 33 screens which are under construction or development and are expected to open in 2014 and 2018.

        Included in other long-term liabilities as of December 31, 2012 and March 29, 2012 is $10,318,000 and $126,224,000, respectively, of deferred rent representing future minimum rental payments for leases with scheduled rent increases, and $211,329,000 and $125,772,000, respectively, for unfavorable lease liabilities.

        Rent expense is summarized as follows:

(In thousands)
  From Inception
August 31, 2012
through
December 31, 2012
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Minimum rentals

  $ 126,529   $ 166,220   $ 394,742   $ 401,563  

Common area expenses

    12,968     17,591     40,918     43,060  

Percentage rentals based on revenues

    3,877     5,275     9,666     7,251  
                   

Rent

    143,374     189,086     445,326     451,874  

General and administrative and other

    3,940     4,207     8,747     4,665  
                   

Total

  $ 147,314   $ 193,293   $ 454,073   $ 456,539  
                   

NOTE 13—EMPLOYEE BENEFIT PLANS

        The Company sponsors frozen non-contributory qualified and non-qualified defined benefit pension plans generally covering all employees who, prior to the freeze, were age 21 or older and had completed at least 1,000 hours of service in their first twelve months of employment, or in a calendar year ending thereafter, and who were not covered by a collective bargaining agreement. The Company also offers eligible retirees the opportunity to participate in a health plan. Certain employees are eligible for subsidized postretirement medical benefits. The eligibility for these benefits is based upon a

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 13—EMPLOYEE BENEFIT PLANS (Continued)

participant's age and service as of January 1, 2009. The Company also sponsors a postretirement deferred compensation plan.

        On May 2, 2008, the Company's Board of Directors approved revisions to the Company's Post Retirement Medical and Life Insurance Plan effective January 1, 2009 and on July 3, 2008 the changes were communicated to the plan participants. As a result of these revisions, the Company recorded a prior service credit of $5,969,000 through other comprehensive income to be amortized over eleven years starting in fiscal 2010, based on expected future service of the remaining participants.

        As a result of the Merger and the application of "push down" accounting, the benefit plans reflect a new basis of accounting that is based on the fair value of assets acquired and liabilities assumed as of the Merger date. At August 31, 2012, the Successor balance recorded in accumulated other comprehensive income was reset to zero.

        The measurement dates used to determine pension and other postretirement benefits for the Successor period was August 30, 2012, the Merger date, and December 31, 2012, the Transition Period.

        Net periodic benefit cost for the plans consists of the following:

 
  Pension Benefits   Other Benefits  
(In thousands)
  From
Inception
August 31,
2012
through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
  52 Weeks
Ended
March 31,
2011
  From
Inception
August 31,
2012
through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
  52 Weeks
Ended
March 31,
2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Components of net periodic benefit cost:

                                                 

Service cost

  $ 59   $ 76   $ 180   $ 180   $ 61   $ 74   $ 149   $ 154  

Interest cost

    1,484     1,962     4,640     4,612     306     435     1,122     1,275  

Expected return on plan assets

    (1,442 )   (1,811 )   (4,465 )   (3,986 )                

Amortization of net loss

        899     5     137         88          

Amortization of prior service credit

                        (448 )   (984 )   (865 )

Settlement

    (15 )                            
                                   

Net periodic benefit cost

  $ 86   $ 1,126   $ 360   $ 943   $ 367   $ 149   $ 287   $ 564  
                                   

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 13—EMPLOYEE BENEFIT PLANS (Continued)

        The following table summarizes the changes in other comprehensive income:

 
  Pension Benefits   Other Benefits  
(In thousands)
  From
Inception
August 31,
2012
through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
  From
Inception
August 31,
2012
through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Successor)
  (Predecessor)
  (Predecessor)
 

Net (gain) loss

  $ (4,118 ) $   $ 15,615   $ (3,161 ) $   $ 3,324  

Net prior service credit

                    (771 )   (1,035 )

Merger push-down accounting adjustment

        (20,741 )           3,804      

Amortization of net gain (loss)

        (899 )   (5 )       (88 )    

Amortization of prior service credit

                    448     984  

Settlement

    15                      
                           

Total recognized in other comprehensive income

  $ (4,103 ) $ (21,640 ) $ 15,610   $ (3,161 ) $ 3,393   $ 3,273  

Net periodic benefit cost

   
86
   
1,126
   
360
   
367
   
149
   
287
 
                           

Total recognized in net periodic benefit cost and other comprehensive income

  $ (4,017 ) $ (20,514 ) $ 15,970   $ (2,794 ) $ 3,542   $ 3,560  
                           

        The following tables set forth the plan's change in benefit obligations and plan assets and the accrued liability for benefit costs included in the Consolidated Balance Sheets:

 
  Pension Benefits   Other Benefits  
(In thousands)
  From
Inception
August 31,
2012
through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
  From
Inception
August 31,
2012
through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Successor)
  (Predecessor)
  (Predecessor)
 

Change in benefit obligation:

                                     

Benefit obligation at beginning of period

  $ 112,822   $ 96,672   $ 80,350   $ 25,816   $ 24,538   $ 21,916  

Service cost

    59     76     180     61     74     149  

Interest cost

    1,484     1,962     4,640     306     435     1,122  

Plan participant's contributions

                196     227     517  

Actuarial (gain) loss

    (3,465 )   15,161     14,162     (3,161 )   1,828     3,325  

Plan amendment

                    (771 )   (1,035 )

Benefits paid

    (862 )   (1,007 )   (2,660 )   (453 )   (515 )   (1,456 )

Settlement

    (320 )   (42 )                
                           

Benefit obligation at end of period

  $ 109,718   $ 112,822   $ 96,672   $ 22,765   $ 25,816   $ 24,538  
                           

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 13—EMPLOYEE BENEFIT PLANS (Continued)


 
  Pension Benefits   Other Benefits  
(In thousands)
  From
Inception
August 31,
2012
through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
  From
Inception
August 31,
2012
through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Successor)
  (Predecessor)
  (Predecessor)
 

Change in plan assets:

                                     

Fair value of plan assets at beginning of period

  $ 66,059   $ 64,236   $ 59,776   $   $   $  

Actual return on plan assets gain

    2,095     977     3,011              

Employer contribution

    1,247     1,895     4,109     257     288     939  

Plan participants' contributions

                196     227     517  

Benefits paid

    (862 )   (1,007 )   (2,660 )   (453 )   (515 )   (1,456 )

Settlement

    (320 )   (42 )                
                           

Fair value of plan assets at end of period

  $ 68,219   $ 66,059   $ 64,236   $   $   $  
                           

Net liability for benefit cost:

                                     

Funded status

  $ (41,499 ) $ (46,763 ) $ (32,436 ) $ (22,765 ) $ (25,816 ) $ (24,538 )
                           

 

 
  Pension Benefits   Other Benefits  
(In thousands)
  December 31,
2012
  August 30,
2012
  March 29,
2012
  December 31,
2012
  August 30,
2012
  March 29,
2012
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Successor)
  (Predecessor)
  (Predecessor)
 

Amounts recognized in the Balance Sheet:

                                     

Accrued expenses and other liabilities

  $ (154 ) $ (40 ) $ (155 ) $ (885 ) $ (1,016 ) $ (1,062 )

Other long-term liabilities

    (41,345 )   (46,723 )   (32,281 )   (21,880 )   (24,800 )   (23,476 )
                           

Net liability recognized

  $ (41,499 ) $ (46,763 ) $ (32,436 ) $ (22,765 ) $ (25,816 ) $ (24,538 )
                           

Aggregate accumulated benefit obligation

  $ (109,718 ) $ (112,822 ) $ (96,672 ) $ (22,765 ) $ (25,816 ) $ (24,538 )
                           

        The following table summarizes pension plans with accumulated benefit obligations and projected benefit obligations in excess of plan assets:

 
  Pension Benefits  
(In thousands)
  December 31, 2012   March 29, 2012  
 
  (Successor)
  (Predecessor)
 

Aggregated accumulated benefit obligation

  $ (109,718 ) $ (96,672 )

Aggregated projected benefit obligation

    (109,718 )   (96,672 )

Aggregated fair value of plan assets

    68,219     64,236  

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 13—EMPLOYEE BENEFIT PLANS (Continued)

        Amounts recognized in accumulated other comprehensive income consist of the following:

 
  Pension Benefits   Other Benefits  
(In thousands)
  December 31,
2012
  August 30,
2012
  March 29,
2012
  December 31,
2012
  August 30,
2012
  March 29,
2012
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Successor)
  (Predecessor)
  (Predecessor)
 

Net actuarial (gain) loss

  $ (4,118 ) $   $ 21,639   $ (3,161 ) $   $ 4,823  

Prior service credit

                        (8,216 )

        Amounts in accumulated other comprehensive income expected to be recognized in components of net periodic pension cost during the calendar year 2013 are as follows:

(In thousands)
  Pension Benefits   Other Benefits  

Net actuarial gain

  $   $ (78 )

Actuarial Assumptions

        The weighted-average assumptions used to determine benefit obligations are as follows:

 
  Pension Benefits   Other Benefits  
(In thousands)
  December 31,
2012
  August 30,
2012
  March 29,
2012
  December 31,
2012
  August 30,
2012
  March 29,
2012
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Successor)
  (Predecessor)
  (Predecessor)
 

Discount rate

    4.17 %   3.99 %   4.86 %   3.90 %   3.65 %   4.42 %

Rate of compensation increase

    N/A     N/A     N/A     N/A     N/A     N/A  

        The weighted-average assumptions used to determine net periodic benefit cost are as follows:

 
  Pension Benefits   Other Benefits  
(In thousands)
  From
Inception
August 31,
2012
through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
  52 Weeks
Ended
March 31,
2011
  From
Inception
August 31,
2012
through
December 31,
2012
  March 30,
2012
through
August 30,
2012
  52 Weeks
Ended
March 29,
2012
  52 Weeks
Ended
March 31,
2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Discount rate

    3.99 %   4.86 %   5.86 %   6.16 %   3.65 %   4.42 %   5.51 %   5.97 %

Weighted average expected long-term return on plan assets

    7.27 %   7.27 %   8.00 %   8.00 %   N/A     N/A     N/A     N/A  

Rate of compensation increase

    N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A  

        In developing the expected long-term rate of return on plan assets at each measurement date, the Company considers the plan assets' historical returns, asset allocations, and the anticipated future economic environment and long-term performance of the asset classes. While appropriate consideration is given to recent and historical investment performance, the assumption represents management's best estimate of the long-term prospective return.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 13—EMPLOYEE BENEFIT PLANS (Continued)

        For measurement purposes, the annual rate of increase in the per capita cost of covered health care benefits assumed for 2013 was 8.0% for medical. The rates were assumed to decrease gradually to 5.0% for medical in 2019. The health care cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 2012 by $2,292,000 and the aggregate of the service and interest cost components of postretirement expense for calendar year 2013 by $34,000. Decreasing the assumed health care cost trend rates by one percentage point in each year would decrease the accumulated postretirement obligation for calendar year 2013 by $1,933,000 and the aggregate service and interest cost components of postretirement expense for calendar year 2013 by $28,000. The Company's retiree health plan provides a benefit to its retirees that is at least actuarially equivalent to the benefit provided by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("Medicare Part D").

