NOTE 1—BASIS OF PRESENTATION

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

On August 30, 2012, Wanda acquired Parent through a merger between Parent and Wanda Film Exhibition Co. Ltd. ("Merger Subsidiary"), a wholly-owned indirect subsidiary of Wanda, whereby Merger Subsidiary merged with and into Parent with Parent continuing as the surviving corporation and as a wholly-owned indirect subsidiary of Wanda (the "Merger"). In connection with the change of control pursuant to the Merger, the Company's assets and liabilities were adjusted to fair value on the closing date of the Merger by application of "push down" accounting. As a result of the application of "push down" accounting in connection with the Merger, the Company's financial statement presentations herein distinguish between a predecessor period ("Predecessor"), for periods prior to the Merger, and a successor period ("Successor"), for periods subsequent to the Merger. The Successor applied "push down" accounting and its financial statements reflect a new basis of accounting that is based on the fair value of assets acquired and liabilities assumed as of the Merger date, August 30, 2012. The Consolidated Financial Statements presented herein are those of Successor from August 31, 2012 through September 30, 2013, and those of Predecessor for all periods prior to the Merger date. As a result of the application of "push down" accounting at the time of the Merger, the financial statements for the Predecessor period and for the Successor period are presented on different bases and are, therefore, not comparable. See Note 2—Merger for additional information regarding the Merger.

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

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

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

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. The Company initially corrected these amounts as out-of-period adjustments during the three months ended June 30, 2013. The Company revised its presentation during the third quarter of 2013 to record these adjustments in the appropriate periods.

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 prior 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 adjusted its December 31, 2012 balance sheet included in this Form 10-Q 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 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 accumulated deficit. This adjustment has also been reflected in the Company's 10-K/A Amendment No. 2 for the Transition Period ended December 31, 2012.

Goodwill: The activity for goodwill is presented below:

(In thousands)	Total

	(Successor)
Balance as of December 31, 2012	$	2,251,296
Increase in Goodwill from purchase price allocation adjustments related to the Merger		31,951
Increase in Goodwill from purchase price allocation adjustments related to the Rave acquisition		13,127

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

See Note 2—Merger and Note 3—Acquisition, for additional information regarding the Merger and the Rave Acquisitions.

Discontinued Operations: The results of operations for the Company's discontinued operations have been eliminated from the Company's continuing operations and classified as discontinued operations for each period presented within the Company's Consolidated Statements of Operations. During the nine months ended September 30, 2013, the Company received $4,666,000 for a sales price adjustment from the sale of theatres located in Canada. The sales price adjustment was related to tax attributes of the theatres sold in Canada, which were not determinable or probable of collection at the date of the sale. The Company completed its tax returns for periods prior to the date of sale during the nine months ended September 30, 2013, at which time the buyer was able to determine amounts due pursuant to the sales price adjustment and remit payment to the Company. The Company recorded the additional gain on sale following the guidance for gain contingencies in ASC 450-30-25-1 when the gains were realizable.

The Company calculated the gain on sale and closure of its theatres in Canada and in the UK as follows during the period of December 30, 2011 through August 30, 2012:

(In thousands)	Total

	(Predecessor)
Proceeds from sale of UK theatre	$	395
Proceeds from sale of Canada theatres		1,472
Cash payment for closure of Canada theatre		(7,562	)

Net cash payment	$	(5,695	)
Fixed asset write-offs		(1,885	)
Recognition of cumulative translation losses in AOCI(1)		(11,069	)
Legal and professional fees		(1,582	)
Operating Lease Liabilities:
Deferred rent write-off		14,848
Unfavorable lease write-off		31,099
Deferred gain write-off		13,666

Gain on sale, net of lease termination expense	$	39,382

(1): This amount was reclassified from accumulated other comprehensive income to discontinued operations in the Consolidated Statements of Operations.

The Company operated all of the Canada and UK theatres pursuant to long-term operating lease agreements with original terms of 20 years. In connection with the sales of these theatres, the buyers assumed responsibility under the operating lease agreements and the Company was relieved of its legal obligation for future payments under the lease agreements. For the theatre that was closed, the Company paid the landlord $7,562,000 to terminate its obligation under the lease at the date of closing.

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

	Three Months Ended (unaudited)							Nine Months Ended (unaudited)

(In thousands)	Three Months Ended September 30, 2013		From Inception August 31, 2012 through September 27, 2012		June 29, 2012 through August 30, 2012			Nine Months Ended September 30, 2013			From Inception August 31, 2012 through September 27, 2012		December 30, 2011 through August 30, 2012
	(Successor)		(Successor)		(Predecessor)			(Successor)			(Successor)		(Predecessor)
Loss on redemption of 8% Senior Subordinated Notes due 2014	$	—	$	—	$	1,297		$	—		$	—	$	1,937
Loss (gain) on Senior Secured Credit Facility		110		—		—			(130	)		—		383
Other expense (income)		—		49		(458	)		(54	)		49		(335	)

Other expense (income)	$	110	$	49	$	839		$	(184	)	$	49	$	1,985