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AMC ENTERTAINMENT HOLDINGS, INC. - Quarter Report: 2016 September (Form 10-Q)

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

 

 

 

(Mark One)

 

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

For the quarterly period ended September 30, 2016

OR

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

For the transition period from              to            

 

Commission file number 001‑33892

 


 

AMC ENTERTAINMENT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware
(State or other jurisdiction of
incorporation or organization)

26‑0303916
(I.R.S. Employer
Identification No.)

One AMC Way
11500 Ash Street, Leawood, KS
(Address of principal executive offices)

   
66211
(Zip Code)

 

 

Registrant’s telephone number, including area code: (913) 213‑2000

 


 

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 ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

 

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 the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act.

 

 

 

 

 

Large accelerated filer ☐

Accelerated filer ☒ 

Non‑accelerated filer ☐
(Do not check if a
smaller reporting company)

Smaller reporting company ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐  No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

Title of each class of common stock

   

Number of shares
outstanding as of October 24, 2016

  Class A common stock
Class B common stock

 

21,613,532
75,826,927

 

 

 

 

 


 

Table of Contents

AMC ENTERTAINMENT HOLDINGS, INC.

 

INDEX

 

 

 

Page
Number

 

PART I—FINANCIAL INFORMATION

 

Item 1. 

Financial Statements (Unaudited)

3

 

Consolidated Statements of Operations

3

 

Consolidated Statements of Comprehensive Income

4

 

Consolidated Balance Sheets

5

 

Consolidated Statements of Cash Flows

6

 

Notes to Consolidated Financial Statements

7

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

55

Item 4. 

Controls and Procedures

55

 

PART II—OTHER INFORMATION

 

Item 1. 

Legal Proceedings

57

Item 1A. 

Risk Factors

57

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

58

Item 3. 

Defaults Upon Senior Securities

58

Item 4. 

Mine Safety Disclosures

58

Item 5. 

Other Information

58

Item 6. 

Exhibits

59

 

Signatures

61

 

 

 

2


 

Table of Contents

PART I—FINANCIAL INFORMATION

 

Item 1.  Financial Statements. (Unaudited)

 

AMC ENTERTAINMENT HOLDINGS, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

    

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

 

 

 

(unaudited)

 

(unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

$

496,729

 

$

441,262

 

$

1,460,537

 

$

1,393,338

 

Food and beverage

 

 

248,889

 

 

216,764

 

 

736,587

 

 

667,804

 

Other theatre

 

 

34,153

 

 

30,814

 

 

112,626

 

 

101,901

 

Total revenues

 

 

779,771

 

 

688,840

 

 

2,309,750

 

 

2,163,043

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Film exhibition costs

 

 

259,069

 

 

233,390

 

 

784,363

 

 

751,894

 

Food and beverage costs

 

 

33,949

 

 

31,080

 

 

102,014

 

 

95,395

 

Operating expense

 

 

211,554

 

 

195,505

 

 

613,893

 

 

588,177

 

Rent

 

 

121,904

 

 

115,861

 

 

369,307

 

 

348,804

 

General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs

 

 

4,961

 

 

751

 

 

15,113

 

 

2,590

 

Other

 

 

19,785

 

 

18,706

 

 

58,935

 

 

41,384

 

Depreciation and amortization

 

 

63,025

 

 

58,008

 

 

185,746

 

 

173,034

 

Operating costs and expenses

 

 

714,247

 

 

653,301

 

 

2,129,371

 

 

2,001,278

 

Operating income

 

 

65,524

 

 

35,539

 

 

180,379

 

 

161,765

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense (income)

 

 

79

 

 

 —

 

 

(5)

 

 

9,273

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate borrowings

 

 

24,679

 

 

22,682

 

 

74,434

 

 

73,478

 

Capital and financing lease obligations

 

 

2,099

 

 

2,286

 

 

6,441

 

 

6,990

 

Equity in earnings of non-consolidated entities

 

 

(12,030)

 

 

(10,850)

 

 

(28,143)

 

 

(21,536)

 

Investment expense (income)

 

 

176

 

 

163

 

 

(9,602)

 

 

(5,039)

 

Total other expense

 

 

15,003

 

 

14,281

 

 

43,125

 

 

63,166

 

Earnings before income taxes

 

 

50,521

 

 

21,258

 

 

137,254

 

 

98,599

 

Income tax provision

 

 

20,085

 

 

9,080

 

 

54,560

 

 

36,360

 

Net earnings

 

$

30,436

 

$

12,178

 

$

82,694

 

$

62,239

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.31

 

$

0.12

 

$

0.84

 

$

0.64

 

Diluted

 

$

0.31

 

$

0.12

 

$

0.84

 

$

0.63

 

Average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

98,194

 

 

97,978

 

 

98,196

 

 

97,959

 

Diluted

 

 

98,284

 

 

98,073

 

 

98,211

 

 

98,024

 

Dividends declared per basic and diluted common share

 

$

0.20

 

$

0.20

 

$

0.60

 

$

0.60

 

 

See Notes to Consolidated Financial Statements.

3


 

Table of Contents

AMC ENTERTAINMENT HOLDINGS, INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

    

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

 

 

 

(unaudited)

 

(Unaudited)

 

Net earnings

 

$

30,436

 

$

12,178

 

$

82,694

 

$

62,239

 

Unrealized foreign currency translation adjustment, net of tax

 

 

160

 

 

700

 

 

766

 

 

981

 

Pension and other benefit adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss arising during the period, net of tax

 

 

 —

 

 

 —

 

 

 —

 

 

(45)

 

Prior service credit arising during the period, net of tax

 

 

 —

 

 

 —

 

 

 —

 

 

746

 

Amortization of net (gain) loss reclassified into general and administrative: other, net of tax

 

 

5

 

 

7

 

 

13

 

 

(1,686)

 

Amortization of prior service credit reclassified into general and administrative: other, net of tax

 

 

 —

 

 

 —

 

 

 —

 

 

(1,762)

 

Curtailment gain reclassified into general and administrative: other, net of tax

 

 

 —

 

 

 —

 

 

 —

 

 

(7,239)

 

Settlement gain reclassified into general and administrative: other, net of tax

 

 

 —

 

 

 —

 

 

 —

 

 

(175)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

144

 

 

(2,311)

 

 

557

 

 

(1,868)

 

Realized net (gain) loss reclassified into investment income, net of tax

 

 

(1)

 

 

(5)

 

 

(1,783)

 

 

(154)

 

Equity method investees' cash flow hedge:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net holding gain arising during the period, net of tax

 

 

80

 

 

(465)

 

 

(562)

 

 

(847)

 

Realized net loss reclassified into equity in earnings of non-consolidated entities, net of tax

 

 

86

 

 

112

 

 

275

 

 

351

 

Other comprehensive income (loss)

 

 

474

 

 

(1,962)

 

 

(734)

 

 

(11,698)

 

Total comprehensive income

 

$

30,910

 

$

10,216

 

$

81,960

 

$

50,541

 

 

 

See Notes to Consolidated Financial Statements.

4


 

Table of Contents

AMC ENTERTAINMENT HOLDINGS, INC.

 

CONSOLIDATED BALANCE SHEETS

 

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

    

September 30, 2016

    

December 31, 2015

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and equivalents

 

$

46,312

 

$

211,250

 

Receivables, net

 

 

57,741

 

 

105,509

 

Other current assets

 

 

91,574

 

 

97,608

 

Total current assets

 

 

195,627

 

 

414,367

 

Property, net

 

 

1,537,951

 

 

1,401,928

 

Intangible assets, net

 

 

231,179

 

 

237,376

 

Goodwill

 

 

2,410,713

 

 

2,406,691

 

Deferred tax asset

 

 

75,557

 

 

126,198

 

Other long-term assets

 

 

518,229

 

 

501,757

 

Total assets

 

$

4,969,256

 

$

5,088,317

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

261,447

 

$

313,025

 

Accrued expenses and other liabilities

 

 

151,573

 

 

158,664

 

Deferred revenues and income

 

 

162,737

 

 

221,679

 

Current maturities of corporate borrowings and capital and financing lease obligations

 

 

19,400

 

 

18,786

 

Total current liabilities

 

 

595,157

 

 

712,154

 

Corporate borrowings

 

 

1,843,339

 

 

1,902,598

 

Capital and financing lease obligations

 

 

86,289

 

 

93,273

 

Exhibitor services agreement

 

 

363,833

 

 

377,599

 

Other long-term liabilities

 

 

513,857

 

 

462,626

 

Total liabilities

 

 

3,402,475

 

 

3,548,250

 

Commitments and contingencies

 

 

 

 

 

 

 

Class A common stock (temporary equity) ($.01 par value, 140,014 shares issued and 103,245 shares outstanding as of September 30, 2016; 167,211 shares issued and 130,442 shares outstanding as of December 31, 2015)

 

 

1,080

 

 

1,364

 

Stockholders’ equity:

 

 

 

 

 

 

 

Class A common stock ($.01 par value, 524,173,073 shares authorized; 21,510,287 shares issued and outstanding as of September 30, 2016;  21,445,090 shares issued and outstanding as of December 31, 2015)

 

 

215

 

 

214

 

Class B common stock ($.01 par value, 75,826,927 shares authorized; 75,826,927 shares issued and outstanding as of September 30, 2016 and December 31, 2015)

 

 

758

 

 

758

 

Additional paid-in capital

 

 

1,187,244

 

 

1,182,923

 

Treasury stock (36,769 shares as of September 30, 2016 and December 31, 2015, at cost)

 

 

(680)

 

 

(680)

 

Accumulated other comprehensive income

 

 

2,070

 

 

2,804

 

Accumulated earnings

 

 

376,094

 

 

352,684

 

Total stockholders’ equity

 

 

1,565,701

 

 

1,538,703

 

Total liabilities and stockholders’ equity

 

$

4,969,256

 

$

5,088,317

 

 

See Notes to Consolidated Financial Statements.

5


 

Table of Contents

AMC ENTERTAINMENT HOLDINGS, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

    

September 30, 2016

    

September 30, 2015

 

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net earnings

 

$

82,694

 

$

62,239

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

185,746

 

 

173,034

 

Amortization of net premium on corporate borrowings

 

 

174

 

 

674

 

Deferred income taxes

 

 

45,636

 

 

17,671

 

Theatre and other closure expense

 

 

3,576

 

 

3,911

 

Loss (gain) on dispositions

 

 

(2,658)

 

 

281

 

Stock-based compensation

 

 

4,509

 

 

9,377

 

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

 

 

(13,689)

 

 

(2,561)

 

Landlord contributions

 

 

77,348

 

 

43,224

 

Deferred rent

 

 

(23,452)

 

 

(18,272)

 

Net periodic benefit credit

 

 

597

 

 

(18,089)

 

Change in assets and liabilities, excluding acquisitions:

 

 

 

 

 

 

 

Receivables

 

 

51,723

 

 

52,532

 

Other assets

 

 

303

 

 

205

 

Accounts payable

 

 

(116,950)

 

 

(69,844)

 

Accrued expenses and other liabilities

 

 

(87,227)

 

 

(42,277)

 

Other, net

 

 

3,004

 

 

(2,880)

 

Net cash provided by operating activities

 

 

211,334

 

 

209,225

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

 

(256,599)

 

 

(215,574)

 

Acquisition of Starplex Cinemas, net of cash acquired

 

 

681

 

 

 

Investments in non-consolidated entities, net

 

 

(10,480)

 

 

(958)

 

Proceeds from disposition of long-term assets

 

 

19,365

 

 

604

 

Other, net

 

 

(1,252)

 

 

(1,158)

 

Net cash used in investing activities

 

 

(248,285)

 

 

(217,086)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of Senior Subordinated Notes due 2025

 

 

 —

 

 

600,000

 

Payments under revolver credit facility, net of borrowings

 

 

(55,000)

 

 

 —

 

Repurchase of Senior Subordinated Notes due 2020

 

 

 —

 

 

(626,114)

 

Cash used to pay dividends

 

 

(59,081)

 

 

(59,012)

 

Deferred financing costs

 

 

(821)

 

 

(11,978)

 

Principal payments under capital and financing lease obligations

 

 

(6,370)

 

 

(5,811)

 

Principal payments under Term Loan

 

 

(6,605)

 

 

(5,813)

 

Principal amount of coupon payment under Senior Subordinated Notes due 2020

 

 

 —

 

 

(3,357)

 

Net cash used in financing activities

 

 

(127,877)

 

 

(112,085)

 

Effect of exchange rate changes on cash and equivalents

 

 

(110)

 

 

(321)

 

Net decrease in cash and equivalents

 

 

(164,938)

 

 

(120,267)

 

Cash and equivalents at beginning of period

 

 

211,250

 

 

218,206

 

Cash and equivalents at end of period

 

$

46,312

 

$

97,939

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest (net of amounts capitalized of $142 and $122)

 

$

67,873

 

$

76,301

 

Income taxes paid (refunded), net

 

 

4,592

 

 

(1,028)

 

Schedule of non-cash operating and investing activities:

 

 

 

 

 

 

 

Investment in NCM (See Note 3-Investments)

 

$

 —

 

$

6,812

 

 

See Notes to Consolidated Financial Statements.

6


 

Table of Contents

AMC ENTERTAINMENT HOLDINGS, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

September 30, 2016

 

(Unaudited)

 

NOTE 1—BASIS OF PRESENTATION

 

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

 

On March 31, 2016, AMC Entertainment Inc. (“AMCE”) merged with and into Holdings, its direct parent company. In connection with the merger, Holdings assumed all of the obligations of AMCE pursuant to the indentures to the 5.875% Senior Subordinated Notes due 2022 (“Notes due 2022”), the 5.75% Senior Subordinated Notes due 2025 (“Notes due 2025”) and the Credit Agreement, dated as of April 30, 2013 (as subsequently amended).

 

As of September 30, 2016, Wanda owned approximately 77.82% of Holdings’ outstanding common stock and 91.32% of the combined voting power of Holdings’ outstanding common stock and has the power to control Holdings’ affairs and policies, including with respect to the election of directors (and, through the election of directors, the appointment of management), entering into mergers, sales of substantially all of the Company’s assets and other extraordinary transactions.

 

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 exhibition costs, (3) Income and operating taxes, (4) Theatre and other closure expense, and (5) Gift card and exchange ticket income. Actual results could differ from those estimates.

 

Principles of Consolidation:  The accompanying unaudited consolidated financial statements include the accounts of Holdings and all subsidiaries, as discussed above, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2015. The accompanying consolidated balance sheet as of December 31, 2015, which was derived from audited financial statements, and the unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America for complete consolidated financial statements. 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. 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 stockholders’ equity, net earnings and total comprehensive income for the periods presented are attributable to controlling interests. Due to the seasonal nature of the Company’s business, results for the nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the twelve months ending December 31, 2016. The Company manages its business under one reportable segment called Theatrical Exhibition.

 

7


 

Table of Contents

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

(In thousands)

 

September 30, 2016

 

September 30, 2015

 

September 30, 2016

 

September 30, 2015

Loss on redemption of 9.75% Senior Subordinated Notes due 2020

 

$

 —

 

$

 —

 

$

 —

 

$

9,273

Other

 

 

79

 

 

 —

 

 

(5)

 

 

 —

Other expense (income)

 

$

79

 

$

 —

 

$

(5)

 

$

9,273

 

Changes in Accounting Principles:  The Company adopted the provisions of Accounting Standards Update (“ASU”) No. 2015-03 and 2015-15, Interest-Imputation of Interest (Subtopic 835-30) as of the beginning of 2016 on a retrospective basis. As a result of the adoption of ASU No. 2015-03 and ASU No. 2015-15, the Company reclassified $21,768,000 of debt issuance costs for its term loan and senior subordinated notes from other long-term assets to corporate borrowings in the Consolidated Balance Sheet as of December 31, 2015. The Company continues to defer and present its debt issuance costs related to its line-of-credit arrangement as an asset regardless of whether there are any outstanding borrowings on the line-of-credit arrangement as provided in ASU No. 2015-15.

 

During the nine months ended September 30, 2016, the Company early adopted the provisions of ASU No. 2016-09, Compensation – Stock Compensation Improvements to Employee Share-Based Payment Accounting as of the beginning of 2016. The effect of adopting ASU 2016-09 is reflected in Stockholders’ Equity in the Consolidated Balance Sheets on a modified retrospective basis through a cumulative-effect adjustment. This guidance simplifies several aspects of the accounting for share-based payment awards to employees including accounting for income taxes, forfeitures, statutory tax withholding requirements and classification in the statement of cash flows. As permitted under ASU 2016-09, the Company has elected to account for forfeitures in compensation cost when they occur. A summary of the changes made to the Consolidated Balance Sheets at December 31, 2015, is included in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

As Filed

   

Updated

Additional paid-in capital

 

$  

1,183,218

   

$  

1,182,923

Accumulated earnings

 

 

352,389

   

 

352,684

 

 

 

 

NOTE 2—ACQUISITION

In December 2015, the Company completed the acquisition of SMH Theatres, Inc. (“Starplex Cinemas”) for cash. The purchase price for Starplex Cinemas was $172,172,000, net of cash acquired, and was subject to working capital and other purchase price adjustments as described in the stock purchase agreement. Starplex Cinemas operated 33 theatres with 346 screens in small and mid‑size markets in 12 states, which further complements the Company’s large market portfolio. The Company expects to realize synergies and cost savings related to this acquisition as a result of purchasing and procurement economies of scale and general and administrative expense savings, particularly with respect to the consolidation of corporate related functions and elimination of redundancies.