Cash Flows

        The Company expects to contribute $2,469,000 to the pension plans during the calendar year 2013.

        The following table provides the benefits expected to be paid (inclusive of benefits attributable to estimated future employee service) in each of the next five fiscal years, and in the aggregate for the five years thereafter:

(In thousands)
  Pension Benefits   Other Benefits
Net of Medicare
Part D Adjustments
  Medicare Part D
Adjustments
 

2013

  $ 3,004   $ 902   $ 78  

2014

    2,445     926     90  

2015

    3,152     983     99  

2016

    3,631     1,032     106  

2017

    3,930     1,068     116  

Years 2018 - 2022

    25,510     5,637     804  

Pension Plan Assets

        The Company's investment objectives for its defined benefit pension plan investments are: (1) to preserve the real value of its principal; (2) to maximize a real long-term return with respect to the plan assets consistent with minimizing risk; (3) to achieve and maintain adequate asset coverage for accrued benefits under the plan; and (4) to maintain sufficient liquidity for payment of the plan obligations and expenses. The Company uses a diversified allocation of equity, debt, commodity and real estate

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 13—EMPLOYEE BENEFIT PLANS (Continued)

exposures that are customized to the Plan's cash flow benefit needs. The target allocations for plan assets are as follows:

Asset Category
  Target
Allocation
 

Fixed(1)

    12 %

High yield fund

    4 %

Equity Securities—U.S. 

    23 %

Equity Securities—International

    16 %

Collective trust fund

    26 %

Private Real Estate

    12 %

Public REITs

    2 %

Commodities broad basket

    5 %
       

    100 %
       

(1)
Includes U.S. Treasury Securities and Bond market fund.

        Valuation Techniques.    The fair values classified within Level 1 of the valuation hierarchy were determined using quoted market prices from actively traded markets. The fair values classified within Level 2 of the valuation hierarchy included pooled separate accounts and collective trust funds, which valuations were based on market prices for the underlying instruments that were observable in the market or could be derived by observable market data from independent external valuation information.

        The fair value of the pension plan assets at December 31, 2012, by asset class are as follows:

 
   
  Fair Value Measurements at March 29, 2012 Using  
(In thousands)
  Total Carrying
Value at
December 31, 2012
  Quoted prices in
active market
(Level 1)
  Significant other
observable inputs
(Level 2)
  Significant
unobservable inputs
(Level 3)
 

Cash and cash equivalents

  $ 19   $ 19   $   $  

U.S. Treasury Securities

    1,668     1,668          

Equity securities:

                         

U.S. companies

    15,993     2,184     13,809      

International companies

    11,098     11,098          

Public REITs

    1,229         1,229        

Bond market fund

    6,222     6,222          

Collective trust fund

    17,551         17,551      

Commodities broad basket fund

    3,304     3,304          

High yield bond fund

    3,104         3,104      

Private real estate

    8,031         8,031      
                   

Total assets at fair value

  $ 68,219   $ 24,495   $ 43,724   $  
                   

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 13—EMPLOYEE BENEFIT PLANS (Continued)

        The fair value of the pension plan assets at March 29, 2012, by asset class are as follows:

 
   
  Fair Value Measurements at March 29, 2012 Using  
(In thousands)
  Total Carrying
Value at
March 29, 2012
  Quoted prices in
active market
(Level 1)
  Significant other
observable inputs
(Level 2)
  Significant
unobservable inputs
(Level 3)
 

Cash and cash equivalents

  $ 15   $ 15   $   $  

U.S. Treasury Securities

    2,413     2,413          

Equity securities:

                         

U.S. companies

    20,060     2,789     17,271      

International companies

    10,169     10,157     12      

Public REITs

    1,416         1,416        

Bond market fund

    13,345     13,345          

Collective trust fund

    6,510         6,510      

Commodities broad basket fund

    3,090     3,090          

High yield bond fund

    2,843         2,843      

Private real estate

    4,375         4,375      
                   

Total assets at fair value

  $ 64,236   $ 31,809   $ 32,427   $  
                   

Defined Contribution Plan

        The Company sponsors a voluntary 401(k) savings plan covering certain employees age 21 or older and who are not covered by a collective bargaining agreement. Effective January 1, 2011, under the Company's 401(k) Savings Plan, the Company began to match 100% of each eligible employee's elective contributions up to 3% and 50% of contributions up to 5% of the employee's eligible compensation. During the first three quarters of fiscal 2011, the Company matched 50% of each eligible employee's elective contributions up to 6% of the employee's eligible compensation. The Company's expense under the 401(k) savings plan was $1,182,000, $1,108,000, $2,676,000, and $1,650,000 for the period August 31, 2012 through December 31, 2012, the period March 30, 2012 through August 30, 2012, and the fiscal years ended March 29, 2012 and March 31, 2011, respectively.

Union-Sponsored Plans

        Certain theatre employees are covered by union-sponsored pension and health and welfare plans. Company contributions into these plans are determined in accordance with provisions of negotiated labor contracts. Contributions aggregated $80,000, $109,000, $261,000, and $380,000, for the period August 31, 2012 through December 31, 2012, the period March 30, 2012 through August 30, 2012, and the fiscal years ended March 29, 2012 and March 31, 2011, respectively.

        As of December 31, 2012, the Company's liability related to the collectively bargained multiemployer pension plan withdrawals was immaterial. At March 29, 2012, the Company's withdrawal liabilities related to multiemployer pension plans where it had ceased making contributions was approximately $2,622,000.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 14—COMMITMENTS AND CONTINGENCIES

        The Company, in the normal course of business, is a party to various ordinary course claims from vendors (including an online ticketing vendor, concession suppliers and film distributors), landlords and other legal proceedings. If management believes that a loss arising from these actions is probable and can reasonably be estimated, the Company records the amount of the loss, or the minimum estimated liability when the loss is estimated using a range and no point is more probable than another. As additional information becomes available, any potential liability related to these actions is assessed and the estimates are revised, if necessary. Management believes that the ultimate outcome of such other matters, individually and in the aggregate, will not have a material adverse effect on the Company's financial position or overall trends in results of operations. However, litigation and claims are subject to inherent uncertainties and unfavorable outcomes could occur. An unfavorable outcome could include monetary damages. If an unfavorable outcome were to occur, there exists the possibility of a material adverse impact on the results of operations in the period in which the outcome occurs or in future periods.

NOTE 15—THEATRE AND OTHER CLOSURE AND DISPOSITION OF ASSETS

        The Company has provided reserves for estimated losses from theatres and screens which have been permanently closed and vacant space with no right to future use. As of December 31, 2012, the Company has reserved $61,344,000 for lease terminations which have either not been consummated or paid, related primarily to eight theatres and certain vacant restaurant space. The Company is obligated under long-term lease commitments with remaining terms of up to 15 years for theatres which have been closed. As of December 31, 2012, base rents aggregated approximately $8,919,000 annually and $79,369,000 over the remaining terms of the leases.

        A rollforward of reserves for theatre and other closure is as follows:

(In thousands)
  From Inception
August 31, 2012
through
December 31, 2012
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

Beginning balance

  $ 62,935   $ 65,471   $ 73,852   $ 6,694  

Theatre and other closure expense—continuing operations

    2,381     4,191     7,449     60,763  

Theatre and other closure expense—discontinued operations

        7,562          

Transfer of lease liability

    994     (697 )   571     11,780  

Net book value of abandoned and other property dispositions

            (485 )   (1,819 )

Foreign currency translation adjustment

    405     (38 )   (511 )   48  

Cash payments

    (5,371 )   (13,554 )   (15,405 )   (3,614 )
                   

Ending balance

  $ 61,344   $ 62,935   $ 65,471   $ 73,852  
                   

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 15—THEATRE AND OTHER CLOSURE AND DISPOSITION OF ASSETS (Continued)

        The current portion of the ending balance is included with accrued expenses and other liabilities and the long-term portion of the ending balance is included with other long-term liabilities in the accompanying Consolidated Balance Sheets.

        During the period of August 31, 2012 through December 31, 2012 and the period of March 30, 2012 through August 30, 2012, the Company recognized $2,381,000 and $4,191,000 of theatre and other closure expense primarily related to the early termination of a lease agreement and accretion on previously closed properties with remaining lease obligations. In addition, the Company closed one theatre with 20 screens located in Canada and paid the landlord $7,562,000 to terminate the lease agreement. See Note 4—Discontinued Operations for additional information.

        During the fifty-two weeks ended March 29, 2012, the Company recognized $7,449,000 of theatre and other closure expense primarily related to accretion on previously closed properties with remaining lease obligations.