The acquisition is 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 preliminary and subject to changes as an appraisal of both tangible and intangible assets and liabilities is finalized, working capital and other purchase price adjustments are completed and additional information regarding the tax bases of assets and liabilities becomes available. The following is a summary of a preliminary allocation of the purchase price:

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(In thousands)

    

December 31, 2015

 

Changes

 

September 30, 2016

 

Cash

 

$

2,119

 

$

400

 

$

2,519

 

Receivables

 

 

2,001

 

 

(140)

 

 

1,861

 

Other current assets

 

 

4,806

 

 

(178)

 

 

4,628

 

Property (1)

 

 

50,810

 

 

1,329

 

 

52,139

 

Intangible assets (2)

 

 

21,080

 

 

400

 

 

21,480

 

Goodwill (3)

 

 

116,891

 

 

4,022

 

 

120,913

 

Other long-term assets

 

 

290

 

 

 —

 

 

290

 

Accounts payable

 

 

(4,211)

 

 

 —

 

 

(4,211)

 

Accrued expenses and other liabilities

 

 

(4,689)

 

 

(466)

 

 

(5,155)

 

Deferred revenues and income

 

 

(2,295)

 

 

(172)

 

 

(2,467)

 

Deferred tax liability

 

 

(10,610)

 

 

(5,476)

 

 

(16,086)

 

Other long-term liabilities (4)

 

 

(1,220)

 

 

 —

 

 

(1,220)

 

Total estimated purchase price

 

$

174,972

 

$

(281)

 

$

174,691

 


(1)

Amounts recorded for property include land, buildings, leasehold improvements, furniture, fixtures and equipment.

 

(2)

Amounts recorded for intangible assets includes favorable leases, a non‑compete agreement and trade name.

 

(3)

Amounts recorded for goodwill are generally not expected to be deductible for tax purposes.

 

(4)

Amounts recorded for other long‑term liabilities consist of an unfavorable lease.

 

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, and market comparables.

 

In connection with the acquisition of Starplex Cinemas, the Company classified two Starplex Cinemas theatres with 22 screens as held for sale as of December 31, 2015, that were divested in January 2016 as required by the Antitrust Division of the United States Department of Justice. Assets held for sale of approximately $5,390,000 were classified as other current assets in the Company’s Consolidated Balance Sheets at December 31, 2015.

 

Activity of goodwill is presented below:

 

 

 

 

 

 

(In thousands)

    

Total

 

Balance as of December 31, 2015

 

$

2,406,691

 

Adjustments to acquisition of Starplex Cinemas (see table above)

 

 

4,022

 

Balance as of September 30, 2016

 

$

2,410,713

 

 

 

NOTE 3—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, and are recorded in the Consolidated Balance Sheets in other long-term assets. Investments in non-consolidated affiliates as of September 30, 2016, include a 17.40% interest in National CineMedia, LLC (“NCM” or “NCM LLC”), a 29% interest in Digital Cinema Implementation Partners, LLC (“DCIP”), a 15.45% interest in Digital Cinema Distribution Coalition, LLC (“DCDC”), a 50% interest in Open Road Releasing, LLC, operator of Open Road Films, LLC (“Open Road Films”), a 32% interest in AC JV, LLC (“AC JV”), owner of Fathom Events, and a 50% interest in two U.S. motion picture theatres and one IMAX screen. Indebtedness held by equity method investees is non-recourse to the Company.

 

RealD Inc. Common Stock.  The Company sold all of its 1,222,780 shares in RealD Inc. during the nine months ended September 30, 2016 and recognized a gain on sale of $3,008,000.  

 

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Equity in Earnings (Losses) of Non‑Consolidated Entities

 

Aggregated condensed financial information of the Company’s significant non-consolidated equity method investments is shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

(In thousands)

    

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

 

Revenues

 

$

161,774

 

$

154,838

 

$

438,775

 

$

433,831

 

Operating costs and expenses

 

 

110,924

 

 

99,850

 

 

321,447

 

 

341,178

 

Net earnings

 

$

50,850

 

$

54,988

 

$

117,328

 

$

92,653

 

 

The components of the Company’s recorded equity in earnings (losses) of non-consolidated entities are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

(In thousands)

    

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

 

National CineMedia, LLC

 

$

3,350

 

$

4,431

 

$

6,202

 

$

3,360

 

Digital Cinema Implementation Partners, LLC

 

 

7,944

 

 

6,253

 

 

20,566

 

 

16,844

 

Open Road Releasing, LLC

 

 

 —

 

 

 —

 

 

 —

 

 

(430)

 

AC JV, LLC

 

 

107

 

 

(243)

 

 

186

 

 

983

 

Other

 

 

629

 

 

409

 

 

1,189

 

 

779

 

The Company’s recorded equity in earnings

 

$

12,030

 

$

10,850

 

$

28,143

 

$

21,536

 

 

 

NCM Transactions.  As of September 30, 2016, the Company owns 23,862,988 common membership units, or a 17.40% interest, in NCM and 200,000 common shares of NCM, Inc. The estimated fair market value of the common units in NCM and the common stock investment in NCM, Inc. was approximately $354,207,000, based on the publically quoted price per share of NCM, Inc. on September 30, 2016 of $14.72 per share.

 

The Company recorded the following transactions with NCM:

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

(In thousands)

    

September 30, 2016

    

December 31, 2015

 

Due from NCM for on-screen advertising revenue

 

$

1,585

 

$

2,406

 

Due to NCM for Exhibitor Services Agreement

 

 

763

 

 

1,226

 

Promissory note payable to NCM

 

 

5,555

 

 

5,555

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

(In thousands)

   

September 30, 2016

   

September 30, 2015

   

September 30, 2016

   

September 30, 2015

 

Other theatre revenues:

 

 

 

 

 

 

 

 

 

 

 

Net NCM screen advertising revenues

 

$

10,441

 

$

8,756

 

$

31,123

 

$

26,727

 

Operating expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

NCM beverage advertising expense

 

 

1,532

 

 

1,321

 

 

4,516

 

 

6,836

 

 

 

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The Company recorded the following changes in the carrying amount of its investment in NCM and equity in losses of NCM during the nine months ended September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

    

Accumulated

    

 

    

 

    

 

 

 

 

 

 

 

 

Exhibitor

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

Investment

 

Services

 

Comprehensive

 

Cash

 

Equity in

 

Advertising

 

(In thousands)

 

in NCM(1)

 

Agreement(2)

 

(Income)

 

Received

 

Earnings

 

(Revenue)

 

Ending balance at December 31, 2015

 

$

327,471

 

$

(377,599)

 

$

(4,014)

 

 

 

 

 

 

 

 

 

 

Receipt of excess cash distributions 

 

 

(13,703)

 

 

 —

 

 

 —

 

$

13,703

 

$

 —

 

$

 —

 

Reclassify book value of NCM, Inc. shares

 

 

408

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Amortization of deferred revenue

 

 

 —

 

 

13,766

 

 

 —

 

 

 —

 

 

 —

 

 

(13,766)

 

Equity in earnings and loss from amortization of basis difference (3)(4)

 

 

6,202

 

 

 —

 

 

 —

 

 

 —

 

 

(6,202)

 

 

 —

 

For the period ended or balance as of September 30, 2016

 

$

320,378

 

$

(363,833)

 

$

(4,014)

 

$

13,703

 

$

(6,202)

 

$

(13,766)

 

 


(1)

The following table represents AMC’s investment in common membership units including units received under the Common Unit Adjustment Agreement dated as of February 13, 2007:

 

 

 

 

 

 

 

 

    

Common

 

 

 

Membership Units

 

 

    

Tranche 1

    

Tranche 2 (a)

 

Beginning balance at December 31, 2012

 

17,323,782

 

 —

 

Additional units received in June 30, 2013

 

 —

 

1,728,988

 

Additional units received in June 30, 2014

 

 —

 

141,731

 

Additional units received in June 30, 2015

 

 —

 

469,163

 

Additional units received in December 31, 2015

 

 —

 

4,399,324

 

Units exchanged for NCM, Inc. shares in December 2015

 

 —

 

(200,000)

 

Ending balance at September 30, 2016

 

17,323,782

 

6,539,206

 


(a)

The additional units received in June 2013, June 2014, June 2015 and December 2015 were measured at fair value (Level 1) using NCM, Inc.’s stock price of $15.22,  $15.08,  $14.52 and $15.75, respectively.

 

(2)

Represents the unamortized portion of the Exhibitor Services Agreement (“ESA”) with NCM. Such amounts are being amortized to other theatre revenues over the remainder of the 30 year term of the ESA ending in 2036, using a units‑of‑revenue method, as described in ASC 470‑10‑35 (formerly EITF 88‑18, Sales of Future Revenues).

 

(3)

Represents percentage ownership of NCM’s earnings on both Tranche 1 and Tranche 2 Investments.

 

(4)

Certain differences between the Company’s carrying value and the Company’s share of NCM’s membership equity have been identified and are amortized to equity in earnings over the respective lives of the assets and liabilities.

 

During the nine months ended September 30, 2016 and September 30, 2015, the Company received payments of $7,218,000 and $5,352,000, respectively, related to the NCM tax receivable agreement. The receipts are recorded in investment income, net of related amortization for the NCM tax receivable agreement intangible asset.

 

DCIP Transactions.  The Company pays equipment rent monthly and records the equipment rental expense on a straight‑line basis over 12 years.

 

The Company recorded the following transactions with DCIP:

 

 

 

 

 

 

 

 

 

 

 

As of

    

As of

 

(In thousands)

    

September 30, 2016

    

December 31, 2015

 

 

 

 

 

 

 

Due from DCIP for equipment and warranty purchases

 

$

1,943

 

$

1,460

 

Deferred rent liability for digital projectors

 

 

8,495

 

 

8,725

 

 

 

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Three Months Ended

 

Nine Months Ended

(In thousands)

   

September 30, 2016

   

September 30, 2015

   

September 30, 2016

   

September 30, 2015

Operating expense:

 

 

 

 

 

 

 

 

 

 

Digital equipment rental expense

 

$

1,375

 

$

1,350

 

$

3,839

 

$

4,026

 

 

Open Road Films Transactions.  During the three and nine months ended September 30, 2016 and September 30, 2015, the Company continued to suspend equity method accounting for its investment in Open Road Films as the investment in Open Road Films had reached the Company’s remaining capital commitment. On April 1, 2016, the Company funded $3,000,000 of the capital commitment, on June 1, 2016, funded $1,750,000 of the capital commitment, on June 22, 2016, funded $1,750,000 of the capital commitment and on July 1, 2016, funded the remaining $3,500,000 of the capital commitment. The Company’s share of cumulative losses from Open Road Films in excess of the Company’s capital commitment was $34,122,000 as of September 30, 2016 and $14,422,000 as of December 31, 2015.

 

The Company recorded the following transactions with Open Road Films:

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

(In thousands)

    

September 30, 2016

    

December 31, 2015

 

Due from Open Road Films

 

$

4,394

 

$

2,472

 

Film rent payable to Open Road Films

 

 

1,313

 

 

1,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

(In thousands)

  

September 30, 2016

  

September 30, 2015

  

September 30, 2016

  

September 30, 2015

 

Film exhibition costs:

 

 

 

 

 

 

 

 

 

 

Gross film exhibition cost on Open Road Films

 

$

1,400

 

$

660

 

$

7,100

 

$

4,100

 

 

AC JV Transactions.    The Company recorded the following transactions with AC JV:

 

 

 

 

 

 

 

 

 

 

 

As of

    

As of

 

(In thousands)

    

September 30, 2016

    

December 31, 2015

 

Due from AC JV

 

$

42

 

$

109

 

Due to AC JV for Fathom Events programming

 

 

642

 

 

445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

(In thousands)

    

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

 

Film exhibition costs:

 

 

 

 

 

 

 

 

 

 

Gross exhibition cost on Fathom Events programming

 

$

2,058

 

$

2,228

 

$

5,781

 

$

6,297

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTE 4—STOCKHOLDERS’ EQUITY

 

Common Stock Rights and Privileges

 

The rights of the holders of Holdings’ Class A common stock and Holdings’ Class B common stock are identical, except with respect to voting and conversion applicable to the Class B common stock. Holders of Holdings’ Class A common stock are entitled to one vote per share and holders of Holdings’ Class B common stock are entitled to three votes per share. Holders of Class A common stock and Class B common stock will share ratably (based on the number of shares of common stock held) in any dividend declared by the board of directors, subject to any preferential rights of any outstanding preferred stock. The Class A common stock is not convertible into any other shares of Holdings’ capital stock. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock shall convert automatically into

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one share of Class A common stock upon any transfer, whether or not for value, except for certain transfers described in Holdings’ certificate of incorporation.

 

Dividends

 

The following is a summary of dividends and dividend equivalents paid to stockholders during the nine months ended September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount per

 

Total Amount

 

    

 

    

 

    

Share of

    

Declared

Declaration Date

 

Record Date

 

Date Paid

 

Common Stock

 

(In thousands)

February 25, 2016

 

March 7, 2016

 

March 21, 2016

 

 

0.20

 

$

19,762

April 27, 2016

 

June 6, 2016

 

June 20, 2016

 

 

0.20

 

 

19,762

July 25, 2016

 

September 6, 2016

 

September 19, 2016

 

 

0.20

 

 

19,760

 

During the nine months ended September 30, 2016, the Company paid dividends and dividend equivalents of $59,081,000, decreased additional paid-in capital for 20,805 shares surrendered to pay payroll and income taxes by $472,000 and accrued $368,000 for the remaining unpaid dividends at September 30, 2016. The aggregate dividends paid for Class A common stock, Class B common stock, and dividend equivalents were approximately $12,968,000,  $45,496,000 and $617,000, respectively, during the nine months ended September 30, 2016.

 

Related Party Transaction

 

As of September 30, 2016 and December 31, 2015, the Company recorded a receivable due from Wanda of $483,000 and $141,000, respectively, for reimbursement of general administrative and other expense incurred on behalf of Wanda.

 

Temporary Equity

 

Certain members of management have the right to require Holdings to repurchase the Class A common stock held by them under certain limited circumstances pursuant to the terms of a stockholders agreement. Beginning on January 1, 2016 (or upon the termination of a management stockholder’s employment by the Company without cause, by the management stockholder for good reason, or due to the management stockholder’s death or disability) management stockholders will have the right, in limited circumstances, to require Holdings to purchase shares that are not fully and freely tradeable at a price equal to the price per share paid by such management stockholder with appropriate adjustments for any subsequent events such as dividends, splits, or combinations. The shares of Class A common stock, subject to the stockholder agreement, are classified as temporary equity, apart from permanent equity, as a result of the contingent redemption feature contained in the stockholder agreement. The Company determined the amount reflected in temporary equity for the Class A common stock based on the price paid per share by the management stockholders and Wanda on August 30, 2012, the date Wanda acquired Holdings.

 

During the nine months ended September 30, 2016, a former employee who held 27,197 shares, relinquished his put right, therefore the related amount of $284,000 was reclassified to additional paid-in capital, a component of stockholders’ equity.

 

Stock‑Based Compensation

 

Holdings adopted a stock‑based compensation plan in December of 2013.

 

The Company recognized stock-based compensation expense of $1,705,000 and $2,199,000 within general and administrative: other during the three months ended September 30, 2016 and September 30, 2015, respectively, and $4,509,000 and $9,377,000 during the nine months ended September 30, 2016 and September 30, 2015, respectively. The Company’s financial statements reflect an increase to additional paid-in capital related to stock-based compensation of $4,509,000 during the nine months ended September 30, 2016. As of September 30, 2016, there was approximately $11,259,000 of total estimated unrecognized compensation cost, assuming attainment of the performance targets at 100%, related to stock-based compensation arrangements expected to be recognized during the remainder of calendar

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2016, calendar 2017 and calendar 2018. The Company expects to recognize compensation cost of $1,713,000 during the remainder of calendar 2016 and $4,773,000 during each calendar 2017 and calendar 2018.

 

2013 Equity Incentive Plan

 

The 2013 Equity Incentive Plan provides for grants of non‑qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock units, stock awards, and cash performance awards. The maximum number of shares of Holdings’ common stock available for delivery pursuant to awards granted under the 2013 Equity Incentive Plan is 9,474,000 shares. At September 30, 2016, the aggregate number of shares of Holdings’ common stock remaining available for grant was 7,682,824 shares.

 

Awards Granted in 2016

 

During the nine months ended September 30, 2016, Holdings’ Board of Directors approved awards of stock, restricted stock units (“RSUs”), and performance stock units (“PSUs”) to certain of the Company’s employees and directors under the 2013 Equity Incentive Plan. The fair value of the stock at the grant dates of January 4, 2016, February 24, 2016 and March 1, 2016 was $23.17,  $22.55 and $24.88 per share, respectively, and was based on the closing price of Holdings’ stock.

 

The award agreements generally had the following features:

 

·

Stock Award:  On January 4, 2016, 4 members of Holdings’ Board of Directors were granted an award of 4,260 fully vested shares of Class A common stock each, and on February 24, 2016, 1 member of Holdings’ Board of Directors was granted an award of 4,302 fully vested shares of Class A common stock, for a total award of 21,342 shares. The Company recognized approximately $492,000 of expense in general and administrative: other expense during the nine months ended September 30, 2016, in connection with these share grants.

 

·

Restricted Stock Unit Awards:  On March 1, 2016, RSU awards of 145,739 units were granted to certain members of management. Each RSU represents the right to receive one share of Class A common stock at a future date. The RSUs vest over 3 years with 1/3 vesting on each of January 2, 2017, 2018 and 2019. The RSUs will be settled within 30 days of vesting. A dividend equivalent equal to the amount paid in respect of one share of Class A common stock underlying the RSUs began to accrue with respect to the RSUs on the date of grant. Such accrued dividend equivalents are paid to the holder upon vesting of the RSUs. The grant date fair value was $3,626,000 based on a stock price of $24.88 on March 1, 2016. The Company recognized approximately  $834,000 of expense in general and administrative: other expense during the nine months ended September 30, 2016, in connection with these awards.

 

On March 1, 2016, RSU awards of 135,981 units were granted to certain executive officers covered by Section 162(m) of the Internal Revenue Code. The RSUs will be forfeited if Holdings does not achieve a specified cash flow from operating activities target for each of the twelve months ending December 31, 2016, 2017 and 2018. The RSUs vest over 3 years with 1/3 vesting in each of 2017, 2018 and 2019 if cash flow from operating activities target is met. The vested RSUs will be settled within 30 days of vesting. A dividend equivalent equal to the amount paid in respect of one share of Class A common stock underlying the RSUs began to accrue with respect to the RSUs on the date of grant. Such accrued dividend equivalents are paid to the holder upon vesting of the RSUs. The grant date fair value was $3,383,000 based on the probable outcome of the performance targets and a stock price of $24.88 on March 1, 2016. The Company recognized expense for these awards of $789,000 in general and administrative: other expense, during the nine months ended September 30, 2016, based on current estimates that the performance condition for all years is expected to be achieved.

 

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·

Performance Stock Unit Award: On March 1, 2016, PSU awards were granted to certain members of management and executive officers, with both a three year cumulative free cash flow and net income performance target condition and a service condition, covering a performance period beginning January 1, 2016 and ending on December 31, 2018. The PSUs will vest ratably based on a scale ranging from 80% to 120% of the performance target with the vested amount ranging from 30% to 150%. If the performance target is met at 100%, the PSU awards granted on March 1, 2016 will be 279,558 units. No PSUs will vest if Holdings does not achieve the three year cumulative free cash flow and net income minimum performance target or the participant’s service does not continue through the last day of the performance period. The vested PSUs will be settled within 30 days of vesting. A dividend equivalent equal to the amount paid in respect of one share of Class A common stock underlying the PSUs began to accrue with respect to the PSUs on the date of grant. Such accrued dividend equivalents are paid to the holder upon vesting of the PSUs. Assuming attainment of the performance target at 100%, the Company recognized expense for these awards of approximately $1,432,000 during the nine months ended September 30, 2016 and will recognize approximately $2,046,000 in general and administrative: other expense during the twelve months ending December 31, 2016. The grant date fair value was $7,009,000 based on the probable outcome of the performance conditions and a stock price of $24.88 on March 1, 2016.

 

·

Performance Stock Unit Transition Award:  In recognition of the shift from one year to three year performance periods for annual equity awards, on March 1, 2016, PSU transition awards were granted to certain members of management and executive officers, with both a 2016 free cash flow and net income performance target condition and a service condition, covering a performance period beginning January 1, 2016 and ending on December 31, 2016. The PSUs will vest ratably based on a scale ranging from 80% to 120% of the performance target with the vested amount ranging from 30% to 150%. If the performance target is met at 100%, the transition PSU awards granted on March 1, 2016 will be 54,094 units. No PSUs will vest if Holdings does not achieve the free cash flow or net income minimum performance target or the participant’s service does not continue through the last day of the performance period. The vested PSUs will be settled within 30 days of vesting. A dividend equivalent equal to the amount paid in respect of one share of Class A common stock underlying the PSUs began to accrue with respect to the PSUs on the date of grant. Such accrued dividend equivalents are paid to the holder upon vesting of the PSUs. Assuming attainment of the performance target at 100%, the Company recognized $942,000 during the nine months ended September 30, 2016 and will recognize expense for these awards of approximately $1,346,000 in general and administrative: other expense during the twelve months ending December 31, 2016. The grant date fair value was $1,360,000 based on the probable outcome of the performance condition and a stock price of $24.88 on March 1, 2016.

 

The following table represents the nonvested RSU and PSU activity for the nine months ended September 30, 2016:

 

 

 

 

 

 

 

 

 

    

 

    

Weighted

 

 

 

 

 

Average

 

 

 

Shares of RSU

 

Grant Date

 

 

 

and PSU

 

Fair Value

 

Beginning balance at January 1, 2016

 

19,226

 

$

29.59

 

Granted(1)

 

618,092

 

 

24.88

 

Vested

 

(19,226)

 

 

29.59

 

Forfeited

 

(4,882)

 

 

24.88

 

Nonvested at September 30, 2016

 

613,210

 

$

24.88

 

 


(1)

The number of shares granted under the PSU award, assumes Holdings will attain a performance target at 100%. The PSUs will vest ratably based on a scale ranging from 80% to 120% of the performance target with the vested amount ranging from 30% to 150%.

 

 

 

NOTE 5—INCOME TAXES

 

The Company’s effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company

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estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate, adjusted for discrete items, if any. The Company refines the estimates of the year’s taxable income as new information becomes available, including actual year‑to‑date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year‑to‑date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions. The Company recognizes income tax-related interest expense and penalties as income tax expense and general and administrative expense, respectively.

 

The effective tax rate based on the projected annual taxable income for the year ending December 31, 2016 is 39.75%. The effective tax rate for the nine months ended September 30, 2016 and September 30, 2015 was 39.75% and 36.9%, respectively. The Company’s tax rate for the nine months ended September 30, 2016 differs from the statutory tax rate primarily due to state income taxes and permanent items. During the three months ended June 30, 2015, the Company received a favorable state ruling that resulted in a reduction of uncertain tax positions and as a result, the Company recorded a net discrete tax benefit of approximately $2,900,000.  During the three months ended September 30, 2015, the Company received a notice of proposed adjustment from the Internal Revenue Service based upon its ongoing review of the Company's tax return for the fiscal period ended March 29, 2012. As a result of this notification, the Company recorded a net discrete tax provision of $1,900,000 for interest on the proposed adjustment ($1,200,000 net of tax), reinstated approximately $17,700,000 of deferred tax assets and recorded current interest and taxes payable of $19,600,000. The Company has also calculated additional estimated New Jersey tax liability of approximately $694,000 resulting from the proposed adjustment. The net impact of these discrete items reduced the Company's projected annual effective rate for the year to 37.9% and the actual rate for the nine months ended September 30, 2015 to 36.9%.

 

 

NOTE 6—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 September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at September 30, 2016 Using

 

 

 

 

 

 

 

 

 

 

 

 

Significant

 

 

    

Total Carrying

    

Quoted prices in

    

Significant other

    

unobservable

 

 

 

Value at

 

active market

 

observable inputs

 

inputs

 

(In thousands)

 

September 30, 2016 (1)

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Other long-term assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market mutual funds

 

$

581

 

$

581

 

$

 —

 

$

 —

 

Equity securities, available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual fund large U.S. equity

 

 

2,094

 

 

2,094

 

 

 —

 

 

 —

 

Mutual fund small/mid U.S. equity

 

 

2,733

 

 

2,733

 

 

 —

 

 

 —

 

Mutual fund international

 

 

677

 

 

677

 

 

 —

 

 

 —

 

Mutual fund balanced

 

 

512

 

 

512

 

 

 —

 

 

 —

 

Mutual fund fixed income

 

 

987

 

 

987

 

 

 —

 

 

 —

 

Total assets at fair value

 

$

7,584

 

$

7,584

 

$

 —

 

$

 —

 

 

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(1)

The investments relate to a non-qualified deferred compensation arrangement on behalf of certain management. The Company has an equivalent liability for this related-party transaction recorded in other long-term liabilities for the deferred compensation obligation.

 

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, fixed income, and international funds and are measured at fair value using quoted market prices. See Note 8Accumulated Other Comprehensive Income for the unrealized gain on the equity securities recorded in accumulated other comprehensive income.

 

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 September 30, 2016 Using

 

 

 

 

    

 

    

Significant other

    

Significant

 

 

 

Total Carrying

 

Quoted prices in

 

observable

 

unobservable

 

 

 

Value at

 

active market

 

inputs

 

inputs

 

(In thousands)

 

September 30, 2016

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Current maturities of corporate borrowings

 

$

10,195

 

$

 

$

8,944

 

$

1,389

 

Corporate borrowings

 

 

1,843,339

 

 

 

 

1,884,297

 

 

4,166

 

 

 

 

Valuation Technique.  Quoted market prices and observable market based inputs were used to estimate fair value for Level 2 inputs. The Level 3 fair value measurement represents the transaction price of the corporate borrowings under market conditions.

 

NOTE 7—THEATRE AND OTHER CLOSURE AND DISPOSITION OF ASSETS

 

A rollforward of reserves for theatre and other closure and disposition of assets is as follows:

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

(In thousands)

    

September 30, 2016

    

September 30, 2015

 

Beginning balance

 

$

42,973

 

$

52,835

 

Theatre and other closure expense

 

 

3,576

 

 

3,911

 

Transfer of assets and liabilities

 

 

 —

 

 

 —

 

Foreign currency translation adjustment

 

 

(761)

 

 

(1,918)

 

Cash payments

 

 

(8,912)

 

 

(9,274)

 

Ending balance

 

$

36,876

 

$

45,554

 

 

 

In the accompanying Consolidated Balance Sheets, as of September 30, 2016, the current portion of the ending balance totaling $8,079,000 is included with accrued expenses and other liabilities and the long-term portion of the ending balance totaling $28,797,000 is included with other long-term liabilities. Theatre and other closure reserves for leases that have not been terminated were recorded at the present value of the future contractual commitments for the base rents, taxes and maintenance.

 

During the three months ended September 30, 2016 and the three months ended September 30, 2015, the Company recognized theatre and other closure expense of $951,000 and $1,600,000, respectively, and during the nine months ended September 30, 2016 and the nine months ended September 30, 2015, the Company recognized theatre and other closure expense of $3,576,000 and  $3,911,000, respectively. Theatre and other closure expense included the accretion on previously closed properties with remaining lease obligations.

 

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NOTE 8—ACCUMULATED OTHER COMPREHENSIVE INCOME

 

The following tables present the change in accumulated other comprehensive income by component:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized Net

 

Unrealized Net

 

 

 

 

 

 

 

 

 

 

 

 

Gain from

 

Gains from Equity

 

 

 

 

 

 

Foreign

 

Pension and

 

Marketables

 

Method Investees’

 

 

 

 

(In thousands)

    

Currency

    

Other Benefits

    

Securities

    

Cash Flow Hedge

    

Total

 

Balance, December 31, 2015

 

$

2,101

 

$

(3,289)

 

$

1,465

 

$

2,527

 

$

2,804

 

Other comprehensive income (loss) before reclassifications

 

 

766

 

 

13

 

 

557

 

 

(562)

 

 

774

 

Amounts reclassified from accumulated other comprehensive income

 

 

 —

 

 

 —

 

 

(1,783)

 

 

275

 

 

(1,508)

 

Other comprehensive income (loss)

 

 

766

 

 

13

 

 

(1,226)

 

 

(287)

 

 

(734)

 

Balance, September 30, 2016

 

$

2,867

 

$

(3,276)

 

$

239

 

$

2,240

 

$

2,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized Net

 

Unrealized Net

 

 

 

 

 

 

 

 

 

Pension and

 

Gain from

 

Gain from Equity

 

 

 

 

 

 

Foreign

 

Other

 

Marketables

 

Method Investees’

 

 

 

 

(In thousands)

    

Currency

    

Benefits (1)

    

Securities

    

Cash Flow Hedge

    

Total

 

Balance, December 31, 2014

 

$

729

 

$

6,675

 

$

2,677

 

$

2,763

 

$

12,844

 

Other comprehensive income (loss) before reclassifications

 

 

981

 

 

701

 

 

(1,868)

 

 

(847)

 

 

(1,033)

 

Amounts reclassified from accumulated other comprehensive income

 

 

 —

 

 

(10,862)

 

 

(154)

 

 

351

 

 

(10,665)

 

Other comprehensive income (loss)

 

 

981

 

 

(10,161)

 

 

(2,022)

 

 

(496)

 

 

(11,698)

 

Balance, September 30, 2015

 

$

1,710

 

$

(3,486)

 

$

655

 

$

2,267

 

$

1,146

 

 


(1)

See Note 9—Employee Benefit Plans for further information regarding pre-tax amounts reclassified from accumulated other comprehensive income.

 

The tax effects allocated to each component of other comprehensive income (loss) during the three months ended September 30, 2016 and the three months ended September 30, 2015 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

September 30, 2016

 

September 30, 2015

 

 

   

 

   

Tax

   

 

   

 

   

Tax

   

 

 

 

 

Pre-Tax

 

(Expense)

 

Net-of-Tax

 

Pre-Tax

 

(Expense)

 

Net-of-Tax

 

(In thousands)

 

Amount

 

Benefit

 

Amount

 

Amount

 

Benefit

 

Amount

 

Unrealized foreign currency translation adjustment

 

$

261

 

$

(101)

 

$

160

 

$

1,147

 

$

(447)

 

$

700

 

Pension and other benefit adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss arising during the period

 

 

 —

 

 

 —

 

 

 —

 

 

12

 

 

(5)

 

 

7

 

Amortization of net loss reclassified into general and administrative: other

 

 

7

 

 

(2)

 

 

5

 

 

 —

 

 

 —

 

 

 —

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net holding gain (loss) arising during the period

 

 

237

 

 

(93)

 

 

144

 

 

(3,788)

 

 

1,477

 

 

(2,311)

 

Realized net gain reclassified into investment expense (income)

 

 

(2)

 

 

1

 

 

(1)

 

 

(7)

 

 

2

 

 

(5)

 

Equity method investees' cash flow hedge:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net holding loss arising during the period

 

 

131

 

 

(51)

 

 

80

 

 

(763)

 

 

298

 

 

(465)

 

Realized net loss reclassified into equity in earnings of non-consolidated entities

 

 

141

 

 

(55)

 

 

86

 

 

184

 

 

(72)

 

 

112

 

Other comprehensive income (loss)

 

$

775

 

$

(301)

 

$

474

 

$

(3,215)

 

$

1,253

 

$

(1,962)

 

 

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The tax effects allocated to each component of other comprehensive income (loss) during the nine months ended September 30, 2016 and the nine months ended September 30, 2015 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30, 2016

 

September 30, 2015

 

 

   

 

   

Tax

   

 

   

 

   

Tax

    

 

 

 

 

Pre-Tax

 

(Expense)

 

Net-of-Tax

 

Pre-Tax

 

(Expense)

 

Net-of-Tax

 

(In thousands)

 

Amount

 

Benefit

 

Amount

 

Amount

 

Benefit

 

Amount

 

Unrealized foreign currency translation adjustment

 

$

1,255

 

$

(489)

 

$

766

 

$

1,608

 

$

(627)

 

$

981

 

Pension and other benefit adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss arising during the period

 

 

 —

 

 

 —

 

 

 —

 

 

(73)

 

 

28

 

 

(45)

 

Prior service credit arising during the period

 

 

 —

 

 

 —

 

 

 —

 

 

1,223

 

 

(477)

 

 

746

 

Amortization of net (gain) loss reclassified into general and administrative: other

 

 

21

 

 

(8)

 

 

13

 

 

(2,763)

 

 

1,077

 

 

(1,686)

 

Amortization of prior service credit reclassified into general and administrative: other

 

 

 —

 

 

 —

 

 

 —

 

 

(2,888)

 

 

1,126

 

 

(1,762)

 

Curtailment gain reclassified into general and administrative: other

 

 

 —

 

 

 —

 

 

 —

 

 

(11,867)

 

 

4,628

 

 

(7,239)

 

Settlement gain reclassified into general and administrative: other

 

 

 —

 

 

 —

 

 

 —

 

 

(288)

 

 

113

 

 

(175)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net holding gain (loss) arising during the period

 

 

913

 

 

(356)

 

 

557

 

 

(3,062)

 

 

1,194

 

 

(1,868)

 

Realized net gain reclassified into investment expense (income)

 

 

(2,923)

 

 

1,140

 

 

(1,783)

 

 

(252)

 

 

98

 

 

(154)

 

Equity method investees' cash flow hedge:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net holding loss arising during the period

 

 

(922)

 

 

360

 

 

(562)

 

 

(1,389)

 

 

542

 

 

(847)

 

Realized net loss reclassified into equity in earnings of non-consolidated entities

 

 

451

 

 

(176)

 

 

275

 

 

576

 

 

(225)

 

 

351

 

Other comprehensive income (loss)

 

$

(1,205)

 

$

471

 

$

(734)

 

$

(19,175)

 

$

7,477

 

$

(11,698)

 

 

 

 

 

 

 

NOTE 9—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 offered eligible retirees the opportunity to participate in a health plan. Certain employees were eligible for subsidized postretirement medical benefits. The eligibility for these benefits was based upon a participant’s age and service as of January 1, 2009. The Company also sponsors a postretirement deferred compensation plan.