        During the fourth quarter of fiscal year ending March 31, 2011, the Company evaluated excess capacity and vacant and under-utilized retail space throughout the theatre circuit. On March 28, 2011, management decided to permanently close 73 underperforming screens and auditoriums in six theatre locations in the United States and Canada while continuing to operate 89 screens at these locations. The permanently closed screens were physically segregated from the screens that are in operation and access to the closed space was restricted. Additionally, management decided to discontinue development of and cease use of (including for storage) certain vacant and under-utilized retail space at four other theatres in the United States and the United Kingdom. As a result of closing the screens and auditoriums and discontinuing the development of and use of the other spaces, the Company recorded a charge of $55,015,000 for theatre and other closure expense, which is included in operating expense in the Consolidated Statements of Operations during the fiscal year ending March 31, 2011. The charge to theatre and other closure expense reflects the discounted contractual amounts of the existing lease obligations of $53,561,000 for the remaining 7 to 13 year terms of the leases as well as expenses incurred for related asset removal and shutdown costs of $1,454,000. A significant portion of each of the affected properties was closed and is no longer used. The charges to theatre and other closure expense do not result in any new, increased or accelerated obligations for cash payments related to the underlying long-term operating lease agreements.

        In addition to the auditorium closures, the Company permanently closed 22 theatres with 144 screens in the U.S. during the fifty-two weeks ended March 31, 2011. The Company recorded $5,748,000 for theatre and other closure expense, which is included in operating expense in the Consolidated Statements of Operations, due primarily to the remaining lease terms of 5 theatre closures and accretion of the closure liability related to theatres closed during prior periods. Of the theatre closures in fiscal 2011, 9 theatres with 35 screens were owned properties that were marketed for sale; 7 theatres with 67 screens that had leases were allowed to expire; a single screen theatre with a management agreement was allowed to expire; and 5 theatres with 41 screens were closed with remaining lease terms in excess of one month.

        Theatre and other closure reserves for leases that have not been terminated are recorded at the present value of the future contractual commitments for the base rents, taxes and maintenance. As of

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 15—THEATRE AND OTHER CLOSURE AND DISPOSITION OF ASSETS (Continued)

December 31, 2012, the future lease obligations are discounted at annual rates ranging from 7.55% to 9.0%.

NOTE 16—FAIR VALUE MEASUREMENTS

        Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts business. The inputs used to develop these fair value measurements are established in a hierarchy, which ranks the quality and reliability of the information used to determine the fair values. The fair value classification is based on levels of inputs. Assets and liabilities that are carried at fair value are classified and disclosed in one of the following categories:

Level 1:   Quoted market prices in active markets for identical assets or liabilities.

Level 2:

 

Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3:

 

Unobservable inputs that are not corroborated by market data.

        Recurring Fair Value Measurements.    The following table summarizes the fair value hierarchy of the Company's financial assets carried at fair value on a recurring basis as of December 31, 2012:

 
   
  Fair Value Measurements at December 31, 2012 Using  
(In thousands)
  Total Carrying
Value at
December 31, 2012
  Quoted prices in
active market
(Level 1)
  Significant other
observable inputs
(Level 2)
  Significant
unobservable inputs
(Level 3)
 

Other long-term assets:

                         

Money Market Mutual Funds

  $ 85   $ 85   $   $  

Equity securities, available-for-sale:

                         

RealD Inc. Common Stock

    13,707     13,707          

Mutual Fund Large U.S. Equity

    1,995     1,995          

Mutual Fund Small/Mid U.S. Equity

    413     413          

Mutual Fund International

    249     249          

Mutual Fund Balance

    150     150          

Mutual Fund Fixed Income

    349     349          
                   

Total assets at fair value

  $ 16,948   $ 16,948   $   $  
                   

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 16—FAIR VALUE MEASUREMENTS (Continued)

        The following table summarizes the fair value hierarchy of the Company's financial assets carried at fair value on a recurring basis as of March 29, 2012:

 
   
  Fair Value Measurements at March 29, 2012 Using  
 
  Total Carrying
Value at
March 29,
2012
 
(In thousands)
  Quoted prices in
active market
(Level 1)
  Significant other
observable inputs
(Level 2)
  Significant
unobservable inputs
(Level 3)
 

Other long-term assets:

                         

Money Market Mutual Funds

  $ 72   $ 72   $   $  

Equity securities, available-for-sale:

                         

RealD Inc. Common Stock

    15,945     15,945          

Mutual Fund Large U.S. Equity

    2,186     2,186          

Mutual Fund Small/Mid U.S. Equity

    332     332          

Mutual Fund International

    146     146          

Mutual Fund Broad U.S. Equity

    34     34          

Mutual Fund Balance

    79     79          

Mutual Fund Fixed Income

    267     267          
                   

Total assets at fair value

  $ 19,061   $ 19,061   $   $  
                   

        Valuation Techniques.    The Company's money market mutual funds are invested in funds that seek to preserve principal, are highly liquid, and therefore are recorded on the balance sheet at the principal amounts deposited, which equals fair value. The equity securities, available-for-sale, primarily consist of common stock and mutual funds invested in equity and fixed income funds and are measured at fair value using quoted market prices. See Note 7—Investments, for further information regarding RealD Inc. common stock and the related other-than-temporary impairment. The unrealized gain on the equity securities recorded in accumulated other comprehensive income as of December 31, 2012 was approximately $1,913,000.

        Nonrecurring Fair Value Measurements.    See Note 2—Merger, for information regarding the Company's assets and liabilities that were measured at fair value on a nonrecurring basis due to the Merger on August 30, 2012. The following table summarizes the fair value hierarchy of the Company's assets that were measured at fair value on a nonrecurring basis during fiscal 2012:

 
   
  Fair Value Measurements During Fiscal 2012 Using    
 
(In thousands)
  Total Carrying
Value
  Quoted prices in
active market
(Level 1)
  Significant
other
observable
inputs (Level 2)
  Significant
unobservable
inputs
(Level 3)
  Total Losses  

Property, net:

                               

Property owned, net

  $ 99           $ 99   $ 285  

Other long-term assets:

                               

Investment in a joint venture

    2,761             2,761     2,742  

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 16—FAIR VALUE MEASUREMENTS (Continued)

        In accordance with the provisions of the impairment of long-lived assets subsections of ASC 360-10, long-lived assets held and used that were considered impaired were written down to their fair value at December 29, 2011, March 29, 2012 and March 31, 2011 of $2,761,000, $99,000 and $10,587,000, respectively. For the fifty-two weeks ending March 29, 2012, the Company recorded impairments of long-lived assets of $285,000 and a charge to equity in earnings of non-consolidated entities of $2,742,000.

        Other Fair Value Measurement Disclosures.    The Company is required to disclose the fair value of financial instruments that are not recognized at fair value in the statement of financial position for which it is practicable to estimate that value:

 
   
  Fair Value Measurements at December 31, 2012 Using  
(In thousands)
  Total Carrying
Value at
December 31, 2012
  Quoted prices in
active market
(Level 1)
  Significant other
observable inputs
(Level 2)
  Significant
unobservable inputs
(Level 3)
 

Current Maturities of Corporate Borrowings

  $ 8,004   $   $ 8,063   $  

Corporate Borrowings

    2,070,671         2,115,919      

        Valuation Technique.    Quoted market prices were used to estimate fair value.

        At March 29, 2012, the carrying amount of the Company's liabilities for corporate borrowings was $2,146,534,000 and the fair value was approximately $2,146,136,000.

NOTE 17—OPERATING SEGMENT

        The Company reports information about operating segments in accordance with ASC 280-10, Segment Reporting, which requires financial information to be reported based on the way management organizes segments within a company for making operating decisions and evaluating performance. The Company has identified one reportable segment for its theatrical exhibition operations.

        Information about the Company's revenues from continuing operations and assets by geographic area is as follows:

Revenues (In thousands)
  From Inception
August 31, 2012
through
December 31, 2012
  March 30, 2012
through
August 30, 2012
  52 Weeks
Ended
March 29, 2012
  52 Weeks
Ended
March 31, 2011
 
 
  (Successor)
  (Predecessor)
  (Predecessor)
  (Predecessor)
 

United States

  $ 808,378   $ 1,202,179   $ 2,507,562   $ 2,346,677  

Canada

    809     885     2,814     4,324  

Europe

    2,305     3,008     11,601     11,537  
                   

Total revenues

  $ 811,492   $ 1,206,072   $ 2,521,977   $ 2,362,538  
                   

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 17—OPERATING SEGMENT (Continued)

Long-term assets, net (In thousands)
  December 31, 2012   March 29, 2012  

United States

  $ 3,974,577   $ 3,231,794  

Canada

    102     2,241  

Europe

    496     204  
           

Total long-term assets(1)

  $ 3,975,175   $ 3,234,239  
           

(1)
Long-term assets are comprised of property, intangible assets, goodwill and other long-term assets.

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION

        The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10, Financial statements of guarantors and issuers of guaranteed securities registered or being registered. Each of the subsidiary guarantors are 100% owned by AMCE. The subsidiary guarantees of AMCE's Notes due 2019 and Notes due 2020 are full and unconditional and joint and several. There are significant restrictions on the Company's ability to obtain funds from any of its subsidiaries through dividends, loans or advances. The Company and its subsidiary guarantor's investments in its consolidated subsidiaries are presented under the equity method of accounting.

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Successor from Inception on August 31, 2012 through December 31, 2012:

(In thousands)
  AMCE   Subsidiary
Guarantors
  Subsidiary
Non-
Guarantors
  Consolidating
Adjustments
  Consolidated AMC
Entertainment Inc.
 