 

On January 12, 2015, the Compensation Committee and all of the Board of Directors of AMC Entertainment Holdings, Inc. adopted resolutions to terminate the AMC Postretirement Medical Plan with an effective date of March 31, 2015. During the three months ended March 31, 2015, the Company notified eligible associates that their retiree medical coverage under the plan would terminate after March 31, 2015. Payments to eligible associates were approximately $4,300,000 during the nine months ended September 30, 2015. The Company recorded net periodic benefit credits including curtailment gains, settlement gains, amortization of unrecognized prior service credits and amortization of actuarial gains recorded in accumulated other comprehensive income related to the termination and settlement of the plan during the nine months ended September 30, 2015, as further described in the table below.

 

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Net periodic benefit cost (credit) recognized for the plans in general and administrative: other during the three months ended September 30, 2016 and the three months ended September 30, 2015 consists of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other Benefits

 

(In thousands)

    

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

 

Components of net periodic benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

Interest cost

 

 

1,081

 

 

1,069

 

 

 —

 

 

 —

 

Expected return on plan assets

 

 

(889)

 

 

(1,167)

 

 

 —

 

 

 —

 

Amortization of net (gain) loss

 

 

7

 

 

12

 

 

 —

 

 

 —

 

Net periodic benefit cost (credit)

 

$

199

 

$

(86)

 

$

 —

 

$

 —

 

 

The net periodic benefit cost (credit) recognized for the plans in general and administrative: other during the nine months ended September 30, 2016 and the nine months ended September 30, 2015 consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other Benefits

 

(In thousands)

    

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

 

Components of net periodic benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

 —

 

$

 —

 

$

 —

 

$

2

 

Interest cost

 

 

3,243

 

 

3,208

 

 

 —

 

 

7

 

Expected return on plan assets

 

 

(2,667)

 

 

(3,500)

 

 

 —

 

 

 —

 

Amortization of net (gain) loss

 

 

21

 

 

34

 

 

 —

 

 

(2,797)

 

Amortization of prior service credit

 

 

 —

 

 

 —

 

 

 —

 

 

(2,888)

 

Curtailment gain

 

 

 —

 

 

 —

 

 

 —

 

 

(11,867)

 

Settlement(gain) loss

 

 

 —

 

 

287

 

 

 —

 

 

(575)

 

Net periodic benefit cost (credit)

 

$

597

 

$

29

 

$

 —

 

$

(18,118)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTE 10—COMMITMENTS AND CONTINGENCIES

 

The Company, in the normal course of business, is a party to various ordinary course claims from vendors (including food and beverage suppliers and film distributors), landlords, competitors, 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 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 can occur. An unfavorable outcome might 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.

 

On May 28, 2015, the Company received a Civil Investigative Demand (“CID”) from the Antitrust Division of the United States Department of Justice in connection with an investigation under Sections 1 and 2 of the Sherman Antitrust Act. Beginning in May of 2015, the Company also received CIDs from the Attorneys General for the States of Ohio, Texas, Washington, Florida, New York, Kansas, and from the District of Columbia, regarding similar inquiries under those states’ antitrust laws. The CIDs request the production of documents and answers to interrogatories concerning potentially anticompetitive conduct, including film clearances and participation in certain joint ventures. The Company may receive additional CIDs from antitrust authorities in other jurisdictions in which it operates. The Company does not believe it has violated federal or state antitrust laws and is cooperating with the relevant governmental authorities. However, the Company cannot predict the ultimate scope, duration or outcome of these investigations.

 

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On July 24, 2016, Holdings, Congress Merger Subsidiary, Inc., Holdings’ indirect wholly owned subsidiary, and Carmike Cinemas, Inc. (“Carmike”) entered into an amended and restated merger agreement, which amends and restates that certain Agreement and Plan of Merger, dated March 3, 2016, and pursuant to which the Company will acquire all of the outstanding shares of Carmike for either $33.06 in cash or 1.0819 shares of Class A common stock, at the election of the Carmike stockholders, and subject to a customary proration mechanism to achieve an aggregate consideration mix of 70% cash and 30% in shares of Holdings Class A common stock. The Company has entered into a debt financing commitment letter in connection with the amended and restated merger agreement which provides senior secured incremental term loans in an aggregate amount of up to $225,000,000 and a senior subordinated bridge loan in an aggregate amount of up to $300,000,000 to fund the acquisition. There can be no assurance that the Company will be successful in completing the debt financing on favorable terms as it involves matters outside of the Company’s control. The merger is subject to customary closing conditions, including regulatory approval and approval by Carmike’s shareholders.

 

On July 12, 2016, the Company entered into a definitive agreement to acquire the equity of Odeon and UCI Cinemas Holdings Limited (“Odeon”) from private equity firm Terra Firma for a total consideration of (i) cash in the amount of GBP £375.0 million ($460.8 million), (ii) shares of AMC Class A common stock valued at GBP £125.0 million ($153.6 million) and (iii) the repayment of indebtedness of approximately GBP £478.6 million ($588.1 million) as of October 19, 2016. The US Dollar amounts set forth in the preceding sentence assume a Euro/USD exchange rate of 1.0973 and a GBP/USD exchange rate of 1.2289 as of October 19, 2016. Odeon is a leading European cinema operator with 242 cinemas and 2,236 screens. Odeon operates in four major markets: the United Kingdom, Spain, Italy and Germany; and three smaller markets: Austria, Portugal, and Ireland. The Company has entered into a debt financing commitment letter in connection with the definitive agreement to acquire Odeon, which provides senior secured incremental term loans in an aggregate amount of up to $525,000,000 and a senior subordinated bridge loan in an aggregate amount of up to $800,000,000 to fund the acquisition. The closing of the acquisition is subject to clearance by the European Commission and the UK Competition and Markets Authority.

 

 

NOTE 11—NEW ACCOUNTING PRONOUNCEMENTS

 

In February 2016, the FASB issued ASU No. 2016‑02, Leases, which is intended to improve financial reporting about leasing transactions. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than 12 months. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2016‑02 will have on its results of operations and cash flows and believes that the significance of its future minimum rental payments will result in a material increase in assets and liabilities.

 

In May 2014, the FASB issued ASU No. 2014‑09, Revenue from Contracts with Customers (Topic 606), (“ASU 2014‑09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective. On July 9, 2015, the FASB decided to delay the effective date of ASU 2014‑09 by one year. The new standard is effective for the Company on January 1, 2018. Companies may elect to adopt this application as of the original effective date for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014‑09 will have on its consolidated financial statements and related disclosures and has not yet selected a transition method.

 

NOTE 12—EARNINGS PER SHARE

 

Basic earnings per share is computed by dividing net earnings by the weighted-average number of common shares outstanding. Diluted earnings per share includes the effects of unvested RSU’s with a service condition only and unvested contingently issuable RSUs and PSUs that have service and performance conditions, if dilutive.

 

21


 

Table of Contents

The following table sets forth the computation of basic and diluted earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

(In thousands)

    

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

30,436

 

$

12,178

 

$

82,694

 

$

62,239

 

Denominator (shares in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares for basic earnings per common share

 

 

98,194

 

 

97,978

 

 

98,196

 

 

97,959

 

Common equivalent shares for RSUs and PSUs

 

 

90

 

 

95

 

 

15

 

 

65

 

Shares for diluted earnings per common share

 

 

98,284

 

 

98,073

 

 

98,211

 

 

98,024

 

Basic earnings per common share

 

$

0.31

 

$

0.12

 

$

0.84

 

$

0.64

 

Diluted earnings per common share

 

$

0.31

 

$

0.12

 

$

0.84

 

$

0.63

 

 

 

Vested RSUs and PSU’s have dividend rights identical to the Company’s Class A and Class B common stock and are treated as outstanding shares for purposes of computing basic and diluted earnings per share. Certain unvested RSUs and unvested PSUs are subject to performance conditions and are included in diluted earnings per share, if dilutive, using the treasury stock method based on the number of shares, if any, that would be issuable under the terms of the Company’s 2013 Equity Incentive Plan (“Plan”) if the end of the reporting period were the end of the contingency period. During the three and nine months ended September 30, 2016 unvested PSU’s of 100,096 at the minimum performance target were not included in the computation of diluted earnings per share since the shares would not be issuable under the terms of the Plan, if the end of the reporting period were the end of the contingency period.

 

22


 

Table of Contents

 

NOTE 13—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 Holdings. The subsidiary guarantees of the Company’s Notes due 2022 and the Notes due 2025 are full and unconditional and joint and several and subject to customary release provisions. The Company and its subsidiary guarantors’ investments in its consolidated subsidiaries are presented under the equity method of accounting.

 

Three months ended September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

 

Subsidiary

 

Consolidating

 

Consolidated

 

(In thousands)

 

Holdings

 

Guarantors

 

Non-Guarantors

 

Adjustments

 

Holdings

 

Revenues

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

Admissions

 

$

 —

 

$

495,728

 

$

1,001

 

$

 —

 

$

496,729

 

Food and beverage

 

 

 —

 

 

248,448

 

 

441

 

 

 —

 

 

248,889

 

Other theatre

 

 

 —

 

 

34,081

 

 

72

 

 

 —

 

 

34,153

 

Total revenues

 

 

 —

 

 

778,257

 

 

1,514

 

 

 —

 

 

779,771

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Film exhibition costs

 

 

 —

 

 

258,603

 

 

466

 

 

 —

 

 

259,069

 

Food and beverage costs

 

 

 —

 

 

33,854

 

 

95

 

 

 —

 

 

33,949

 

Operating expense

 

 

 —

 

 

210,802

 

 

752

 

 

 —

 

 

211,554

 

Rent

 

 

 —

 

 

121,476

 

 

428

 

 

 —

 

 

121,904

 

General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs

 

 

 —

 

 

4,961

 

 

 —

 

 

 —

 

 

4,961

 

Other

 

 

 —

 

 

19,783

 

 

2

 

 

 —

 

 

19,785

 

Depreciation and amortization

 

 

 —

 

 

63,021

 

 

4

 

 

 —

 

 

63,025

 

Operating costs and expenses

 

 

 —

 

 

712,500

 

 

1,747

 

 

 —

 

 

714,247

 

Operating income (loss)

 

 

 —

 

 

65,757

 

 

(233)

 

 

 —

 

 

65,524

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in net (earnings) loss of subsidiaries

 

 

(28,287)

 

 

193

 

 

 —

 

 

28,094

 

 

 —

 

Other expense (income)

 

 

 —

 

 

79

 

 

 —

 

 

 —

 

 

79

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate borrowings

 

 

24,649

 

 

26,868

 

 

 —

 

 

(26,838)

 

 

24,679

 

Capital and financing lease obligations

 

 

 —

 

 

2,099

 

 

 —

 

 

 —

 

 

2,099

 

Equity in earnings of non-consolidated entities

 

 

 —

 

 

(12,030)

 

 

 —

 

 

 —

 

 

(12,030)

 

Investment income

 

 

(26,798)

 

 

176

 

 

(40)

 

 

26,838

 

 

176

 

Total other expense (income)

 

 

(30,436)

 

 

17,385

 

 

(40)

 

 

28,094

 

 

15,003

 

Earnings (loss) before income taxes

 

 

30,436

 

 

48,372

 

 

(193)

 

 

(28,094)

 

 

50,521

 

Income tax provision

 

 

 —

 

 

20,085

 

 

 —

 

 

 —

 

 

20,085

 

Net earnings (loss)

 

$

30,436

 

$

28,287

 

$

(193)

 

$

(28,094)

 

$

30,436

 

 

23


 

Table of Contents

Three months ended September 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

 

Subsidiary

 

Consolidating

 

Consolidated

 

(In thousands)

 

Holdings

 

Guarantors

 

Non-Guarantors

 

Adjustments

 

Holdings

 

Revenues

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

Admissions

 

$

 —

 

$

440,280

 

$

982

 

$

 —

 

$

441,262

 

Food and beverage

 

 

 —

 

 

216,319

 

 

445

 

 

 —

 

 

216,764

 

Other theatre

 

 

 —

 

 

30,713

 

 

101

 

 

 —

 

 

30,814

 

Total revenues

 

 

 —

 

 

687,312

 

 

1,528

 

 

 —

 

 

688,840

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Film exhibition costs

 

 

 —

 

 

232,920

 

 

470

 

 

 —

 

 

233,390

 

Food and beverage costs

 

 

 —

 

 

30,986

 

 

94

 

 

 —

 

 

31,080

 

Operating expense

 

 

1

 

 

194,583

 

 

921

 

 

 —

 

 

195,505

 

Rent

 

 

 —

 

 

115,356

 

 

505

 

 

 —

 

 

115,861

 

General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs

 

 

 —

 

 

751

 

 

 —

 

 

 —

 

 

751

 

Other

 

 

 —

 

 

18,704

 

 

2

 

 

 —

 

 

18,706

 

Depreciation and amortization

 

 

 —

 

 

57,996

 

 

12

 

 

 —

 

 

58,008

 

Operating costs and expenses

 

 

1

 

 

651,296

 

 

2,004

 

 

 —

 

 

653,301

 

Operating income (loss)

 

 

(1)

 

 

36,016

 

 

(476)

 

 

 —

 

 

35,539

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in net (earnings) loss of subsidiaries

 

 

(9,881)

 

 

476

 

 

 —

 

 

9,405

 

 

 —

 

Other expense (income)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate borrowings

 

 

22,626

 

 

30,002

 

 

 —

 

 

(29,946)

 

 

22,682

 

Capital and financing lease obligations

 

 

 —

 

 

2,286

 

 

 —

 

 

 —

 

 

2,286

 

Equity in earnings of non-consolidated entities

 

 

 —

 

 

(10,850)

 

 

 —

 

 

 —

 

 

(10,850)

 

Investment income

 

 

(24,924)

 

 

(4,859)

 

 

 —

 

 

29,946

 

 

163

 

Total other expense (income)

 

 

(12,179)

 

 

17,055

 

 

 —

 

 

9,405

 

 

14,281

 

Earnings (loss) before income taxes

 

 

12,178

 

 

18,961

 

 

(476)

 

 

(9,405)

 

 

21,258

 

Income tax provision

 

 

 —

 

 

9,080

 

 

 —

 

 

 —

 

 

9,080

 

Net earnings (loss)

 

$

12,178

 

$

9,881

 

$

(476)

 

$

(9,405)

 

$

12,178

 

 

24


 

Table of Contents

Nine months ended September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

 

Subsidiary

 

Consolidating

 

Consolidated

(In thousands)

 

Holdings

 

Guarantors

 

Non-Guarantors

 

Adjustments

 

Holdings

Revenues

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

Admissions

 

$

 —

 

$

1,457,478

 

$

3,059

 

$

 —

 

$

1,460,537

Food and beverage

 

 

 —

 

 

735,241

 

 

1,346

 

 

 —

 

 

736,587

Other theatre

 

 

 —

 

 

112,259

 

 

367

 

 

 —

 

 

112,626

Total revenues

 

 

 —

 

 

2,304,978

 

 

4,772

 

 

 —

 

 

2,309,750

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Film exhibition costs

 

 

 —

 

 

782,900

 

 

1,463

 

 

 —

 

 

784,363

Food and beverage costs

 

 

 —

 

 

101,738

 

 

276

 

 

 —

 

 

102,014

Operating expense

 

 

 —

 

 

611,430

 

 

2,463

 

 

 —

 

 

613,893

Rent

 

 

 —

 

 

367,919

 

 

1,388

 

 

 —

 

 

369,307

General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs

 

 

 —

 

 

15,113

 

 

 —

 

 

 —

 

 

15,113

Other

 

 

 —

 

 

58,933

 

 

2

 

 

 —

 

 

58,935

Depreciation and amortization

 

 

 —

 

 

185,720

 

 

26

 

 

 —

 

 

185,746

Operating costs and expenses

 

 

 —

 

 

2,123,753

 

 

5,618

 

 

 —

 

 

2,129,371

Operating income (loss)

 

 

 —

 

 

181,225

 

 

(846)

 

 

 —

 

 

180,379

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in net (earnings) loss of subsidiaries

 

 

(76,509)

 

 

398

 

 

 —

 

 

76,111

 

 

 —

Other expense (income)

 

 

 —

 

 

(5)

 

 

 —

 

 

 —

 

 

(5)

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate borrowings

 

 

74,339

 

 

86,064

 

 

 —

 

 

(85,969)

 

 

74,434

Capital and financing lease obligations

 

 

 —

 

 

6,441

 

 

 —

 

 

 —

 

 

6,441

Equity in earnings of non-consolidated entities

 

 

 —

 

 

(28,143)

 

 

 —

 

 

 —

 

 

(28,143)

Investment income

 

 

(80,524)

 

 

(14,599)

 

 

(448)

 

 

85,969

 

 

(9,602)

Total other expense (income)

 

 

(82,694)

 

 

50,156

 

 

(448)

 

 

76,111

 

 

43,125

Earnings (loss) before income taxes

 

 

82,694

 

 

131,069

 

 

(398)

 

 

(76,111)

 

 

137,254

Income tax provision

 

 

 —

 

 

54,560

 

 

 —

 

 

 —

 

 

54,560

Net earnings (loss)

 

$

82,694

 

$

76,509

 

$

(398)

 

$

(76,111)

 

$

82,694

 

25


 

Table of Contents

Nine months ended September 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

 

Subsidiary

 

Consolidating

 

Consolidated

(In thousands)

 

Holdings

 

Guarantors

 

Non-Guarantors

 

Adjustments

 

Holdings

Revenues

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

Admissions

 

$

 —

 

$

1,390,126

 