Revenues

                               

Admissions

  $   $ 547,094   $ 1,538   $   $ 548,632  

Concessions

        229,101     638         229,739  

Other theatre

        32,990     131         33,121  
                       

Total revenues

        809,185     2,307         811,492  
                       

Operating costs and expenses

                               

Film exhibition costs

        290,888     673         291,561  

Concession costs

        30,374     171         30,545  

Operating expense

    (21 )   229,199     1,256         230,434  

Rent

        142,698     676         143,374  

General and administrative:

                               

Merger, acquisition and transaction costs

        3,366             3,366  

Management fee

                     

Other

        29,073     37         29,110  

Depreciation and amortization

        71,616     17         71,633  
                       

Operating costs and expenses

    (21 )   797,214     2,830         800,023  
                       

Operating income (loss)

    21     11,971     (523 )       11,469  

Other expense (income)

                               

Equity in net loss of subsidiaries

    48,107     788         (48,895 )    

Other expense

        49             49  

Interest expense:

                               

Corporate borrowings

    45,145     61,280         (61,166 )   45,259  

Capital and financing lease obligations

        1,873             1,873  

Equity in losses of non-consolidated entities

    348     2,114     18         2,480  

Investment expense (income)

    (50,909 )   (9,967 )       61,166     290  
                       

Total other expense

    42,691     56,137     18     (48,895 )   49,951  
                       

Loss from continuing operations before income taxes

    (42,670 )   (44,166 )   (541 )   48,895     (38,482 )

Income tax benefit

        3,500             3,500  
                       

Loss from continuing operations

    (42,670 )   (47,666 )   (541 )   48,895     (41,982 )

Loss from discontinued operations, net of income taxes

        (441 )   (247 )       (688 )
                       

Net loss

  $ (42,670 ) $ (48,107 ) $ (788 ) $ 48,895   $ (42,670 )
                       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Predecessor from March 30, 2012 through August 30, 2012:

(In thousands)
  AMCE   Subsidiary
Guarantors
  Subsidiary
Non-
Guarantors
  Consolidating
Adjustments
  Consolidated AMC
Entertainment Inc.
 

Revenues

                               

Admissions

  $   $ 814,034   $ 1,997   $   $ 816,031  

Concessions

        341,260     870         342,130  

Other theatre

        47,771     140         47,911  
                       

Total revenues

        1,203,065     3,007         1,206,072  
                       

Operating costs and expenses

                               

Film exhibition costs

        435,526     1,013         436,539  

Concession costs

        47,142     184         47,326  

Operating expense

    28     295,708     1,592         297,328  

Rent

        188,283     803         189,086  

General and administrative:

                               

Merger, acquisition and transaction costs

        172             172  

Management fee

        2,500             2,500  

Other

        27,013     12         27,025  

Depreciation and amortization

        80,944     27         80,971  
                       

Operating costs and expenses

    28     1,077,288     3,631         1,080,947  
                       

Operating income (loss)

    (28 )   125,777     (624 )       125,125  

Other expense (income)

                               

Equity in net earnings of subsidiaries

    (88,759 )   (15,269 )       104,028      

Other expense

        960             960  

Interest expense:

                               

Corporate borrowings

    67,366     87,133         (86,885 )   67,614  

Capital and financing lease obligations

        2,390             2,390  

Equity in (earnings) losses of non-consolidated entities

    60     (6,382 )   (1,223 )       (7,545 )

Investment income

    (73,095 )   (13,831 )       86,885     (41 )
                       

Total other expense

    (94,428 )   55,001     (1,223 )   104,028     63,378  
                       

Earnings from continuing operations before income taxes

    94,400     70,776     599     (104,028 )   61,747  

Income tax provision

        2,500             2,500  
                       

Earnings from continuing operations

    94,400     68,276     599     (104,028 )   59,247  

Earnings from discontinued operations, net of income taxes

        20,483     14,670         35,153  
                       

Net earnings

  $ 94,400   $ 88,759   $ 15,269   $ (104,028 ) $ 94,400  
                       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Predecessor fifty-two weeks ended March 29, 2012:

(In thousands)
  AMCE   Subsidiary
Guarantors
  Subsidiary
Non-Guarantors
  Consolidating
Adjustments
  Consolidated AMC
Entertainment Inc.
 

Revenues

                               

Admissions

  $   $ 1,712,943   $ 8,352   $   $ 1,721,295  

Concessions

        687,083     2,597         689,680  

Other theatre

        110,349     653         111,002  
                       

Total revenues

        2,510,375     11,602         2,521,977  

Operating costs and expenses

                               

Film exhibition costs

        912,405     3,649         916,054  

Concession costs

        93,062     519         93,581  

Operating expense

    227     689,239     7,317         696,783  

Rent

        442,610     2,716         445,326  

General and administrative:

                               

Merger, acquisition and transaction costs

    85     2,537             2,622  

Management fee

        5,000             5,000  

Other

        51,695     81         51,776  

Depreciation and amortization

        212,576     241         212,817  

Impairment of long-lived assets

        285             285  
                       

Operating costs and expenses

    312     2,409,409     14,523         2,424,244  
                       

Operating income (loss)

    (312 )   100,966     (2,921 )       97,733  

Other expense (income)

                               

Equity in loss of consolidated subsidiaries

    93,172     3,658         (96,830 )    

Other expense

        1,402             1,402  

Interest expense

                               

Corporate borrowings

    160,849     206,205         (205,409 )   161,645  

Capital and financing lease obligations

        5,968             5,968  

Equity in (earnings) loss of non-consolidated entities

    2,359     (15,465 )   547         (12,559 )

Investment expense (income)

    (175,229 )   (12,539 )       205,409     17,641  
                       

Total other expense

    81,151     189,229     547     (96,830 )   174,097  
                       

Loss from continuing operations before income taxes

    (81,463 )   (88,263 )   (3,468 )   96,830     (76,364 )

Income tax provision

    525     1,490             2,015  
                       

Loss from continuing operations

    (81,988 )   (89,753 )   (3,468 )   96,830     (78,379 )

Loss from discontinued operations, net of income taxes

        (3,419 )   (190 )       (3,609 )
                       

Net loss

  $ (81,988 ) $ (93,172 ) $ (3,658 ) $ 96,830   $ (81,988 )
                       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Predecessor fifty-two weeks ended March 31, 2011:

(In thousands)
  AMCE   Subsidiary
Guarantors
  Subsidiary
Non-Guarantors
  Consolidating
Adjustments
  Consolidated AMC
Entertainment Inc.
 

Revenues

                               

Admissions

  $   $ 1,636,528   $ 8,309   $   $ 1,644,837  

Concessions

        642,565     2,432         644,997  

Other theatre

        71,905     799         72,704  
                       

Total revenues

        2,350,998     11,540         2,362,538  

Operating costs and expenses

                               

Film exhibition costs

        856,870     3,600         860,470  

Concession costs

        79,232     531         79,763  

Operating expense

        671,379     19,885         691,264  

Rent

        446,783     5,091         451,874  

General and administrative:

                               

Merger, acquisition and transaction costs

        14,085             14,085  

Management fee

        5,000             5,000  

Other

        58,011     125         58,136  

Depreciation and amortization

        211,209     235         211,444  

Impairment of long-lived assets

        12,779             12,779  
                       

Operating costs and expenses

        2,355,348     29,467         2,384,815  
                       

Operating loss

        (4,350 )   (17,927 )       (22,277 )

Other expense (income)

                               

Equity in loss of consolidated subsidiaries

    135,042     28,545         (163,587 )    

Other expense

    367     27,480             27,847  

Interest expense

                               

Corporate borrowings

    143,562     181,973         (182,013 )   143,522  

Capital and financing lease obligations

        6,198             6,198  

Equity in (earnings) loss of non-consolidated entities

    (490 )   (26,959 )   10,271         (17,178 )

Gain on NCM transactions

        (64,441 )           (64,441 )

Investment income

    (156,328 )   (26,069 )       182,013     (384 )
                       

Total other expense

    122,153     126,727     10,271     (163,587 )   95,564  
                       

Loss from continuing operations before income taxes

    (122,153 )   (131,077 )   (28,198 )   163,587     (117,841 )

Income tax provision

    700     1,250             1,950  
                       

Loss from continuing operations

    (122,853 )   (132,327 )   (28,198 )   163,587     (119,791 )

Loss from discontinued operations, net of income taxes

        (2,715 )   (347 )       (3,062 )
                       

Net loss

  $ (122,853 ) $ (135,042 ) $ (28,545 ) $ 163,587   $ (122,853 )
                       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Successor as of December 31, 2012:

(In thousands)
  AMCE   Subsidiary
Guarantors
  Subsidiary
Non-Guarantors
  Consolidating
Adjustments
  Consolidated AMC
Entertainment Inc.
 

Assets

                               

Current assets:

                               

Cash and equivalents

  $ 308   $ 89,168   $ 41,452   $   $ 130,928  

Receivables, net

    20     97,004     84         97,108  

Other current assets

        69,150     1,477         70,627  
                       

Total current assets

    328     255,322     43,013         298,663  

Investment in equity of subsidiaries

    888,865     16,980         (905,845 )    

Property, net

        1,147,874     85         1,147,959  

Intangible assets, net

        243,180             243,180  

Intercompany advances

    1,958,022     (1,958,901 )   879          

Goodwill

        2,251,296             2,251,296  

Other long-term assets

    59     332,199     482         332,740  
                       

Total assets

  $ 2,847,274   $ 2,287,950   $ 44,459   $ (905,845 ) $ 4,273,838  
                       

Liabilities and Stockholder's Equity

                               

Current liabilities:

                               

Accounts payable

  $   $ 225,754   $ 466   $   $ 226,220  

Accrued expenses and other liabilities

    14     154,903     369         155,286  

Deferred revenues and income

        171,105     17         171,122  

Current maturities of corporate borrowings and capital and financing lease obligations

    8,004     6,276             14,280  
                       

Total current liabilities

    8,018     558,038     852         566,908  

Corporate borrowings

    2,070,671                 2,070,671  

Capital and financing lease obligations

        116,369             116,369  

Exhibitor services agreement

        318,154             318,154  

Other long-term liabilities

        406,524     26,627         433,151  
                       

Total liabilities

    2,078,689     1,399,085     27,479         3,505,253  

Stockholder's equity

    768,585     888,865     16,980     (905,845 )   768,585  
                       

Total liabilities and stockholder's equity

  $ 2,847,274   $ 2,287,950   $ 44,459   $ (905,845 ) $ 4,273,838  
                       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Predecessor as of March 29, 2012:

(In thousands)
  AMCE   Subsidiary
Guarantors
  Subsidiary
Non-Guarantors
  Consolidating
Adjustments
  Consolidated AMC
Entertainment Inc.
 

Assets

                               

Current assets:

                               

Cash and equivalents

  $ 686   $ 232,009   $ 39,642   $   $ 272,337  

Receivables, net

    552     42,947     51         43,550  

Other current assets

        85,681     2,185         87,866  
                       

Total current assets

    1,238     360,637     41,878         403,753  

Investment in equity of subsidiaries

    221,951     51,981         (273,932 )    

Property, net

        883,219     478         883,697  

Intangible assets, net

        135,024             135,024  

Intercompany advances

    2,078,742     (2,130,247 )   51,505          

Goodwill

        1,923,667             1,923,667  

Other long-term assets

    35,064     256,611     176         291,851  
                       

Total assets

  $ 2,336,995   $ 1,480,892   $ 94,037   $ (273,932 ) $ 3,637,992  
                       

Liabilities and Stockholder's Equity

                               

Current liabilities:

                               

Accounts payable

  $ 94   $ 195,117   $ 727   $   $ 195,938  

Accrued expenses and other liabilities

    36,027     112,056     1,251         149,334  

Deferred revenues and income

        174,314     41         174,355  

Current maturities of corporate borrowings and capital and financing lease obligations

    59,039     2,807             61,846  
                       

Total current liabilities

    95,160     484,294     2,019         581,473  

Corporate borrowings

    2,087,495                 2,087,495  

Capital and financing lease obligations

        59,413             59,413  

Deferred revenues—for exhibitor services agreement

        328,442             328,442  

Other long-term liabilities

        386,792     40,037         426,829  
                       

Total liabilities

    2,182,655     1,258,941     42,056         3,483,652  

Stockholder's equity

    154,340     221,951     51,981     (273,932 )   154,340  
                       

Total liabilities and stockholder's equity

  $ 2,336,995   $ 1,480,892   $ 94,037   $ (273,932 ) $ 3,637,992  
                       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Successor from Inception on August 31, 2012 through December 31, 2012:

(In thousands)
  AMCE   Subsidiary
Guarantors
  Subsidiary
Non-Guarantors
  Consolidating
Adjustments
  Consolidated AMC
Entertainment Inc.
 

Cash flows from operating activities:

                               

Net cash provided by (used in) operating activities

  $ (21,605 ) $ 143,430   $ (47,933 ) $   $ 73,892  
                       

Cash flows from investing activities:

                               

Capital expenditures

        (72,765 )   (9 )       (72,774 )

Merger

        3,110             3,110  

Acquisition of Rave theatres, net of cash acquired

        (87,555 )           (87,555 )

Proceeds from the disposition of long-term assets

        112     (22 )       90  

Investments in non-consolidated entities, net

        (1,173 )   (21 )       (1,194 )

Other, net

        (575 )           (575 )
                       

Net cash used in investing activities

        (158,846 )   (52 )       (158,898 )
                       

Cash flows from financing activities:

                               

Principal payments under Term Loan

    (4,002 )               (4,002 )

Principal payments under capital and financing lease obligations

        (875 )           (875 )

Capital contributions

    100,000                 100,000  

Change in construction payables

        22,487             22,487  

Change in intercompany advances

    (74,376 )   23,867     50,509          
                       

Net cash provided by financing activities

    21,622     45,479     50,509         117,610  
                       

Effect of exchange rate changes on cash and equivalents

        3,779     (3,986 )       (207 )
                       

Net increase (decrease) in cash and equivalents

    17     33,842     (1,462 )       32,397  

Cash and equivalents at beginning of period

    291     55,326     42,914         98,531  
                       

Cash and equivalents at end of period

  $ 308   $ 89,168   $ 41,452   $   $ 130,928  
                       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Predecessor March 30, 2012 through August 30, 2012:

(In thousands)
  AMCE   Subsidiary
Guarantors
  Subsidiary
Non-Guarantors
  Consolidating
Adjustments
  Consolidated AMC
Entertainment Inc.
 

Cash flows from operating activities:

                               

Net cash provided by (used in) operating activities

  $ (3,735 ) $ 82,423   $ 809   $   $ 79,497  
                       

Cash flows from investing activities:

                               

Capital expenditures

        (40,095 )   (21 )       (40,116 )

Proceeds from the disposition of long-term assets

        7,134     157         7,291  

Investments in non-consolidated entities, net

        (17 )   1,606         1,589  

Other, net

        205             205  
                       

Net cash provided by (used in) investing activities

        (32,773 )   1,742         (31,031 )
                       

Cash flows from financing activities:

                               

Repurchase of Senior Subordinated Notes due 2014

    (191,035 )               (191,035 )

Principal payments under Term Loan

    (4,002 )               (4,002 )

Principal payments under capital and financing lease obligations

        (1,298 )           (1,298 )

Deferred financing costs

    (2,378 )               (2,378 )

Change in construction payables

        (23,575 )           (23,575 )

Change in intercompany advances

    200,755     (200,872 )   117          
                       

Net cash provided by (used in) financing activities

    3,340     (225,745 )   117         (222,288 )
                       

Effect of exchange rate changes on cash and equivalents

        (588 )   604         16  
                       

Net increase (decrease) in cash and equivalents

    (395 )   (176,683 )   3,272         (173,806 )

Cash and equivalents at beginning of period

    686     232,009     39,642         272,337  
                       

Cash and equivalents at end of period

  $ 291   $ 55,326   $ 42,914   $   $ 98,531  
                       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Predecessor fifty-two weeks ended March 29, 2012:

(In thousands)
  AMCE   Subsidiary
Guarantors
  Subsidiary
Non-Guarantors
  Consolidating
Adjustments
  Consolidated AMC
Entertainment Inc.
 

Cash flows from operating activities:

                               

Net cash provided by (used in) operating activities

  $ 21,673   $ 177,633   $ (1,979 ) $   $ 197,327  
                       

Cash flows from investing activities:

                               

Capital expenditures

        (139,195 )   (164 )       (139,359 )

Proceeds from disposition of long-term assets

        1,474             1,474  

Investments in non-consolidated entities, net

    1,049     (27,928 )   (1 )       (26,880 )

Proceeds from sale/leaseback of digital projection equipment

        953             953  

Other, net

        98             98  
                       

Net cash provided by (used in) investing activities

    1,049     (164,598 )   (165 )       (163,714 )
                       

Cash flows from financing activities:

                               

Proceeds from issuance of Term Loan due 2018

    297,000                 297,000  

Repayment of Term Loan 2013

    (140,657 )               (140,657 )

Repurchase of Senior Subordinated Notes due 2014

    (108,965 )               (108,965 )

Principal payments under Term Loan

    (4,875 )               (4,875 )

Principal payments under capital and financing lease obligations

        (3,422 )           (3,422 )

Deferred financing costs

    (6,002 )               (6,002 )

Change in construction payables

        13,512             13,512  

Dividends paid to Parent

    (109,581 )               (109,581 )

Change in intercompany advances

    51,044     (52,427 )   1,383          
                       

Net cash provided by (used in) financing activities

    (22,036 )   (42,337 )   1,383         (62,990 )
                       

Effect of exchange rate changes on cash and equivalents

        215     341         556  
                       

Net increase (decrease) in cash and equivalents

    686     (29,087 )   (420 )       (28,821 )

Cash and equivalents at beginning of period

        261,096     40,062         301,158  
                       

Cash and equivalents at end of period

  $ 686   $ 232,009   $ 39,642   $   $ 272,337  
                       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 18—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Predecessor fifty-two weeks ended March 31, 2011:

(In thousands)
  AMCE   Subsidiary
Guarantors
  Subsidiary
Non-Guarantors
  Consolidating
Adjustments
  Consolidated AMC
Entertainment Inc.
 

Cash flows from operating activities:

                               

Net cash provided by operating activities

  $ 47,587   $ 44,144   $ 341   $   $ 92,072  
                       

Cash flows from investing activities:

                               

Capital expenditures

        (128,952 )   (395 )       (129,347 )

Acquisition of Kerasotes, net of cash acquired

        (280,606 )           (280,606 )

Proceeds from NCM, Inc. stock sale

        102,224             102,224  

Proceeds from disposition of long-term assets

        58,391             58,391  

Investments in non-consolidated entities, net

        (1,819 )   200         (1,619 )

Proceeds from sale/leaseback of digital projection equipment

        4,905             4,905  

Proceeds from disposition of Cinemex, net of cash disposed

        1,840             1,840  

Other, net

        (5,825 )           (5,825 )
                       

Net cash used in investing activities

        (249,842 )   (195 )       (250,037 )
                       

Cash flows from financing activities:

                               

Proceeds from issuance of Senior Subordinated Notes due 2020

    600,000                 600,000  

Repurchase of Senior. Subordinated Notes due 2016

    (325,000 )               (325,000 )

Payment of tender offer and consent solicitation consideration on Senior Subordinated Notes due 2016

    (5,801 )               (5,801 )

Principal payments under Term Loan

    (6,500 )               (6,500 )

Principal payments under capital and financing lease obligations

        (4,194 )           (4,194 )

Deferred financing costs

    (14,642 )               (14,642 )

Change in construction payables

        (727 )           (727 )

Dividends paid to Parent

    (278,258 )               (278,258 )

Change in intercompany advances

    (17,386 )   16,623     763          
                       

Net cash provided by (used in) financing activities

    (47,587 )   11,702     763         (35,122 )
                       

Effect of exchange rate changes on cash and equivalents

        (150 )   (948 )       (1,098 )
                       

Net decrease in cash and equivalents

        (194,146 )   (39 )       (194,185 )

Cash and equivalents at beginning of period

        455,242     40,101         495,343  
                       

Cash and equivalents at end of period

  $   $ 261,096   $ 40,062   $   $ 301,158  
                       

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AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Periods Ended December 31, 2012, March 29, 2012 and March 31, 2011

NOTE 19—RELATED PARTY TRANSACTIONS

Amended and Restated Fee Agreement

        Upon the consummation of a change of control transaction or an initial public offering, each of the Sponsors were entitled to receive, in lieu of quarterly payments of the annual management fee, a fee equal to the net present value of the aggregate annual management fee that would have been payable to the Sponsors during the remainder of the term of the fee agreement (assuming a twelve year term from the date of the original fee agreement), calculated using the treasury rate having a final maturity date that is closest to the twelfth anniversary of the date of the original fee agreement date. The Sponsors waived their right to the payment described above that was triggered by the Merger. As a result of the Merger, the Company ceased paying the annual management fee of $5,000,000 to the Sponsors.