$

3,212

 

$

 —

 

$

1,393,338

Food and beverage

 

 

 —

 

 

666,398

 

 

1,406

 

 

 —

 

 

667,804

Other theatre

 

 

 —

 

 

101,538

 

 

363

 

 

 —

 

 

101,901

Total revenues

 

 

 —

 

 

2,158,062

 

 

4,981

 

 

 —

 

 

2,163,043

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Film exhibition costs

 

 

 —

 

 

750,368

 

 

1,526

 

 

 —

 

 

751,894

Food and beverage costs

 

 

 —

 

 

95,097

 

 

298

 

 

 —

 

 

95,395

Operating expense

 

 

75

 

 

585,430

 

 

2,672

 

 

 —

 

 

588,177

Rent

 

 

 —

 

 

347,364

 

 

1,440

 

 

 —

 

 

348,804

General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs

 

 

 —

 

 

2,590

 

 

 —

 

 

 —

 

 

2,590

Other

 

 

 —

 

 

41,381

 

 

3

 

 

 —

 

 

41,384

Depreciation and amortization

 

 

 —

 

 

172,984

 

 

50

 

 

 —

 

 

173,034

Operating costs and expenses

 

 

75

 

 

1,995,214

 

 

5,989

 

 

 —

 

 

2,001,278

Operating income (loss)

 

 

(75)

 

 

162,848

 

 

(1,008)

 

 

 —

 

 

161,765

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in net (earnings) loss of subsidiaries

 

 

(54,014)

 

 

937

 

 

 —

 

 

53,077

 

 

 —

Other expense (income)

 

 

 —

 

 

9,273

 

 

 —

 

 

 —

 

 

9,273

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate borrowings

 

 

73,836

 

 

98,472

 

 

 —

 

 

(98,830)

 

 

73,478

Capital and financing lease obligations

 

 

 —

 

 

6,990

 

 

 —

 

 

 —

 

 

6,990

Equity in earnings of non-consolidated entities

 

 

 —

 

 

(21,536)

 

 

 —

 

 

 —

 

 

(21,536)

Investment income

 

 

(82,136)

 

 

(21,662)

 

 

(71)

 

 

98,830

 

 

(5,039)

Total other expense (income)

 

 

(62,314)

 

 

72,474

 

 

(71)

 

 

53,077

 

 

63,166

Earnings (loss) before income taxes

 

 

62,239

 

 

90,374

 

 

(937)

 

 

(53,077)

 

 

98,599

Income tax provision (benefit)

 

 

 —

 

 

36,360

 

 

 —

 

 

 —

 

 

36,360

Net earnings (loss)

 

$

62,239

 

$

54,014

 

$

(937)

 

$

(53,077)

 

$

62,239

 

26


 

Table of Contents

Three months ended September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

 

Subsidiary

 

Consolidating

 

Consolidated

 

(In thousands)

 

Holdings

 

Guarantors

 

Non-Guarantors

 

Adjustments

 

Holdings

 

Net earnings (loss)

    

$

30,436

    

$

28,287

    

$

(193)

    

$

(28,094)

    

$

30,436

 

Equity in other comprehensive income (loss) of subsidiaries

 

 

474

 

 

129

 

 

 —

 

 

(603)

 

 

 —

 

Unrealized foreign currency translation adjustment, net of tax

 

 

 —

 

 

31

 

 

129

 

 

 —

 

 

160

 

Pension and other benefit adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

Amortization of net loss reclassified into general and administrative: others, net of tax

 

 

 —

 

 

5

 

 

 —

 

 

 —

 

 

5

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

Unrealized holding gain arising during the period, net of tax

 

 

 —

 

 

144

 

 

 —

 

 

 —

 

 

144

 

Realized net gain reclassified to net investment income, net of tax

 

 

 —

 

 

(1)

 

 

 —

 

 

 —

 

 

(1)

 

Equity method investees’ cash flow hedge:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

Unrealized net holding loss arising during the period, net of tax

 

 

 —

 

 

80

 

 

 —

 

 

 —

 

 

80

 

Realized net holding loss reclassified to equity in earnings of non-consolidated entities, net of tax

 

 

 —

 

 

86

 

 

 —

 

 

 —

 

 

86

 

Other comprehensive income (loss)

 

 

474

 

 

474

 

 

129

 

 

(603)

 

 

474

 

Total comprehensive income

 

$

30,910

 

$

28,761

 

$

(64)

 

$

(28,697)

 

$

30,910

 

 

27


 

Table of Contents

Three months ended September 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

Subsidiary

Consolidating

Consolidated

 

(In thousands)

 

Holdings

 

Guarantors

 

Non-Guarantors

 

Adjustments

Holdings

 

Net earnings (loss)

    

$

12,178

    

$

9,881

    

$

(476)

    

$

(9,405)

    

$

12,178

 

Equity in other comprehensive income (loss) of subsidiaries

 

 

(1,962)

 

 

403

 

 

 —

 

 

1,559

 

 

 —

 

Unrealized foreign currency translation adjustment, net of tax

 

 

 —

 

 

297

 

 

403

 

 

 —

 

 

700

 

Pension and other benefit adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net loss reclassified into general and administrative: others, net of tax

 

 

 —

 

 

7

 

 

 —

 

 

 —

 

 

7

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain arising during the period, net of tax

 

 

 —

 

 

(2,311)

 

 

 —

 

 

 —

 

 

(2,311)

 

Realized net gain reclassified to net investment income, net of tax

 

 

 —

 

 

(5)

 

 

 —

 

 

 —

 

 

(5)

 

Equity method investees’ cash flow hedge:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net holding loss arising during the period, net of tax

 

 

 —

 

 

(465)

 

 

 —

 

 

 —

 

 

(465)

 

Realized net holding loss reclassified to equity in earnings of non-consolidated entities, net of tax

 

 

 —

 

 

112

 

 

 —

 

 

 —

 

 

112

 

Other comprehensive income (loss)

 

 

(1,962)

 

 

(1,962)

 

 

403

 

 

1,559

 

 

(1,962)

 

Total comprehensive income (loss)

 

$

10,216

 

$

7,919

 

$

(73)

 

$

(7,846)

 

$

10,216

 

 

28


 

Table of Contents

Nine months ended September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

Subsidiary

Consolidating

Consolidated

 

(In thousands)

 

Holdings

Guarantors

Non-Guarantors

 

Adjustments

Holdings

 

Net earnings (loss)

    

$

82,694

    

$

76,509

    

$

(398)

    

$

(76,111)

    

$

82,694

 

Equity in other comprehensive income (loss) of subsidiaries

 

 

(734)

 

 

1,031

 

 

 —

 

 

(297)

 

 

 —

 

Unrealized foreign currency translation adjustment, net of tax

 

 

 —

 

 

(265)

 

 

1,031

 

 

 —

 

 

766

 

Pension and other benefit adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

Amortization of net loss reclassified into general and administrative: others, net of tax

 

 

 —

 

 

13

 

 

 —

 

 

 —

 

 

13

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

Unrealized holding gain arising during the period, net of tax

 

 

 —

 

 

557

 

 

 —

 

 

 —

 

 

557

 

Realized net gain reclassified to net investment income, net of tax

 

 

 —

 

 

(1,783)

 

 

 —

 

 

 —

 

 

(1,783)

 

Equity method investees’ cash flow hedge:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

Unrealized net holding loss arising during the period, net of tax

 

 

 —

 

 

(562)

 

 

 —

 

 

 —

 

 

(562)

 

Realized net holding loss reclassified to equity in earnings of non-consolidated entities, net of tax

 

 

 —

 

 

275

 

 

 —

 

 

 —

 

 

275

 

Other comprehensive income (loss)

 

 

(734)

 

 

(734)

 

 

1,031

 

 

(297)

 

 

(734)

 

Total comprehensive income

 

$

81,960

 

$

75,775

 

$

633

 

$

(76,408)

 

$

81,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29


 

Table of Contents

Nine months ended September 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

Subsidiary

Consolidating

Consolidated

 

(In thousands)

 

Holdings

Guarantors

Non-Guarantors

 

Adjustments

Holdings

 

Net earnings (loss)

    

$

62,239

    

$

54,014

    

$

(937)

    

$

(53,077)

    

$

62,239

 

Equity in other comprehensive income (loss) of subsidiaries

 

 

(11,698)

 

 

307

 

 

 —

 

 

11,391

 

 

 —

 

Unrealized foreign currency translation adjustment, net of tax

 

 

 —

 

 

674

 

 

307

 

 

 —

 

 

981

 

Pension and other benefit adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss arising during the period, net of tax

 

 

 —

 

 

(45)

 

 

 —

 

 

 —

 

 

(45)

 

Prior service credit arising during the period, net of tax

 

 

 —

 

 

746

 

 

 —

 

 

 —

 

 

746

 

Amortization of net (gain) loss reclassified into general and administrative: other, net of tax

 

 

 —

 

 

(1,686)

 

 

 —

 

 

 —

 

 

(1,686)

 

Amortization of prior service credit reclassified into general and administrative: other, net of tax

 

 

 —

 

 

(1,762)

 

 

 —

 

 

 —

 

 

(1,762)

 

Curtailment gain reclassified into general and administrative: other, net of tax

 

 

 —

 

 

(7,239)

 

 

 —

 

 

 —

 

 

(7,239)

 

Settlement gain reclassified into general and administrative: other, net of tax

 

 

 —

 

 

(175)

 

 

 —

 

 

 —

 

 

(175)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain arising during the period, net of tax

 

 

 —

 

 

(1,868)

 

 

 —

 

 

 —

 

 

(1,868)

 

Realized net gain reclassified to net investment income, net of tax

 

 

 —

 

 

(154)

 

 

 —

 

 

 —

 

 

(154)

 

Equity method investees’ cash flow hedge:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net holding loss arising during the period, net of tax

 

 

 —

 

 

(847)

 

 

 —

 

 

 —

 

 

(847)

 

Realized net holding loss reclassified to equity in earnings of non-consolidated entities, net of tax

 

 

 —

 

 

351

 

 

 —

 

 

 —

 

 

351

 

Other comprehensive income (loss)

 

 

(11,698)

 

 

(11,698)

 

 

307

 

 

11,391

 

 

(11,698)

 

Total comprehensive income (loss)

 

$

50,541

 

$

42,316

 

$

(630)

 

$

(41,686)

 

$

50,541

 

 

30


 

Table of Contents

As of September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

 

Subsidiary

 

Consolidating

 

Consolidated

 

(In thousands)

 

Holdings

 

Guarantors

 

Non-Guarantors

 

Adjustments

 

Holdings

 

Assets

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

1,944

 

$

43,912

 

$

456

 

$

 —

 

$

46,312

 

Receivables, net

 

 

 —

 

 

57,498

 

 

243

 

 

 —

 

 

57,741

 

Other current assets

 

 

 —

 

 

90,433

 

 

1,141

 

 

 —

 

 

91,574

 

Total current assets

 

 

1,944

 

 

191,843

 

 

1,840

 

 

 —

 

 

195,627

 

Investment in equity of subsidiaries

 

 

1,668,122

 

 

40,825

 

 

 —

 

 

(1,708,947)

 

 

 —

 

Property, net

 

 

 —

 

 

1,537,745

 

 

206

 

 

 —

 

 

1,537,951

 

Intangible assets, net

 

 

 —

 

 

231,179

 

 

 —

 

 

 —

 

 

231,179

 

Intercompany advances

 

 

1,754,590

 

 

(1,807,510)

 

 

52,920

 

 

 —

 

 

 —

 

Goodwill

 

 

(2,143)

 

 

2,412,856

 

 

 —

 

 

 —

 

 

2,410,713

 

Deferred tax asset

 

 

 —

 

 

75,557

 

 

 —

 

 

 —

 

 

75,557

 

Other long-term assets

 

 

8,205

 

 

510,010

 

 

14

 

 

 —

 

 

518,229

 

Total assets

 

$

3,430,718

 

$

3,192,505

 

$

54,980

 

$

(1,708,947)

 

$

4,969,256

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

 —

 

$

261,203

 

$

244

 

$

 —

 

$

261,447

 

Accrued expenses and other liabilities

 

 

15,958

 

 

135,508

 

 

107

 

 

 —

 

 

151,573

 

Deferred revenues and income

 

 

 —

 

 

162,724

 

 

13

 

 

 —

 

 

162,737

 

Current maturities of corporate borrowings and capital and financing lease obligations

 

 

8,806

 

 

10,594

 

 

 —

 

 

 —

 

 

19,400

 

Total current liabilities

 

 

24,764

 

 

570,029

 

 

364

 

 

 —

 

 

595,157

 

Corporate borrowings

 

 

1,839,173

 

 

4,166

 

 

 —

 

 

 —

 

 

1,843,339

 

Capital and financing lease obligations

 

 

 —

 

 

86,289

 

 

 —

 

 

 —

 

 

86,289

 

Exhibitor services agreement

 

 

 —

 

 

363,833

 

 

 —

 

 

 —

 

 

363,833

 

Other long-term liabilities

 

 

 —

 

 

500,066

 

 

13,791

 

 

 —

 

 

513,857

 

Total liabilities

 

 

1,863,937

 

 

1,524,383

 

 

14,155

 

 

 —

 

 

3,402,475

 

Temporary equity

 

 

1,080

 

 

 —

 

 

 —

 

 

 —

 

 

1,080

 

Stockholders’ equity

 

 

1,565,701

 

 

1,668,122

 

 

40,825

 

 

(1,708,947)

 

 

1,565,701

 

Total liabilities and stockholders’ equity

 

$

3,430,718

 

$

3,192,505

 

$

54,980

 

$

(1,708,947)

 

$

4,969,256

 

 

31


 

Table of Contents

As of December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

 

Subsidiary

 

Consolidating

 

Consolidated

 

(In thousands)

 

Holdings

 

Guarantors

 

Non-Guarantors

 

Adjustments

 

Holdings

 

Assets

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

1,944

 

$

167,023

 

$

42,283

 

$

 

$

211,250

 

Receivables, net

 

 

(21)

 

 

105,477

 

 

53

 

 

 

 

105,509

 

Other current assets

 

 

 

 

96,302

 

 

1,306

 

 

 

 

97,608

 

Total current assets

 

 

1,923

 

 

368,802

 

 

43,642

 

 

 —

 

 

414,367

 

Investment in equity of subsidiaries

 

 

1,638,903

 

 

31,609

 

 

 

 

(1,670,512)

 

 

 

Property, net

 

 

 

 

1,401,686

 

 

242

 

 

 

 

1,401,928

 

Intangible assets, net

 

 

 

 

237,376

 

 

 

 

 

 

237,376

 

Intercompany advances

 

 

1,805,829

 

 

(1,811,112)

 

 

5,283

 

 

 

 

 

Goodwill

 

 

(2,143)

 

 

2,408,834

 

 

 

 

 

 

2,406,691

 

Deferred income tax asset

 

 

295

 

 

125,903

 

 

 

 

 

 

126,198

 

Other long-term assets

 

 

9,686

 

 

492,057

 

 

14

 

 

 

 

501,757

 

Total assets

 

$

3,454,493

 

$

3,255,155

 

$

49,181

 

$

(1,670,512)

 

$

5,088,317

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

 

$

312,591

 

$

434

 

$

 

$

313,025

 

Accrued expenses and other liabilities

 

 

7,188

 

 

151,619

 

 

(143)

 

 

 

 

158,664

 

Deferred revenues and income

 

 

 

 

221,679

 

 

 

 

 

 

221,679

 

Current maturities of corporate borrowings and capital and financing lease obligations

 

 

8,806

 

 

9,980

 

 

 

 

 

 

18,786

 

Total current liabilities

 

 

15,994

 

 

695,869

 

 

291

 

 

 —

 

 

712,154

 

Corporate borrowings

 

 

1,898,432

 

 

4,166

 

 

 

 

 

 

1,902,598

 

Capital and financing lease obligations

 

 

 

 

93,273

 

 

 

 

 

 

93,273

 

Exhibitor services agreement

 

 

 

 

377,599

 

 

 

 

 

 

377,599

 

Other long-term liabilities

 

 

 

 

445,345

 

 

17,281

 

 

 

 

462,626

 

Total liabilities

 

 

1,914,426

 

 

1,616,252

 

 

17,572

 

 

 —

 

 

3,548,250

 

Temporary equity

 

 

1,364

 

 

 

 

 

 

 

 

1,364

 

Stockholders’ equity

 

 

1,538,703

 

 

1,638,903

 

 

31,609

 

 

(1,670,512)

 

 

1,538,703

 

Total liabilities and stockholders’ equity

 

$

3,454,493

 

$

3,255,155

 

$

49,181

 

$

(1,670,512)

 

$

5,088,317

 

 

32


 

Table of Contents

Nine months ended September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

 

Subsidiary

 

Consolidating

 

Consolidated

 

(In thousands)

 

Holdings

 

Guarantors

 

Non-Guarantors

 

Adjustments

 

Holdings

 

Cash flows from operating activities:

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

Net cash provided by operating activities

 

$

19,674

 

$

193,682

 

$

(2,022)

 

$

 —

 

$

211,334

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 —

 

 

(256,592)

 

 

(7)

 

 

 —

 

 

(256,599)

 

Acquisition of Starplex, net of cash acquired

 

 

 —

 

 

681

 

 

 —

 

 

 —

 

 

681

 

Investments in non-consolidated entities, net

 

 

 —

 

 

(10,480)

 

 

 —

 

 

 —

 

 

(10,480)

 

Proceeds from disposition of long-term assets

 

 

 —

 

 

19,365

 

 

 —

 

 

 —

 

 

19,365

 

Other, net

 

 

 —

 

 

(1,252)

 

 

 —

 

 

 —

 

 

(1,252)

 

Net cash used in investing activities

 

 

 —

 

 

(248,278)

 

 

(7)

 

 

 —

 

 

(248,285)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments under revolving credit facility

 

 

(55,000)

 

 

 —

 

 

 —

 

 

 —

 

 

(55,000)

 

Cash used to pay dividends

 

 

(59,081)

 

 

 —

 

 

 —

 

 

 —

 

 

(59,081)

 

Deferred financing fees

 

 

(821)

 

 

 —

 

 

 —

 

 

 —

 

 

(821)

 

Principal payments under capital and financing lease obligations

 

 

 —

 

 

(6,370)

 

 

 —

 

 

 —

 

 

(6,370)

 

Principle payments under Term Loan

 

 

(6,605)

 

 

 —

 

 

 —

 

 

 —

 

 

(6,605)

 

Change in intercompany advances

 

 

101,833

 

 

(62,120)

 

 

(39,713)

 

 

 —

 

 

 —

 

Net cash used in financing activities

 

 

(19,674)

 

 

(68,490)

 

 

(39,713)

 

 

 —

 

 

(127,877)

 

Effect of exchange rate changes on cash and equivalents

 

 

 —

 

 

(25)

 

 

(85)

 

 

 —

 

 

(110)

 

Net decrease in cash and equivalents

 

 

 —

 

 

(123,111)

 

 

(41,827)

 

 

 —

 

 

(164,938)

 

Cash and equivalents at beginning of period

 

 

1,944

 

 

167,023

 

 

42,283

 

 

 —

 

 

211,250

 

Cash and equivalents at end of period

 

$

1,944

 

$

43,912

 

$

456

 

$

 —

 

$

46,312

 

 

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Nine months ended September 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary

 

Subsidiary

 

Consolidating

 

Consolidated

(In thousands)

 

Holdings

Guarantors

 

Non-Guarantors

 

Adjustments

 

Holdings

Cash flows from operating activities:

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

Net cash provided by operating activities

 

$

15,344

 

$

192,612

 

$

1,269

 

$

 —

 

$

209,225

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 —

 

 

(215,557)

 

 

(17)

 

 

 —

 

 

(215,574)

Investments in non-consolidated entities, net

 

 

 —

 

 

(958)

 

 

 —

 

 

 —

 

 

(958)

Proceeds from disposition of long-term assets

 

 

 —

 

 

604

 

 

 —

 

 

 —

 

 

604

Other, net

 

 

 —

 

 

(1,158)

 

 

 —

 

 

 —

 

 

(1,158)

Net cash used in investing activities

 

 

 —

 

 

(217,069)

 

 

(17)

 

 

 —

 

 

(217,086)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of Senior Subordinated Notes due 2025

 

 

600,000

 

 

 —

 

 

 —

 

 

 —

 

 

600,000

Repurchase of Senior Subordinated Notes due 2020

 

 

(626,114)

 

 

 —

 

 

 —

 

 

 —

 

 

(626,114)

Cash used to pay dividends

 

 

(59,012)

 

 

 —

 

 

 —

 

 

 —

 

 

(59,012)

Deferred financing costs

 

 

(11,978)

 

 

 —

 

 

 —

 

 

 —

 

 

(11,978)

Principal payments under capital and financing lease obligations

 

 

 —

 

 

(5,811)

 

 

 —

 

 

 —

 

 

(5,811)

Principle payments under Term Loan

 

 

(5,813)

 

 

 —

 

 

 —

 

 

 —

 

 

(5,813)

Principal amount of coupon payment under Senior Subordinated Notes due 2020

 

 

(3,357)

 

 

 —

 

 

 —

 

 

 —

 

 

(3,357)

Change in intercompany advances

 

 

90,420

 

 

(88,925)

 

 

(1,495)

 

 

 —

 

 

 —

Net cash used in financing activities

 

 

(15,854)

 

 

(94,736)

 

 

(1,495)

 

 

 —

 

 

(112,085)

Effect of exchange rate changes on cash and equivalents

 

 

 —

 

 

(297)

 

 

(24)

 

 

 —

 

 

(321)

Net decrease in cash and equivalents

 

 

(510)

 

 

(119,490)

 

 

(267)

 

 

 —

 

 

(120,267)

Cash and equivalents at beginning of period

 

 

2,454

 

 

174,117

 

 

41,635

 

 

 —

 

 

218,206

Cash and equivalents at end of period

 

$

1,944

 

$

54,627

 

$

41,368

 

$

 —

 

$

97,939

 

 

 

 

NOTE 14—SUBSEQUENT EVENTS

 

On November 8, 2016, the Company issued $595,000,000 aggregate principal amount of 5.875% Senior Subordinated Notes Due 2026 (“Dollar Notes”), which mature on November 15, 2026. The Company will pay interest on the Dollar Notes at 5.875% per annum, semi-annually in arrears on May 15 and November 15, commencing on May 15, 2017.

 

On November 8, 2016, the Company issued £250,000,000 aggregate principal amount of 6.375% Senior Subordinated Notes Due 2024 (“Sterling Notes”), which mature on November 15, 2024. The Company will pay interest on the Sterling Notes at 6.375% per annum, semi-annually in arrears on May 15 and November 15, commencing on May 15, 2017.

 

On November 8, 2016, the Company amended its Credit Agreement dated as of April 30, 2013, as previously amended, to, among other things, lower the interest rate from LIBOR plus 3.25% to LIBOR plus 2.75% and to remove a 0.75% LIBOR rate floor, and borrowed $500,000,000 of New Term Loans at LIBOR plus 2.75%.

 

The net proceeds from the offering of the Dollar Notes and the Sterling Notes, together with the borrowings under the New Term Loans, cash on hand and other sources are intended to be used to fund the acquisitions of Odeon and Carmike, repay certain outstanding debt of Odeon and fund related transaction fees and expenses. As a result of the issuance of the Sterling Notes, the senior subordinated bridge loan commitments pursuant to the debt financing commitment letter entered into by the Company in connection with the definitive agreement to acquire Odeon were reduced from $800,000,000 to $490,000,000.

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On November 3,  2016, Holdings’ Board of Directors declared a cash dividend in the amount of $0.20 per share of Class A and Class B common stock, payable on December 19, 2016 to stockholders of record on December 5, 2016.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward Looking Statements

 

In addition to historical information, this Quarterly Report on Form 10‑Q contains “forward‑looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward‑looking statements may be identified by the use of words such as “may,” “will,” “forecast,” “estimate,” “project,” “intend,” “plan,” “expect,” “should,” “believe” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Similarly, statements made herein and elsewhere regarding our pending acquisitions of Carmike and Odeon are also forward‑looking statements, including statements regarding the anticipated closing date of the acquisitions, the ability to obtain regulatory approvals or to satisfy closing conditions, the costs of the acquisitions or the source or structure of the financings, the expected benefits of the acquisition on our future business, operations and financial performance and our ability to successfully integrate the recently acquired businesses. These forward‑looking statements are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. These forward‑looking statements involve known and unknown risks, uncertainties, assumptions and other factors, including those discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward‑looking statements. These risks and uncertainties include, but are not limited to, the following:

 

·

decreased supply of motion pictures or delayed access to motion pictures;

 

·

quality of motion picture production, spending levels on motion picture marketing, and performance of motion pictures in our markets;

 

·

risks and uncertainties relating to our significant indebtedness;

 

·

limitations on the availability of capital may prevent us from deploying strategic initiatives;

 

·

risks of poor financial results may prevent us from meeting our payment obligations;

 

·

our ability to utilize net operating loss carryforwards to reduce our future tax liability;

 

·

increased competition in the geographic areas in which we operate;

 

·

increased use of alternative film delivery methods or other forms of entertainment;

 

·

shrinking exclusive theatrical release windows;

 

·

certain covenants in the agreements that govern our indebtedness may limit our ability to take advantage of certain business opportunities;

 

·

general political, social, financial market and economic conditions, including the effects of the exit of the United Kingdom from the European Union;

 

·

review by antitrust authorities in connection with acquisition opportunities;

 

·

dependence on key personnel for current and future performance and our ability to attract and retain senior executives and other key personnel including in connection with our pending acquisitions;

 

·

optimizing our theatre circuit through construction and the transformation of our existing theatres may be subject to delay and unanticipated costs;

 

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·

our ability to achieve expected synergies and benefits and performance from our strategic theatre acquisitions and strategic initiatives, execution risks related to our pending and completed acquisitions and other strategic initiatives;

 

·

with respect to our pending Carmike acquisition, our ability to satisfy closing conditions in the anticipated time frame or at all, obtaining regulatory approval, including the risk that any approval may be on terms or subject to conditions that are not anticipated, obtaining Carmike stockholders approval, the possibility that the acquisition does not close, including in circumstances in which we would be obligated to pay Carmike a termination fee or other damage or expenses,  and the amount of cost, fees and expenses related to the acquisition;

 

·

operating a business in markets AMC is unfamiliar with, including acceptance by movie goers of AMC initiatives that are new to those markets;

 

·

the outcome of any legal proceedings, regulatory proceedings or enforcement matters that may be instituted against us, Carmike or Odeon with respect to the pending acquisitions.

 

·

with respect to our pending Odeon acquisition, our ability to operate a business in markets where we have limited experience, the United Kingdom’s exit from the European Union, obtaining regulatory approval, including the risk that any approval may be on terms or subject to conditions that are not anticipated, other business effects including the effects of industry, market, economic, political or regulatory conditions and future exchange or interest rates and the amount of cost, fees and expenses related to the acquisition; 

 

·

our ability to finance the Carmike and Odeon acquisitions on favorable terms;

 

·

our ability to refinance our indebtedness on terms favorable to us;

 

·

the ability to comply with covenants in the agreements governing indebtedness;

 

·

failures, unavailability or security breaches of our information systems;

 

·

our investment and equity in earnings from NCM, LLC may be negatively impacted by the competitive environment in which NCM operates and by the risks associated with its strategic initiatives;

 

·

risks relating to impairment losses and theatre and other closure charges;

 

·

risks relating to the incurrence of legal liability;

 

·

increased costs in order to comply with governmental regulation and the impact of governmental investigations concerning potentially anticompetitive conduct including film clearances and partnering with other major exhibitors in joint ventures; and

 

·

we may not generate sufficient cash flows or have sufficient restricted payment capacity under our Senior Secured Credit Facility or the indentures governing our debt securities to pay our intended dividends on our Class A and Class B common stock.

 

This list of factors that may affect future performance and the accuracy of forward‑looking statements is illustrative but not exhaustive. In addition, new risks and uncertainties may arise from time to time. Accordingly, all forward‑looking statements should be evaluated with an understanding of their inherent uncertainty.

 

Readers are urged to consider these factors carefully in evaluating the forward‑looking statements. For further information about these and other risks and uncertainties as well as strategic initiatives, see Item 1A. “Risk Factors” and Item 1. “Business” in our Annual Report on Form 10‑K for the year ended December 31, 2015 and our other public filings.

 

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All subsequent written and oral forward‑looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward‑looking statements included herein are made only as of the date of this Quarterly Report on Form 10‑Q, and we do not undertake any obligation to release publicly any revisions to such forward‑looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

Overview

 

AMC is one of the world’s largest theatrical exhibition companies and an industry leader in innovation and operational excellence. We operate productive theatres in the country’s top markets, including No. 1 or No.2 market share in the top three markets, New York, Los Angeles and Chicago.

 

Our theatrical exhibition revenues are generated primarily from box office admissions and theatre food and beverage sales. The balance of our revenues are generated from ancillary sources, including on-screen advertising, fees earned from our AMC Stubs™ customer frequency membership program, rental of theatre auditoriums, income from gift card and exchange ticket sales, on-line ticketing fees and arcade games located in theatre lobbies. As of September 30, 2016, we owned, operated or had interests in 388 theatres and 5,295 screens.

 

Film Content

 

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 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 aggregate terms established prior to the opening of the picture. In certain circumstances and less frequently, our rental fees are based on a mutually agreed settlement upon the conclusion of the picture. 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.

 

During the 2015 calendar year, films licensed from our seven largest distributors based on revenues accounted for approximately 89% 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 films in any given year.

 

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 and from year to year.

 

Open Road Releasing, LLC (‘‘Open Road Releasing’’), operator of Open Road Films, LLC (‘‘Open Road Films’’), our joint venture with another major exhibitor, is similarly undertaking an effort to grow our sources of content and provide access to our screens for content that may not otherwise find its way there. Open Road Film’s 2015 release Spotlight won the Academy Award for Best Picture.

 

Fathom Events (‘‘Fathom’’) is another joint venture with several major exhibitors and is the recognized leader in the alternative entertainment industry, offering a variety of one-of-a-kind entertainment events in movie theaters nationwide that include live, high-definition performances of the Metropolitan Opera, the performing arts, major sporting events, music concerts, comedy series, Broadway shows, original programming featuring entertainment’s biggest stars, socially relevant documentaries with audience Q&A and much more. We are working with Fathom to further broaden our programming options to appeal to even wider audiences.

 

AMC Movie Screens

 

During the nine months ended September 30, 2016, we opened 12 new screens, acquired 26 screens, permanently closed 38 screens, temporarily closed 500 screens and reopened 369 screens to implement our strategy and install consumer experience upgrades.

 

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As of September 30, 2016, we had 2,579 3D enabled screens, including IMAX and AMC Proprietary Premium Large Format (“PLF”) screens; approximately 49% of our screens were 3D enabled screens, including IMAX 3D enabled screens, and approximately 3% of our screens were IMAX 3D enabled screens.

 

 

 

 

 

 

 

 

    

Number of

    

Number of

 

 

 

Screens As of

 

Screens As of

 

Format

 

September 30, 2016

 

December 31, 2015

 

Digital

 

5,295

 

5,426

 

3D enabled (including IMAX and PLF)

 

2,579

 

2,643

 

IMAX (3D enabled)

 

154

 

152

 

Dolby Cinema™ at AMC

 

26

 

12

 

AMC Proprietary PLF (3D enabled)

 

5

 

13

 

Dine-in theatres

 

312

 

312

 

Premium seating

 

1,441

 

1,119

 

 

IMAX®.  IMAX is one of the world’s leading entertainment technology companies, specializing in motion picture technologies and presentations. IMAX offers a unique end-to-end cinematic solution combining proprietary software, theater architecture and equipment to create the highest-quality, most immersive motion picture experience for which the IMAX brand has become known globally. Top filmmakers and studios utilize IMAX theaters to connect with audiences in innovative ways, and as such, IMAX’s theater network is among the most important and successful theatrical distribution platforms for major event films around the world.

 

As of September 30, 2016, AMC is the largest IMAX exhibitor in the U.S. with a 44% market share, and each of our IMAX local installations is protected by geographic exclusivity. As of September 30, 2016, our IMAX screen count is 73% greater than our closest competitor. AMC believes that we have had considerable success with our IMAX partnership, and in June 2016 we announced an agreement to expand the number of IMAX screens in our U.S. theatres to 185 by the end of 2019.

 

Dolby Cinema™ at AMC.    In May 2015, we partnered with Dolby Laboratories, Inc. to unveil a premium cinema offering for moviegoers that combined state-of-the-art image and sound technologies with inspired theatre design and comfort. Dolby Cinema at AMC includes Dolby Vision™ laser projection and object oriented Dolby Atmos® audio technology, as well as AMC’s plush power reclining seats with seat transducers that vibrate with the action on screen.

 

As of September 30, 2016, we have 26 fully operational Dolby Cinema at AMC screens.  In August 2016 we announced the acceleration of our Dolby Cinema at AMC deployment. We expect to have 50 Dolby Cinema at AMC auditoriums operational by the end of 2016, and double that number, to 100, operational by the end of 2017, seven years ahead of our original deployment plan.

 

AMC Proprietary PLF.  AMC believes there is considerable opportunity to add a private label PLF format in many of our locations, with superior sight and sound technology and enhanced seating as contrasted with our traditional auditoriums. This PLF format will give AMC the capability to add a screen in theatres already outfitted with IMAX and/or Dolby Cinema at AMC. Also, this PLF should offer an enhanced theatrical experience for movie goers beyond AMC’s current core theatres, but may not carry the same price premium as IMAX or Dolby Cinema at AMC. Therefore, it may be especially relevant in smaller or more price sensitive markets.

 

Guest Amenities

 

We continually upgrade the quality of our theatre circuit through substantial renovations featuring our seating concepts, acquisitions, new builds (including expansions), 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.

 

Recliner seating is the key feature of theatre renovations.  We believe that maximizing comfort and convenience for our customers will be increasingly necessary to maintain and improve our relevance. These renovations, in conjunction with capital contributions from our landlords, involve stripping theatres to their basic structure in order to replace finishes throughout, upgrade the sight and sound experience, install modernized points of sale and, most importantly, replace traditional theatre seats with plush, electric recliners that allow customers to deploy a leg rest and fully recline at the

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push of a button. The renovation process typically involves losing up to two-thirds of a given auditorium’s seating capacity. For an industry historically focused on quantity, this reduction in seating capacity could be viewed as counter-intuitive and harmful to revenues. However, the quality improvement in the customer experience is driving a 53% increase in attendance at these locations in their first year post renovation. Our customers have responded favorably to the significant personal space gains from ample row depths, ability to recline or stretch their legs, extra-wide pillowed chaise and oversized armrests. The reseated theatres attract more midweek audiences than normal theatres and tend to draw more adults who pay higher ticket prices than teens or young children. We typically do not change ticket prices in the first year after construction, however, in subsequent years we typically increase our ticket prices at our reseated theatres by amounts well in excess of price adjustments for our non-renovated theatres.