Control Arrangement

        Wanda has the ability to control the Company's affairs and policies and the election of directors and appointment of management.

Equity Method Investees

        In February 2007, Mr. Travis Reid was hired as the chief executive officer of DCIP, a joint venture between AMCE, Cinemark and Regal formed to explore the possibility of implementing digital cinema in our theatres and to create a financing model and establish agreements with major motion picture studios for the implementation of digital cinema. Mr. Reid resigned as CEO of DCIP in October 2010. Mr. Reid was a member of the Company's Board of Directors until October 15, 2010.

        See Note 7—Investments for further information about related party transactions between us and our equity method investees.

Market Making Transactions

        On December 15, 2010, AMCE sold $600,000,000 in aggregate principal amount of its Notes due 2020. J.P. Morgan Securities LLC, an affiliate of J.P. Morgan Partners, LLC, which prior to the Merger owned approximately 20.8% of Parent, and Credit Suisse Securities (USA) LLC, whose affiliates prior to the Merger owned approximately 1.62% of Parent, were initial purchasers of the Notes due 2020. As of the Merger, the Company is not a related party to J.P. Morgan Partners, LLC and Credit Suisse Securities (USA) LLC.

        On June 9, 2009, AMCE sold $600,000,000 in aggregate principal amount of its Notes due 2019. J.P. Morgan Securities LLC, an affiliate of J.P. Morgan Partners, LLC, which prior to the Merger owned approximately 20.8% of Parent, and Credit Suisse Securities (USA) LLC, whose affiliates prior to the Merger owned approximately 1.62% of Parent, were initial purchasers of the Notes due 2020. As of the Merger, the Company is not a related party to J.P. Morgan Partners, LLC and Credit Suisse Securities (USA) LLC.

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PART IV

Item 15.    Exhibits, Financial Statement Schedules

  (a)(1)   The following financial statements are included in Part II Item 8.:

 
  Page  

Reports of Independent Registered Public Accounting Firms

    35  

Consolidated Statements of Operations—Period August 31, 2012 through December 31, 2012, period March 30, 2012 through August 30, 2012, and fiscal years ended March 29, 2012 and March 31, 2011

    36  

Consolidated Balance Sheets—December 31, 2012 and March 29, 2012

    38  

Consolidated Statements of Cash Flows—Period August 31, 2012 through December 31, 2012, period March 30, 2012 through August 30, 2012, and fiscal years ended March 29, 2012 and March 31, 2011

    39  

Consolidated Statements of Stockholder's Equity (Deficit)—Period August 31, 2012 through December 31, 2012, period March 30, 2012 through August 30, 2012, and fiscal years ended March 29, 2012 and March 31, 2011

    40  

Notes to Consolidated Financial Statements—Periods ended December 31, 2012, March 29, 2012 and March 31, 2011

    41  

 

  (a)(2)   Financial Statement Schedules—All schedules have been omitted because the necessary information is included in the Notes to the Consolidated Financial Statements.

 

  (b)   Exhibits

        A list of exhibits required to be filed as part of this report on Form 10-K is set forth in the Exhibit Index, which immediately precedes such exhibits.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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.

 

 

By:

 

/s/ CHRIS A. COX

Chris A. Cox
Senior Vice President and
Chief Accounting Officer

 

 

Date: December 27, 2013

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ LIN ZHANG

Lin Zhang
  Chairman of the Board   December 27, 2013

/s/ GERARDO I. LOPEZ

Gerardo I. Lopez

 

Chief Executive Officer, Director and President

 

December 27, 2013

/s/ ANTHONY J. SAICH

Anthony J. Saich

 

Director

 

December 27, 2013

/s/ CHAOHUI LIU

Chaohui Liu

 

Director

 

December 27, 2013

/s/ NING YE

Ning Ye

 

Director

 

December 27, 2013

/s/ CRAIG R. RAMSEY

Craig R. Ramsey

 

Executive Vice President and Chief Financial Officer

 

December 27, 2013

/s/ KEVIN M. CONNOR

Kevin M. Connor

 

Senior Vice President, General Counsel and Secretary

 

December 27, 2013

/s/ CHRIS A. COX

Chris A. Cox

 

Senior Vice President and Chief Accounting Officer

 

December 27, 2013

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EXHIBIT INDEX

Exhibit
Number
  Description
  2.1   Unit Purchase Agreement among Kerasotes ShowPlace Theatres Holdings, LLC, Kerasotes ShowPlace Theatres, LLC, ShowPlace Theatres Holding Company, LLC, AMC Showplace Theatres, Inc. and American Multi-Cinema, Inc. (incorporated by reference from Exhibit 2.1 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on July 14, 2010)
        
  3.1   Restated and Amended Certificate of Incorporation of AMC Entertainment Inc. (as amended on December 2, 1997 and September 18, 2001 and December 23, 2004) (incorporated by reference from Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 1-8747) filed December 27, 2004).
        
  3.2   Amended and Restated Bylaws of AMC Entertainment Inc. (incorporated by reference from Exhibit 3.2 to the Company's Current Report on Form 8-K (File No. 1-8747) filed December 27, 2004).
        
      Certificates of Incorporation or corresponding instrument, with amendments, of the following additional registrants:
        
  3.3.1   Loews Citywalk Theatre Corporation (incorporated by reference from Exhibit 3.3.1 to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006).
        
  3.3.2   LCE Mexican Holdings, Inc. (incorporated by reference from Exhibit 3.3.9 to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006).
        
  3.3.3   AMC Card Processing Services, Inc. (incorporated by reference from Exhibit 3.3.93 to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006).
        
  3.3.4   AMC Entertainment International, Inc. (incorporated by reference from Exhibit 3.3.94 to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006).
        
  3.3.5   American Multi-Cinema, Inc. (incorporated by reference from Exhibit 3.3.10 to the Company's Form 10-Q (File No. 1-8747) filed February 8, 2008).
        
  3.3.6   Club Cinema of Mazza, Inc. (incorporated by reference from Exhibit 3.3.97 to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006).
        
  3.3.7   AMC ITD, Inc. (incorporated by reference from Exhibit 3.3.10 to AMCE's Registration Statement on Form S-4 (File No. 333-171819) filed on January 21, 2011).
        
  3.3.8   AMC Theatres of New Jersey, Inc. (incorporated by reference from Exhibit 3.3.8 to AMCE's Form 10-Q (File No. 1-8747) filed on November 9, 2012).
        
  3.4   By-laws of the following Additional Registrants: (incorporated by reference from Exhibit 3.4 to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006):
        
      Loews Citywalk Theatre Corporation
 
   

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Exhibit
Number
  Description
  3.5   By-laws of LCE Mexican Holdings, Inc. (incorporated by reference from Exhibit 3.5 to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006).
        
  3.6   By-laws of AMC Card Processing Services, Inc. (incorporated by reference from Exhibit 3.20 to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006).
        
  3.7   By-laws of AMC Entertainment International, Inc. (incorporated by reference from Exhibit 3.21 to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006).
        
  3.8   By-laws of American Multi-Cinema, Inc. (incorporated by reference from Exhibit 3.9 to the Company's Form 10-Q (File No. 1-8747) filed February 8, 2008).
        
  3.9   By-laws of Club Cinema of Mazza, Inc. (incorporated by reference from Exhibit 3.24 to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006).
        
  3.10   By-laws of AMC ITD, Inc. (incorporated by reference from Exhibit 3.11 to AMCE's Registration Statement on Form S-4 (File No. 333-171819) filed on January 21, 2011).
        
  3.11   By-laws of AMC Theatres of New Jersey, Inc. (incorporated by reference from Exhibit 3.11 to AMCE's Form 10-Q (File No. 1-8747) filed on November 9, 2012).
        
  4.1(a ) Credit Agreement, dated January 26, 2006 among AMC Entertainment Inc., Grupo Cinemex, S.A. de C.V., Cadena Mexicana de Exhibicion, S.A. de C.V., the Lenders and the Issuers named therein, Citicorp U.S. and Canada, Inc. and Banco Nacional de Mexico, S.A., Integrante del Groupo Financiero Banamex. (incorporated by reference from Exhibit 10.7 to the Company's Form 8-K (File No. 1-8747) filed January 31, 2006).
        
  4.1(b ) Guaranty, dated January 26, 2006 by AMC Entertainment Inc. and each of the other Guarantors party thereto, in favor of the Guaranteed Parties named therein (incorporated by reference from Exhibit 10.5 to the Company's Form 8-K (File No. 1-8747) filed January 31, 2006).
        
  4.1(c ) Pledge and Security Agreement, dated January 26, 2006, by AMC Entertainment Inc. and each of the other Grantors party thereto in favor of Citicorp U.S. and Canada, Inc., as agent for the Secured Parties (incorporated by reference from Exhibit 10.9 to the Company's Current Report on Form 8-K (File No. 1-8747) filed January 31, 2006).
        
  4.1(d ) Consent and Release, dated as of April 17, 2006, by and between AMC Entertainment Inc. and Citicorp U.S. and Canada, Inc. (incorporated by reference from Exhibit 4.1(d) to the Company's Registration Statement on Form S-4 (File No. 333-133574) filed April 27, 2006).
        
  4.1(e ) Amendment No. 1 to Credit Agreement, dated as of February 14, 2007, between AMC Entertainment Inc., and Citicorp North America, as Administrative Agent (incorporated by reference from Exhibit 10.4 to the Company's Current Report on Form 8-K (File No. 1-8747) filed February 20, 2007).
        
  4.1(f ) Amendment No. 2 to Credit Agreement, dated as of March 13, 2007, between AMC Entertainment Inc., and Citicorp North America, as Administrative Agent (incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 1-8747) filed March 15, 2007).
 