 

As of September 30, 2016, we now feature recliner seating in approximately 133 theatres, including Dine-in-Theatres, totaling approximately 1,753 screens. By the end of 2016, we expect to convert an additional 500 screens to recliner seating with an additional 750 by the end of 2017.

 

Rebalancing of the new supply-demand relationship created by recliner seating presents us two further opportunities to improve customer convenience and maximize operating results: open-source internet ticketing and reserved seating.

 

Open-source internet ticketing makes all our seats (over 829,000) in all our theatres and auditoriums for all our showtimes as available as possible, on as many websites as possible. This is a significant departure from the years prior to 2012, when tickets to any one of our theatres were only available on one website. We most recently deployed new technology by partnering with Atom Tickets to allow guests to utilize Atom’s mobile movie ticketing platform to purchase our tickets. Atom’s technology allows movie-goers to check movie reviews and AMC show times, coordinate movie outings among friends while allowing them to pay separately, and pre-pay for food and beverage items. Our tickets are currently on sale over the internet, directly or through mobile apps, at our own website and app and Fandango, Movietickets.com, Flixster and Atom Tickets. We believe increased online access is important because it captures customers’ purchase intent more immediately and directly than if we wait for their arrival at the theatre box office to make a purchase. Carefully monitoring internet pre-sales also lets us adjust capacity in real time, moving movies that are poised to over perform to larger capacity auditoriums or more additional auditoriums, thereby maximizing yield.

 

Reserved seating, at some of our busiest theatres, and now available at all of our Manhattan, New York City locations, allows our customers to choose a specific seat in advance of the movie. We believe that knowing there is a specifically chosen seat waiting for a show that promises to be a sellout is comforting to our customers, reduces anxiety around the experience and compels ticket purchases. We believe reserved seating will become increasingly prevalent to the point of being a prerequisite in the medium-term future.

 

We believe the comfort and personal space gains from recliner seating, coupled with the immediacy of demand captured from open-source internet ticketing and the appeal of reserved seating make a powerful economic combination for us.

 

Food and beverage sales are our second largest source of revenue after box office admissions. Food and beverage items traditionally include popcorn, soft drinks, candy and hot dogs. Different varieties of food and beverage items are offered at our theatres based on preferences in the particular geographic region. Our traditional food and beverage strategy emphasizes prominent and appealing food and beverage offerings designed for rapid service and efficiency, including a customer friendly self-serve experience. We design our theatres to have more food and beverage capacity to make it easier to serve larger numbers of customers. Strategic placement of large food and beverage operations within theatres increases their visibility, aids in reducing the length of lines, allows flexibility to introduce new concepts and improves traffic flow around the food and beverage stands.

 

To address recent consumer trends, we are expanding our menu of enhanced 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, ranging from simple, less capital-intensive food and beverage design improvements to the development of new dine-in theatre options. The costs of these conversions in some cases are partially covered by investments from the theatre landlord. We currently operate 19 Dine-In Theatres that deliver chef-inspired menus with seat-side or delivery service to luxury recliners with tables. Our recent Dine-In Theatre concepts are designed to capitalize on the latest food service trend, the fast casual eating experience.

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Coca Cola Freestyle® puts customers in charge with over 140 drink flavor options in a compact footprint. Our operational excellence and history of innovation rewarded us with first-mover advantage on this new technology, which, as of September 30, 2016, was deployed in 361 of our theatres. We anticipate completing the rollout of Coca Cola Freestyle® into all of our theatres by the end of 2016, a year earlier than originally anticipated.

 

AMC Stubs®

 

AMC Stubs® is a customer loyalty program which allows members to earn rewards, receive discounts and participate in exclusive members-only offerings and services. In July 2016, we completed a national relaunch of our AMC Stubs loyalty program featuring both a traditional paid tier called AMC Stubs Premiere® and a new non-paid tier called AMC Stubs Insider®. Both programs reward loyal guests for their patronage of AMC Theatres. The AMC Stubs Insider tier rewards guests for simply coming to the movies, and benefits include free refills on certain food items, discount ticket offers, a birthday gift and 20 reward points earned for every dollar spent. For a $15 annual membership fee, AMC Stubs Premiere members enjoy express service with specially marked shorter lines at the box office and concession stand, free size upgrades on certain food and beverage items, discount ticket offers, a birthday gift, discounted online ticketing fees and 100 points for every dollar spent. Some of the rewards earned are redeemable on future purchases at AMC locations. Once an AMC Stubs Premere or AMC Stubs Insider member accumulates 5,000 points they will earn a $5 virtual reward.

 

As of September 30, 2016, we had 4,144,000 active member households in the AMC Stubs program. Our AMC Stubs members represented approximately 22% of our attendance during 2016 with an average ticket price 3% lower than our non-members and food and beverage expenditures per patron 4% higher than non-members. We expect the number of active member households to reach 4,500,000 by the end of 2016. We believe movie-goers want to be recognized and rewarded for attending our theatres and as a result, our new AMC Stubs program is designed to strengthen guest loyalty, attract new guests and drive additional return visits. Our much larger database of identified moviegoers also provides us with additional insight into our customers’ movie preferences, and this enables us to have both a larger and a more targeted marketing effort to support our Hollywood studio partners.

 

The portion of the admissions and food and beverage revenues attributed to the rewards is deferred as a reduction of admissions and food and beverage revenues and is allocated between admissions and food and beverage revenues based on expected member redemptions.

 

Upon redemption, deferred rewards are recognized as revenues along with associated cost of goods. Points are forfeited upon expiration and recognized as admissions or food and beverage revenues. For the paid tier of the program (AMC Stubs Premiere), 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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The following tables reflect AMC Stubs activity during the three and nine months ended September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMC Stubs Revenue for

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2016

 

    

Deferred

    

 

 

    

Other Theatre

    

 

 

    

Food and

 

 

 

 

 

Membership

 

Deferred

 

Revenues

 

Admissions

 

Beverage

 

Ticketing

(In thousands)

 

Fees

 

Rewards

 

(Membership Fees)

 

Revenues

 

Revenues

 

Revenues

Balance, June 30, 2016

 

$

12,796

 

$

16,281

 

 

 

 

 

 

 

 

 

 

 

 

Membership fees received

 

 

4,145

 

 

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Rewards accumulated, net of expirations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

 —

 

 

6,255

 

 

 —

 

 

(6,255)

 

 

 —

 

 

 —

Food and beverage

 

 

 —

 

 

6,269

 

 

 —

 

 

 —

 

 

(6,269)

 

 

 —

Rewards redeemed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

 —

 

 

(6,007)

 

 

 —

 

 

6,007

 

 

 —

 

 

 —

Food and beverage

 

 

 —

 

 

(6,104)

 

 

 —

 

 

 —

 

 

6,104

 

 

 —

Amortization of deferred revenue

 

 

(6,080)

 

 

 —

 

 

3,198

 

 

722

 

 

1,439

 

 

721

For the period ended or balance as of September 30, 2016

 

$

10,861

 

$

16,694

 

$

3,198

 

$

474

 

$

1,274

 

$

721

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMC Stubs Revenue for

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2016

 

    

Deferred

    

 

 

    

Other Theatre

    

 

 

    

Food and

 

 

 

 

 

Membership

 

Deferred

 

Revenues

 

Admissions

 

Beverage

 

Ticketing

(In thousands)

 

Fees

 

Rewards

 

(Membership Fees)

 

Revenues

 

Revenues

 

Revenues

Balance, December 31, 2015

 

$

12,142

 

$

17,013

 

 

 

 

 

 

 

 

 

 

 

 

Membership fees received

 

 

17,053

 

 

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Rewards accumulated, net of expirations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

 —

 

 

15,894

 

 

 —

 

 

(15,894)

 

 

 —

 

 

 —

Food and beverage

 

 

 —

 

 

19,320

 

 

 —

 

 

 —

 

 

(19,320)

 

 

 —

Rewards redeemed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

 —

 

 

(16,004)

 

 

 —

 

 

16,004

 

 

 —

 

 

 —

Food and beverage

 

 

 —

 

 

(19,529)

 

 

 —

 

 

 —

 

 

19,529

 

 

 —

Amortization of deferred revenue

 

 

(18,334)

 

 

 —

 

 

15,452

 

 

722

 

 

1,439

 

 

721

For the period ended or balance as of September 30, 2016

 

$

10,861

 

$

16,694

 

$

15,452

 

$

832

 

$

1,648

 

$

721

 

The following tables reflect AMC Stubs activity during the three month period and nine month period ended September 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMC Stubs Revenue for

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2015

 

 

    

Deferred

    

 

 

    

Other Theatre

    

 

 

    

Food and

 

 

 

Membership

 

Deferred

 

Revenues

 

Admissions

 

Beverage

 

(In thousands)

 

Fees

 

Rewards

 

(Membership Fees)

 

Revenues

 

Revenues

 

Balance, June 30, 2015

 

$

12,916

 

$

17,972

 

 

 

 

 

 

 

 

 

 

Membership fees received

 

 

4,853

 

 

 

$

 

$

 

$

 

Rewards accumulated, net of expirations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

 

 

3,733

 

 

 

 

(3,733)

 

 

 

Food and beverage

 

 

 

 

5,380

 

 

 

 

 

 

(5,380)

 

Rewards redeemed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

 

 

(4,584)

 

 

 

 

4,584

 

 

 

Food and beverage

 

 

 

 

(6,481)

 

 

 

 

 

 

6,481

 

Amortization of deferred revenue

 

 

(6,042)

 

 

 

 

6,042

 

 

 

 

 

For the period ended or balance as of September 30, 2015

 

$

11,727

 

$

16,020

 

$

6,042

 

$

851

 

$

1,101

 

 

 

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Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMC Stubs Revenue for

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2015

 

    

Deferred

    

 

 

    

Other Theatre

    

 

 

    

Food and

 

 

Membership

 

Deferred

 

Revenues

 

Admissions

 

Beverage

(In thousands)

 

Fees

 

Rewards

 

(Membership Fees)

 

Revenues

 

Revenues

Balance, December 31, 2014

 

$

11,408

 

$

16,129

 

 

 

 

 

 

 

 

 

Membership fees received

 

 

18,610

 

 

 

$

 

$

 

$

Rewards accumulated, net of expirations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

 

 

13,859

 

 

 

 

(13,859)

 

 

Food and beverage

 

 

 

 

19,846

 

 

 

 

 

 

(19,846)

Rewards redeemed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

 

 

 

(13,870)

 

 

 

 

13,870

 

 

Food and beverage

 

 

 

 

(19,944)

 

 

 

 

 

 

19,944

Amortization of deferred revenue

 

 

(18,291)

 

 

 

 

18,291

 

 

 

 

For the period ended or balance as of September 30, 2015

 

$

11,727

 

$

16,020

 

$

18,291

 

$

11

 

$

98

 

 

Significant and Subsequent Events

 

On November 8, 2016, we issued $595,000,000 aggregate principal amount of 5.875% Senior Subordinated Notes Due 2026 (“Dollar Notes”), which mature on November 15, 2026. We will pay interest on the Dollar Notes at 5.875% per annum, semi-annually in arrears on May 15 and November 15, commencing on May 15, 2017.

 

On November 8, 2016, we issued £250,000,000 aggregate principal amount of 6.375% Senior Subordinated Notes Due 2024 (“Sterling Notes”), which mature on November 15, 2024.  We will pay interest on the Sterling Notes at 6.375% per annum, semi-annually in arrears on May 15 and November 15, commencing on May 15, 2017.

 

On November 8, 2016, we amended our Credit Agreement dated as of April 30, 2013, as previously amended, to, among other things, lower the interest rate from LIBOR plus 3.25% to LIBOR plus 2.75% and to remove a 0.75% LIBOR rate floor, and borrowed $500,000,000 of New Term Loans at LIBOR plus 2.75%.

 

The net proceeds from the offering of the Dollar Notes and the Sterling Notes, together with the borrowings under the New Term Loans, cash on hand and other sources are intended to be used to fund the acquisitions of Odeon and Carmike, repay certain outstanding debt of Odeon and fund related transaction fees and expenses. As a result of the issuance of the Sterling Notes, the senior subordinated bridge loan commitments pursuant to the debt financing commitment letter entered into by us in connection with the definitive agreement to acquire Odeon were reduced from $800,000,000 to $490,000,000.

 

Odeon and UCI Cinemas Holdings Limited.    On July 12, 2016, we entered into a definitive agreement to acquire the equity of Odeon and UCI Cinemas Holdings Limited (“Odeon”) from private equity firm Terra Firma for a total consideration of (i) cash in the amount of GBP £375.0 million ($460.8 million), (ii) shares of AMC Class A common stock valued at GBP £125.0 million ($153.6 million) and (iii) the repayment of indebtedness of approximately GBP £478.6 million ($588.1 million) as of October 19, 2016. The US Dollar amounts set forth in the preceding sentence assume a Euro/USD exchange rate of 1.0973 and a GBP/USD exchange rate of 1.2289 as of October 19, 2016. Odeon is a leading European cinema operator with 242 cinemas and 2,236 screens. We have entered into a debt financing commitment letter in connection with the definitive agreement to acquire Odeon, which provides senior secured incremental term loans in an aggregate amount of up to $525,000,000 and a senior subordinated bridge loan in an aggregate amount of up to $800,000,000 to fund the acquisition. As a result of the issuance of the Sterling Notes, the senior subordinated bridge loan commitments pursuant to the debt financing commitment letter entered into by us in connection with the definitive agreement to acquire Odeon were reduced from $800,000,000 to $490,000,000.Odeon operates in four major markets: the United Kingdom, Spain, Italy and Germany; and three smaller markets: Austria, Portugal, and Ireland. The closing of the acquisition is subject to clearance by the European Commission and the UK Competition and Markets Authority.

 

RealD Inc.  We sold all of our 1,222,780 shares of common stock in RealD Inc. during the nine months ended September 30, 2016 and recognized a gain on sale of $3,008,000.

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Carmike Cinemas.  On July 24, 2016, we, Congress Merger Subsidiary, Inc., our indirect wholly owned subsidiary, and Carmike entered into an amended and restated merger agreement, which amends and restates that certain Agreement and Plan of Merger, dated March 3, 2016, and pursuant to which we will acquire all of the outstanding shares of Carmike for either $33.06 in cash or 1.0819 shares of Class A common stock, at the election of the Carmike stockholders, and subject to a customary proration mechanism to achieve an aggregate consideration mix of 70% cash and 30% in shares of our Class A common stock. We entered into a debt financing commitment letter in connection with the amended and restated merger agreement which provides senior secured incremental term loans in an aggregate amount of up to $225,000,000 and a senior subordinated bridge loan in an aggregate amount of up to $300,000,000 to fund the acquisition. There can be no assurance that we will be successful in completing the debt financing on favorable terms as it involves matters outside of our control. The merger is subject to customary closing conditions, including regulatory approval and approval by Carmike’s shareholders. Carmike is a U.S. leader in digital cinema, 3D cinema deployments and alternative programming and is one of the nation’s largest motion picture exhibitors. As of July 24, 2016, Carmike operates 276 theatres and 2,954 screens in 41 states focused primarily in mid-sized communities.

 

Starplex Cinemas.  In December 2015, we completed the acquisition of Starplex Cinemas for cash. The purchase price for Starplex Cinemas was $172,172,000, net of cash acquired, and is subject to working capital and other purchase price adjustments as described in the stock purchase agreement. Starplex Cinemas operates 33 theatres with 346 screens in small and mid-size markets in 12 states, which further complements our large market portfolio. We expect to realize synergies and cost savings related to this acquisition as a result of purchasing and procurement economies of scale and general and administrative expense savings, particularly with respect to the consolidation of corporate related functions and elimination of redundancies. In January 2016, we divested of two Starplex Cinemas theatres with 22 screens, as required by the Antitrust Division of the United States Department of Justice. We received proceeds from the divestiture of approximately $5,390,000. For additional information about the Starplex Cinemas acquisition, see Note 2—Acquisition to our Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q.

 

Corporate Borrowings.  On December 11, 2015, AMCE entered into a first amendment to its Senior Secured Credit Agreement dated April 30, 2013 (“First Amendment”). The First Amendment provides for the incurrence of $125,000,000 incremental term loans (“Incremental Term Loan”). In addition, the First Amendment, among other things, (a) extends the maturity date with respect to (i) the existing Term Loan due 2020 and the Incremental Term Loan (together “Term Loan due 2022”) to December 15, 2022 and (ii) the Revolving Credit Facility from April 30, 2018 to December 15, 2020 and (b) increases the applicable margin for the Term Loan due 2022 from 1.75% with respect to base rate borrowings to 2.25% and 2.75% with respect to LIBOR borrowings to 3.25%. The proceeds of the Incremental Term Loan were used by Holdings to pay expenses related to the First Amendment transactions and the Starplex Cinemas acquisition. At September 30, 2016, the aggregate principal balance of the Term Loan due 2022 was $874,020,000 and borrowings under the Revolving Credit Facility were $20,000,000. As of September 30, 2016, Holdings had approximately $117,389,000 available for borrowing, net of letters of credit, under its Revolving Credit Facility.