   

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Exhibit
Number
  Description
  4.1(g ) Amendment No. 3 to Credit Agreement, dated December 15, 2010 among AMC Entertainment Inc., Citibank, N.A. as issuer and Citicorp North America, Inc., as swing lender and as administrative agent (incorporated by reference from Exhibit 10.1 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 17, 2010).
        
  4.1(h ) Waiver and Amendment No. 4 to Senior Secured Credit Facility, dated July 2, 2012 by and between AMC Entertainment Inc. and Citicorp North America, Inc., as administrative agent (incorporated by reference from Exhibit 10.1 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on July 3, 2012).
        
  4.2(a ) Indenture, dated as of June 9, 2009, respecting AMCE's 8.75% Senior Notes due 2019, by and among AMCE, a Delaware corporation, the Guarantors party thereto from time to time and U.S. Bank National Association, as Trustee (incorporated by reference from Exhibit 4.1 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on June 9, 2009).
        
  4.2(b ) First Supplemental Indenture, dated June 24, 2010, respecting AMC Entertainment Inc.'s 8.75% Senior Notes due 2019 (incorporated by reference from Exhibit 4.3 to AMCE's Form 10-Q (File No. 1-8747) filed on August 10, 2010).
        
  4.2(c ) Second Supplemental Indenture, dated November 30, 2010, respecting AMC Entertainment Inc.'s 8.75% Senior Notes due 2019, pursuant to which AMC ITD, Inc. guaranteed the 8.75% Senior Notes due 2019 (incorporated by reference from Exhibit 4.4 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 17, 2010).
        
  4.3   Registration Rights Agreement, dated as of June 9, 2009, respecting AMCE's 8.75% Senior Notes due 2019, by and among AMCE, the Guarantors party thereto from time to time, Credit Suisse Securities (USA) LLC, for itself and on behalf of the other Initial Purchasers, and J.P. Morgan Securities Inc., as Market Maker (incorporated by reference from Exhibit 4.2 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on June 9, 2009).
        
  4.4   Fourth Supplemental Indenture, dated as of June 21, 2012, respecting AMC Entertainment Inc.'s 8.75% Senior Notes due 2019, between AMC Entertainment Inc. and U.S. Bank National Association, as trustee (incorporated by reference from Exhibit 4.1 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on June 22, 2012).
        
  4.5   Indenture, dated as of December 15, 2010, respecting AMC Entertainment Inc.'s 9.75% Senior Subordinated Notes due 2020, among AMC Entertainment Inc., the Guarantors named therein and U.S. Bank National Association, as trustee (incorporated by reference from Exhibit 4.1 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 17, 2010).
        
  4.6   Registration Rights Agreement, dated December 15, 2010, respecting AMC Entertainment Inc.'s 9.75% Senior Subordinated Notes due 2020, among Goldman, Sachs & Co., J.P. Morgan Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Foros Securities LLC, as representatives of the initial purchasers of the 2020 Senior Subordinated Notes and J.P. Morgan Securities LLC, as market maker (incorporated by reference from Exhibit 4.2 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 17, 2010).
 
   

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Exhibit
Number
  Description
  4.7   Second Supplemental Indenture, dated as of June 21, 2012, respecting AMC Entertainment Inc.'s 9.75% Senior Subordinated Notes due 2020, between AMC Entertainment Inc. and U.S. Bank National Association, as trustee (incorporated by reference from Exhibit 4.2 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on June 22, 2012).
        
  4.8   Incremental Amendment, dated as of February 22, 2012, by and among AMC Entertainment Inc., a Delaware corporation as Borrower, Citicorp North America, Inc. as Administrative Agent under the Credit Agreement and Citicorp North America, Inc., as the Initial Term Loan due 2018 Lender and the other Loan Parties thereto (incorporated by reference from Exhibit 4.8 to AMCE's Form 10-K (File No. 1-8747) filed on May 25, 2012).
        
  10.1   Consent Decree, dated December 21, 2005, by and among Marquee Holdings Inc., LCE Holdings, Inc. and the State of Washington (incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on December 27, 2005).
        
  10.2   Hold Separate Stipulation and Order, dated December 21, 2005, by and among Marquee Holdings Inc., LCE Holdings, Inc. and the State of Washington (incorporated by reference from Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on December 27, 2005).
        
  10.3   Final Judgment, dated December 20, 2005, by and among Marquee Holdings Inc., LCE Holdings, Inc. and the Antitrust Division of the United States Department of Justice (incorporated by reference from Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on December 27, 2005).
        
  10.4   Hold Separate Stipulation and Order, dated December 20, 2005, by and among Marquee Holdings Inc., LCE Holdings and the Antitrust Division of the United States Department of Justice (incorporated by reference from Exhibit 10.4 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on December 27, 2005).
        
  10.5   District of Columbia Final Judgment, dated December 21, 2005, by and among Marquee Holdings Inc., LCE Holdings, Inc. and the District of Columbia (incorporated by reference from Exhibit 10.5 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on December 27, 2005).
        
  10.6   Stipulation for Entry into Final Judgment, dated December 20, 2005, by and among Marquee Holdings Inc., LCE Holdings, Inc. and the State of California (incorporated by reference from Exhibit 10.6 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on December 27, 2005).
        
  10.7   Stipulated Final Judgment, dated December 20, 2005, by and among Marquee Holdings Inc., LCE Holdings, Inc. and the State of California (incorporated by reference from Exhibit 10.7 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on December 27, 2005).
        
  10.8   Amended and Restated Certificate of Incorporation of AMC Entertainment Holdings, Inc. (incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on June 13, 2007)
 
   

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Exhibit
Number
  Description
  10.9   Stockholders Agreement of AMC Entertainment Holdings, Inc., dated June 11, 2007, among AMC Entertainment Holdings, Inc. and the stockholders of AMC Entertainment Holdings, Inc. party thereto. (incorporated by reference from Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on June 13, 2007)
        
  10.10   Management Stockholders Agreement of AMC Entertainment Holdings, Inc., dated June 11, 2007, among AMC Entertainment Holdings, Inc. and the stockholders of AMC Entertainment Holdings, Inc. party thereto. (incorporated by reference from Exhibit 10.4 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on June 13, 2007)
        
  10.11   Continuing Service Agreement, dated January 26, 2006, among AMC Entertainment Inc. (as successor to Loews Cineplex Entertainment Corporation) and Travis Reid, and, solely for the purposes of its repurchase obligations under Section 7 thereto, Marquee Holding Inc. (incorporated by reference from Exhibit 10.4 to the Company's Form 8-K (File No. 1-8747) filed on January 31, 2006).
        
  10.12   Non-Qualified Stock Option Agreement, dated January 26, 2006, between Marquee Holdings Inc. and Travis Reid (incorporated by reference from Exhibit 10.5 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on January 31, 2006).
        
  10.13   Fee Agreement, dated June 11, 2007, by and among AMC Entertainment Holdings, Inc., Marquee Holdings Inc., AMC Entertainment Inc., J.P. Morgan Partners (BHCA), L.P., Apollo Management V, L.P., Apollo Investment Fund V, L.P., Apollo Overseas Partners V, L.P., Apollo Netherlands Partners V(A), L.P., Apollo Netherlands partners V(B), L.P., Apollo German Partners V GmbH & Co KG, Bain Capital Partners, LLC, TC Group, L.L.C., a Delaware limited liability company and Applegate and Collatos, Inc. (incorporated by reference from Exhibit 10.7 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on June 13, 2007).
        
  10.14   American Multi-Cinema, Inc. Savings Plan, a defined contribution 401(k) plan, restated January 1, 1989, as amended (incorporated by reference from Exhibit 10.6 to AMCE's Form S-1 (File No. 33-48586) filed June 12, 1992, as amended).
        
  10.15(a ) Defined Benefit Retirement Income Plan for Certain Employees of American Multi-Cinema, Inc., as Amended and Restated, effective December 31, 2006, and as Frozen, effective December 31, 2006 (incorporated by reference from Exhibit 10.15(a) to AMC Entertainment Inc.'s Form 10-K (File No. 1-8747) filed June 18, 2007).
        
  10.15(b ) AMC Supplemental Executive Retirement Plan, as Amended and Restated, generally effective January 1, 2006, and as Frozen, effective December 31, 2006 (incorporated by reference from Exhibit 10.15(b) to AMC Entertainment Inc.'s Form 10-K (File No. 1-8747) filed June 18, 2007).
        
  10.16   Division Operations Incentive Program (incorporated by reference from Exhibit 10.15 to AMCE's Form S-1 (File No. 33-48586) filed June 12, 1992, as amended).
        
  10.17   Summary of American Multi-Cinema, Inc. Executive Incentive Program (Incorporated by reference from Exhibit 10.36 to AMCE's Registration Statement on Form S-2 (File No. 33-51693) filed December 23, 1993).
        
  10.18   American Multi-Cinema, Inc. Retirement Enhancement Plan, as Amended and Restated, effective January 1, 2006, and as Frozen, effective December 31, 2006 (incorporated by reference from Exhibit 10.20 to AMC Entertainment Inc.'s Form 10-K (File No. 1-8747) filed June 18, 2007).
 
   

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Table of Contents

Exhibit
Number
  Description
  10.19   AMC Non-Qualified Deferred Compensation Plan, as Amended and Restated, effective January 1, 2005 (incorporated by reference from Exhibit 10.22 to AMC Entertainment's Form 10-K (File No. 1-8747) filed on June 18, 2007).
        
  10.20   American Multi-Cinema, Inc. Executive Savings Plan (incorporated by reference from Exhibit 10.28 to AMCE's Registration Statement on Form S-4 (File No. 333-25755) filed April 24, 1997).
        
  10.21   Agreement of Sale and Purchase dated November 21, 1997 among American Multi-Cinema, Inc. and AMC Realty, Inc., as Seller, and Entertainment Properties Trust, as Purchaser (incorporated by reference from Exhibit 10.1 of the Company's Current Report on Form 8-K (File No. 1-8747) filed December 9, 1997).
        
  10.22   Option Agreement dated November 21, 1997 among American Multi-Cinema, Inc. and AMC Realty, Inc., as Seller, and Entertainment Properties Trust, as Purchaser (incorporated by reference from Exhibit 10.2 of the Company's Current Report on Form 8-K (File No. 1-8747) filed December 9, 1997).
        
  10.23   Right to Purchase Agreement dated November 21, 1997, between AMC Entertainment Inc., as Grantor, and Entertainment Properties Trust as Offeree (incorporated by reference from Exhibit 10.3 of the Company's Current Report on Form 8-K (File No. 1-8747) filed December 9, 1997.)
        
  10.24   Lease dated November 21, 1997 between Entertainment Properties Trust, as Landlord, and American Multi- Cinema, Inc., as Tenant (incorporated by reference from Exhibit 10.4 of the Company's Current Report on Form 8-K (File No. 1-8747) filed December 9, 1997). (Similar leases have been entered into with respect to the following theatres: Mission Valley 20, Promenade 16, Ontario Mills 30, Lennox 24, West Olive 16, Studio 30 (Houston), Huebner Oaks 24, First Colony 24, Oak View 24, Leawood Town Center 20, South Barrington 30, Gulf Pointe 30, Cantera 30, Mesquite 30, Hampton Town Center 24, Palm Promenade 24, Westminster Promenade 24, Hoffman Center 22, Elmwood Palace 20, Westbank Palace 16, Clearview Palace 12, Hammond Palace 10, Houma Palace 10, Livonia 20, Forum 30, Studio 29 (Olathe), Hamilton 24, Deer Valley 30, Mesa Grand 24 and Burbank 16.)
        
  10.25   Guaranty of Lease dated November 21, 1997 between AMC Entertainment Inc., as Guarantor, and Entertainment Properties Trust, as Owner (incorporated by reference from Exhibit 10.5 of the Company's Current Report on Form 8-K (File No. 1-8747) filed December 9, 1997, (Similar guaranties have been entered into with respect to the following theatres: Mission Valley 20, Promenade 16, Ontario Mills 30, Lennox 24, West Olive 16, Studio 30 (Houston), Huebner Oaks 24, First Colony 24, Oak View 24, Leawood Town Center 20, South Barrington 30, Gulf Pointe 30, Cantera 30, Mesquite 30, Hampton Town Center 24, Palm Promenade 24, Westminster Promenade 24, Hoffman Center 22, Elmwood Palace 20, Westbank Palace 16, Clearview Palace 12, Hammond Palace 10, Houma Palace 10, Livonia 20, Forum 30, Studio 29 (Olathe), Hamilton 24, Deer Valley 30, Mesa Grand 24 and Burbank 16.)
        
  10.26   Employment agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and John D. McDonald which commenced July 1, 2001 (incorporated by reference from Exhibit 10.29 to Amendment No. 1 to the Company's Form 10-K (File No. 1-8747) filed on July 27, 2001).
 
   

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Table of Contents

Exhibit
Number
  Description
  10.27   Employment agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and Craig R. Ramsey which commenced on July 1, 2001 (incorporated by reference from Exhibit 10.36 to the Company's Form 10-Q filed on August 12, 2002).
        
  10.28   2003 AMC Entertainment Inc. Long-Term Incentive Plan (incorporated by reference from Exhibit 10.2 to the Company's Form 10-Q (File No. 1-8747) filed on November 5, 2003).
        
  10.29   Description of 2004 Grant under the 2003 AMC Entertainment Inc. Long-Term Incentive Plan (incorporated by reference from Exhibit 10.3 to the Company's Form 10-Q (File No. 1-8747) filed on November 5, 2003).
        
  10.30   AMC Entertainment Holdings, Inc. Amended and Restated 2004 Stock Option Plan. (incorporated by reference from Exhibit 10.9 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on June 13, 2007).
        
  10.31   Form of Non-Qualified Stock Option Agreement (incorporated by reference from Exhibit 10.32(b) to AMCE's Registration Statement on Form S-4 (File No. 333-122376) filed on January 28, 2005).
        
  10.32   Form of Incentive Stock Option Agreement (incorporated by reference from Exhibit 10.32(c) to AMCE's Registration Statement on Form S-4 (File No. 333-122376) filed on January 28, 2005).
        
  10.33   Contribution and Unit Holders Agreement, dated as of March 29, 2005, among National Cinema Network, Inc., Regal CineMedia Corporation and National CineMedia, LLC (incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 1-8747) filed April 4, 2005).
        
  10.34   Exhibitor Services Agreement, dated February 13, 2007 between National CineMedia, LLC and American Multi- Cinema, Inc. (filed as Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-33296) of National CineMedia, Inc., filed on February 16, 2007, and incorporated herein by reference).
        
  10.35   First Amended and Restated Loews Screen Integration Agreement, dated February 13, 2007 between National CineMedia, LLC and American Multi-Cinema, Inc. (filed as Exhibit 10.8 to the Current Report on Form 8-K (File No. 001-33296) of National CineMedia, Inc., filed on February 16, 2007, and incorporated herein by reference).
        
  10.36   Third Amended and Restated Limited Liability Company Operating Agreement, dated February 13, 2007 between American Multi-Cinema, Inc., Cinemark Media, Inc., Regal CineMedia Holdings, LLC and National CineMedia, Inc. (incorporated by reference from Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 1-8747) filed February 20, 2007).
        
  10.37   Employment Agreement, dated as of November 6, 2002, by and among Kevin M. Connor, AMC Entertainment Inc. and American Multi-Cinema, Inc. (incorporated by reference from Exhibit 10.49 to the Company's Form 10-K (File No. 1-8747) filed on June 18, 2007).
        
  10.38   Amendment to Stock Purchase Agreement dated as of November 5, 2008 among Entretenimiento GM de Mexico S.A. de C.V., as Buyer, and AMC Netherlands HoldCo B.V., LCE Mexican Holdings, Inc., and AMC Europe S.A., as sellers (incorporated by reference from Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 1-8747) filed January 5, 2009).
 
   

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Table of Contents

Exhibit
Number
  Description
  10.39   Stock Purchase Agreement dated as of November 5, 2008 among Entretenimiento GM de Mexico S.A. de C.V., as Buyer, and AMC Netherlands HoldCo B.V., LCE Mexican Holdings, Inc., and AMC Europe S.A., as sellers (incorporated by reference from Exhibit 10.1 to the Company's Form 10-Q (File No. 1-8747) filed on November 17, 2008).
        
  10.40   Amendment to Exhibitor Services Agreement dated as of November 5, 2008, by and between National CineMedia, LLC and American Multi-Cinema, Inc. (filed as Exhibit 10.1 to the Current Report on Form 8-K (File No. 1-33296) of National CineMedia, Inc., filed on February 6, 2008, and incorporated herein by reference)
        
  10.41   Employment Agreement, dated as of February 23, 2009, by and between Gerardo I. Lopez and AMC Entertainment Inc. (incorporated by reference from Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 1-8747) filed on February 24, 2009)
        
  10.42   Employment Agreement, dated as of April 17, 2009, by and between Robert J. Lenihan and AMC Entertainment Inc. (incorporated by reference from Exhibit 10.51 to AMCE's Form 10-K (File No. 1-8747) filed on June 15, 2010)
        
  10.43   Employment Agreement, dated as of November 24, 2009, by and between Stephen A. Colanero and AMC Entertainment Inc. (incorporated by reference from Exhibit 10.48 to AMCE's Form 10-K (File No. 1-8747) filed on June 3, 2011).
        
  10.44   Second Amendment to the Third Amended and Restated Limited Liability Company Operating Agreement dated as of August 6, 2010, by and between National CineMedia, LLC and American Multi-Cinema, Inc. (filed as Exhibit 10.1 to the Current Report on Form 8-K (File No. 1-33296) of National CineMedia, Inc., filed on August 10, 2010, and incorporated herein by reference).
        
  10.50   AMC Entertainment Holdings, Inc. 2010 Equity Incentive Plan (incorporated by reference from Exhibit 10.1 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on July 14, 2010).
        
  10.51   AMC Entertainment Holdings, Inc. Nonqualified Stock Option Award Agreement (incorporated by reference from Exhibit 10.2 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on July 14, 2010).
        
  10.52   AMC Entertainment Holdings, Inc. Restricted Stock Award Agreement (Time Vesting) (incorporated by reference from Exhibit 10.3 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on July 14, 2010).
        
  10.53   AMC Entertainment Holdings, Inc. Restricted Stock Award Agreement (Performance Vesting) (incorporated by reference from Exhibit 10.4 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on July 14, 2010).
        
  10.64   AMC Entertainment Holdings, Inc. Management Profit Sharing Plan (incorporated by reference from Exhibit 10.1 to the AMCE's Form 10-Q (File No. 1-8747) filed on November 9, 2012).
        
  10.65   Employment Agreement, dated as of August 18, 2010, by and between Elizabeth Frank and AMC Entertainment Inc. (incorporated by reference from Exhibit 10.65 to the Company's Form 10-K (File No. 1-8747) filed on March 13, 2013).
        
  10.66   Employment Agreement, dated as of July 1, 2001 by and among Mark A. McDonald and AMC Entertainment Inc. (incorporated by reference from Exhibit 10.48 to the Company's Form 10-K (File No. 1-8747) filed on June 18, 2008.)
 
   

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Table of Contents

Exhibit
Number
  Description
  14   Code of Ethics (incorporated by reference from Exhibit 14 to AMCE's Form 10-K (File No. 1-8747) filed on June 23, 2004)
        
  21   Subsidiaries of AMC Entertainment Inc.
        
  *31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 2002.
        
  *31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 2002.
        
  *32.1   Section 906 Certifications of Gerardo I. Lopez (Chief Executive Officer) and Craig R. Ramsey (Chief Financial Officer) furnished in accordance with Securities Act Release 33-8212.
        
  **101.INS   XBRL Instance Document
        
  **101.SCH   XBRL Taxonomy Extension Schema Document
        
  **101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
        
  **101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
        
  **101.LAB   XBRL Taxonomy Extension Label Linkbase Document
        
  **101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

*
Filed herewith.

**
Submitted electronically with this Report.

126