 

Notes due 2025.  On June 5, 2015, AMCE issued $600,000,000 aggregate principal amount of its Notes due 2025 in a private offering. Holdings capitalized deferred financing costs of approximately $11,378,000, related to the issuance of the Notes due 2025. The Notes due 2025 mature on June 15, 2025. Holdings will pay interest on the Notes due 2025 at 5.75% per annum, semi-annually in arrears on June 15th and December 15th, commencing on December 15, 2015. Holdings may redeem some or all of the Notes due 2025 at any time on or after June 15, 2020 at 102.875% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after June 15, 2023, plus accrued and unpaid interest to the redemption date. Prior to June 15, 2020, Holdings may redeem the Notes due 2025 at par plus a make-whole premium. Holdings used the net proceeds from the Notes due 2025 private offering and cash on hand, to pay the consideration for the tender offer for the 9.75% Senior Subordinated Notes due 2020 (“Notes due 2020”), plus any accrued and unpaid interest and related transaction fees and expenses.

 

On June 5, 2015, in connection with the issuance of the Notes due 2025, Holdings entered into a registration rights agreement. Subject to the terms of the registration rights agreement, Holdings filed a registration statement on June 19, 2015 pursuant to the Securities Act of 1933, as amended, relating to an offer to exchange the original Notes due 2025 for exchange Notes due 2025 registered pursuant to an effective registration statement; the registration statement was declared effective on June 29, 2015, and Holdings commenced the exchange offer. The exchange notes have terms substantially identical to the original notes except that the exchange notes do not contain terms with respect to transfer restrictions and registration rights and additional interest payable for the failure to consummate the exchange offer within

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210 days after the issue date. After the exchange offer expired on July 27, 2015, all of the original Notes due 2025 were exchanged.

 

Notes due 2020.  On May 26, 2015, Holdings launched a cash tender offer for any and all of its outstanding Notes due 2020 at a purchase price of $1,093 for each $1,000 principal amount of Notes due 2020 validly tendered and accepted by Holdings on or before June 2, 2015 (the “Expiration Date”). Holders of $581,324,000, or approximately 96.9%, of the Notes due 2020 validly tendered and did not withdraw their Notes due 2020 on or prior to the Expiration Date. On October 30, 2015, AMCE gave notice of its intention to redeem any and all of the remaining $18,676,000 principal amount of the Notes due 2020 on December 1, 2015 at 104.875% of the principal amount, plus accrued and unpaid interest to the redemption date. AMCE completed the redemption of all of its outstanding Notes due 2020 on December 1, 2015.

 

On November 8, 2016, we issued $595,000,000 aggregate principal amount of 5.875% Senior Subordinated Notes Due 2026 (“Dollar Notes”), which mature on November 15, 2026. We will pay interest on the Dollar Notes at 5.875% per annum, semi-annually in arrears on May 15 and November 15, commencing on May 15, 2017.

 

On November 8, 2016, we issued £250,000,000 aggregate principal amount of 6.375% Senior Subordinated Notes Due 2024 (“Sterling Notes”), which mature on November 15, 2024. We will pay interest on the Sterling Notes at 6.375% per annum, semi-annually in arrears on May 15 and November 15, commencing on May 15, 2017.

 

On November 8, 2016, we amended our Credit Agreement dated as of April 30, 2013, as previously amended, to, among other things, lower the interest rate from LIBOR plus 3.25% to LIBOR plus 2.75% and to remove a 0.75% LIBOR rate floor, and borrowed $500,000,000 of New Term Loans at LIBOR plus 2.75%.

 

The net proceeds from the offering of the Dollar Notes and the Sterling Notes, together with the borrowings under the New Term Loans, cash on hand and other sources are intended to be used to fund the acquisitions of Odeon and Carmike, repay certain outstanding debt of Odeon and fund related transaction fees and expenses. As a result of the issuance of the Sterling Notes, the senior subordinated bridge loan commitments pursuant to the debt financing commitment letter entered into by us in connection with the definitive agreement to acquire Odeon were reduced from $800,000,000 to $490,000,000.

 

On March 31, 2016, AMCE merged with and into Holdings, its direct parent company. In connection with the merger, Holdings assumed all of the obligations of AMCE pursuant to the indentures to the Notes due 2022, the Notes due 2025 and the Credit Agreement, dated as of April 30, 2013 (as subsequently amended).

 

Postretirement Medical Plan Termination.  On January 12, 2015, the Compensation Committee and the Board of Directors of Holdings, adopted resolutions to terminate the AMC Postretirement Medical Plan with an effective date of March 31, 2015. During the three months ended March 31, 2015, we notified eligible associates that their retiree medical coverage under the plan will terminate after March 31, 2015. Payments to eligible associates were approximately $4,300,000 during the twelve months ended December 31, 2015. We recorded net periodic benefit credits of $18,118,000, including curtailment gains, settlement gains, amortization of unrecognized prior service credits and amortization of actuarial gains recorded in accumulated other comprehensive income related to the termination and settlement of the plan during the nine months ended September 30, 2015.

 

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Table of Contents

Dividends.  The following is a summary of dividends and dividend equivalents declared to stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Amount per

    

Total Amount

 

 

 

 

 

 

 

Share of

 

Declared

 

Declaration Date

 

Record Date

 

Date Paid

 

Common Stock

 

(In thousands)

 

February 25, 2016

 

March 7, 2016

 

March 21, 2016

 

$

0.20

 

$

19,762

 

April 27, 2016

 

June 6, 2016

 

June 20, 2016

 

 

0.20

 

 

19,762

 

July 25, 2016

 

September 6, 2016

 

September 19, 2016

 

 

0.20

 

 

19,760

 

February 3, 2015

 

March 9, 2015

 

March 23, 2015

 

 

0.20

 

 

19,637

 

April 27, 2015

 

June 8, 2015

 

June 22, 2015

 

 

0.20

 

 

19,635

 

July 28, 2015

 

September 8, 2015

 

September 21, 2015

 

 

0.20

 

 

19,622

 

October 29, 2015

 

December 7, 2015

 

December 21, 2015

 

 

0.20

 

 

19,654

 

April 25, 2014

 

June 6, 2014

 

June 16, 2014

 

 

0.20

 

 

19,576

 

July 29, 2014

 

September 5, 2014

 

September 15, 2014

 

 

0.20

 

 

19,576

 

October 27, 2014

 

December 5, 2014

 

December 15, 2014

 

 

0.20

 

 

19,577

 

 

During the nine months ended September 30, 2016 and the nine months ended September 30, 2015, we paid dividends and dividend equivalents of $59,081,000 and $59,012,000, respectively. At September 30, 2016 and September 30, 2015, we accrued $368,000 and $107,000, respectively, for the remaining unpaid dividends.

 

On November 3, 2016, Holdings’ Board of Directors declared a cash dividend in the amount of $0.20 per share of Class A and Class B common stock, payable on December 19, 2016 to stockholders of record on December 5, 2016.

 

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Table of Contents

Operating Results

 

The following table sets forth our revenues, operating costs and expenses attributable to our theatrical exhibition operations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

 

    

Nine Months Ended

    

 

 

(In thousands)

 

September 30, 2016

    

September 30, 2015

    

% Change

 

September 30, 2016

    

September 30, 2015

 

% Change

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theatrical exhibition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Admissions

 

$

496,729

 

$

441,262

 

12.6

%  

$

1,460,537

 

$

1,393,338

 

4.8

%

Food and beverage

 

 

248,889

 

 

216,764

 

14.8

%  

 

736,587

 

 

667,804

 

10.3

%

Other theatre

 

 

34,153

 

 

30,814

 

10.8

%  

 

112,626

 

 

101,901

 

10.5

%

Total revenues

 

$

779,771

 

$

688,840

 

13.2

%  

$

2,309,750

 

$

2,163,043

 

6.8

%

Operating Costs and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theatrical exhibition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Film exhibition costs

 

$

259,069

 

$

233,390

 

11.0

%  

$

784,363

 

$

751,894

 

4.3

%

Food and beverage costs

 

 

33,949

 

 

31,080

 

9.2

%  

 

102,014

 

 

95,395

 

6.9

%

Operating expense

 

 

211,554

 

 

195,505

 

8.2

%  

 

613,893

 

 

588,177

 

4.4

%

Rent

 

 

121,904

 

 

115,861

 

5.2

%  

 

369,307

 

 

348,804

 

5.9

%

General and administrative expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs

 

 

4,961

 

 

751

 

*

%  

 

15,113

 

 

2,590

 

*

%

Other

 

 

19,785

 

 

18,706

 

5.8

%  

 

58,935

 

 

41,384

 

42.4

%

Depreciation and amortization

 

 

63,025

 

 

58,008

 

8.6

%  

 

185,746

 

 

173,034

 

7.3

%

Operating costs and expenses

 

 

714,247

 

 

653,301

 

9.3

%  

 

2,129,371

 

 

2,001,278

 

6.4

%

Operating income

 

 

65,524

 

 

35,539

 

84.4

%  

 

180,379

 

 

161,765

 

11.5

%

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense

 

 

79

 

 

 —

 

*

%  

 

(5)

 

 

9,273

 

*

%

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate borrowings

 

 

24,679

 

 

22,682

 

8.8

%  

 

74,434

 

 

73,478

 

1.3

%

Capital and financing lease obligations

 

 

2,099

 

 

2,286

 

(8.2)

%  

 

6,441

 

 

6,990

 

(7.9)

%

Equity in earnings losses of non-consolidated entities

 

 

(12,030)

 

 

(10,850)

 

10.9

%  

 

(28,143)

 

 

(21,536)

 

30.7

%

Investment income

 

 

176

 

 

163

 

*

%  

 

(9,602)

 

 

(5,039)

 

90.6

%

Total other expense

 

 

15,003

 

 

14,281

 

5.1

%  

 

43,125

 

 

63,166

 

(31.7)

%

Earnings before income taxes

 

 

50,521

 

 

21,258

 

137.7

%  

 

137,254

 

 

98,599

 

39.2

%

Income tax provision

 

 

20,085

 

 

9,080

 

121.2

%  

 

54,560

 

 

36,360

 

50.1

%

Net earnings

 

$

30,436

 

$

12,178

 

149.9

%  

$

82,694

 

$

62,239

 

32.9

%


*     Percentage change in excess of 100%

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Nine Months Ended

 

 

 

September 30, 2016

 

September 30, 2015

 

September 30, 2016

 

September 30, 2015

 

Operating Data:

 

 

 

 

 

 

 

 

 

Screen additions

 

 —

 

 —

 

12

 

12

 

Screen acquisitions

 

15

 

 —

 

26

 

40

 

Screen dispositions

 

 —

 

 —

 

38

 

 —

 

Construction openings (closures), net

 

(54)

 

(94)

 

(131)

 

(62)

 

Average screens(1)

 

5,240

 

4,916

 

5,278

 

4,914

 

Number of screens operated

 

5,295

 

4,937

 

5,295

 

4,937

 

Number of theatres operated

 

388

 

348

 

388

 

348

 

Screens per theatre

 

13.6

 

14.2

 

13.6

 

14.2

 

Attendance (in thousands)(1)

 

51,895

 

47,298

 

153,136

 

145,874

 

 


(1)

Includes consolidated theatres only and excludes screens offline due to construction.

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Adjusted EBITDA

 

We present Adjusted EBITDA as a supplemental measure of our performance. We define Adjusted EBITDA as net earnings plus (i) income tax provision (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.

 

Adjusted EBITDA increased by $35,435,000 or 32.5% during the three months ended September 30, 2016 compared to the three months ended September 30, 2015. The increase in Adjusted EBITDA was due primarily to increases in attendance including the benefit of the Starplex acquisition and average ticket prices, increases in food and beverage revenues per patron, increases in other revenues, and partially offset by decreases in cash distributions from non-consolidated entities and increases in start-up costs, changes in reward structure and build-up of deferred revenues for earned rewards related to the relaunch of AMC Stubs which will result in future revenue when the rewards are redeemed and recognized as revenues.

 

Adjusted EBITDA increased by $38,024,000 or 9.9% during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. The increase in Adjusted EBITDA was due primarily to increases in attendance including the benefit of the Starplex acquisition, food and beverage revenues per patron, increases in other revenues,  offset by decreases in cash distributions from non-consolidated entities, increases in G&A other: including expense due to the prior year postretirement curtailment gain of $18,118,000 and declines in average ticket prices.

 

The following table sets forth our reconciliation of Adjusted EBITDA:

 

Reconciliation of Adjusted EBITDA

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Nine Months Ended

(In thousands)

 

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

Net earnings

 

$

30,436

 

$

12,178

 

$

82,694

 

$

62,239

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

 

20,085

 

 

9,080

 

 

54,560

 

 

36,360

Interest expense

 

 

26,778

 

 

24,968

 

 

80,875

 

 

80,468

Depreciation and amortization

 

 

63,025

 

 

58,008

 

 

185,746

 

 

173,034

Certain operating expenses(1)

 

 

5,772

 

 

3,899

 

 

13,012

 

 

11,313

Equity in earnings of non-consolidated entities

 

 

(12,030)

 

 

(10,850)

 

 

(28,143)

 

 

(21,536)

Cash distributions from non-consolidated entities

 

 

3,401

 

 

8,557

 

 

21,672

 

 

24,328

Investment expense (income)

 

 

176

 

 

163

 

 

(9,602)

 

 

(5,039)

Other expense (income)(2)

 

 

79

 

 

 —

 

 

(5)

 

 

9,273

General and administrative expense—unallocated:

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs(3)

 

 

4,961

 

 

751

 

 

15,113

 

 

2,590

Stock-based compensation expense(4)

 

 

1,705

 

 

2,199

 

 

4,509

 

 

9,377

Adjusted EBITDA

 

$

144,388

 

$

108,953

 

$

420,431

 

$

382,407

(1)

Amounts represent preopening expense related to temporarily closed screens under renovation, theatre and other closure expense for the permanent closure of screens including the related accretion of interest, non-cash deferred digital equipment rent expense, and disposition of assets and other non-operating gains or losses included in

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operating expenses. We have excluded these items as they are non-cash in nature, include components of interest cost for the time value of money or are non-operating in nature.

 

(2)

Other expense for the prior year periods related to the cash tender offer and redemption of the 9.75% Senior Subordinated Notes due 2020. We exclude other expense and income related to financing activities as the amounts are similar to interest expense or income and are non-operating in nature.

 

(3)

Merger, acquisition and transition costs are excluded as it is non-operating in nature.

 

(4)

Non‑cash expense included in general and administrative: other.

 

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 U.S. 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 estimate our value.

 

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; and

 

·

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

 

Results of Operations— For the Three Months Ended September 30, 2016 and September 30, 2015

 

Revenues.  Total revenues increased 13.2%, or $90,931,000 during the three months ended September 30, 2016 compared to the three months ended September 30, 2015. Admissions revenues increased 12.6%, or $55,467,000 during the three months ended September 30, 2016 compared to the three months ended September 30, 2015, primarily due to a 9.7%  increase in attendance and a 2.6%  increase in average ticket price. The increase in attendance was primarily due to the increased performance of film product during the current period, and including the acquisition of Starplex Cinemas in December of 2015 and our comfort and convenience theatre renovation initiatives. The increase in average ticket price is due to a combination of factors, including the anniversary of certain promotional pricing strategies implemented in last year’s third quarter, partially offset by the addition of Starplex theatres with a lower average ticket price and an increase in premium format box office attendance primarily related to Dolby Cinema ® at AMC where we added seven screens in the third quarter. Total admissions revenues were increased by rewards redeemed, net of deferrals, of $474,000 and $851,000 related to rewards accumulated under AMC Stubs during the three months ended September 30, 2016 and the three months ended September 30, 2015, respectively. The rewards accumulated under AMC Stubs are deferred and recognized in future periods upon redemption or expiration of customer rewards.

 

Food and beverage revenues increased 14.8%, or $32,125,000, during the three months ended September 30, 2016 compared to the three months ended September 30, 2015, primarily due to the increase in attendance and an increase in food and beverage revenues per patron of 4.8%. The increase in food and beverage revenues per patron reflects increased prices effective at the start of the fourth quarter of calendar 2015 and the contribution of our food and beverage strategic initiatives. Total food and beverage revenues were increased by rewards redeemed, net of deferrals, and amortization of deferred membership revenues of $1,274,000 and $1,101,000 related to rewards accumulated under

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AMC Stubs during the three months ended September 30, 2016 and the three months ended September 30, 2015, respectively.

 

Total other theatre revenues increased 10.8%, or $3,339,000 during the three months ended September 30, 2016 compared to the three months ended September 30, 2015, primarily due to increases in income from internet ticketing fees, advertising revenues and gift card income.

 

Operating costs and expenses.  Operating costs and expenses increased 9.3%, or $60,946,000 during the three months ended September 30, 2016 compared to the three months ended September 30, 2015. Film exhibition costs increased 11.0%, or $25,679,000, during the three months ended September 30, 2016 compared to the three months ended September 30, 2015, primarily due to the increase in admissions revenues and 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 52.2% for the three months ended September 30, 2016 and 52.9% for the three months ended September 30, 2015 due to an increase in rebates from distributors.

 

Food and beverage costs increased 9.2%, or $2,869,000, during the three months ended September 30, 2016 compared to the three months ended September 30, 2015. As a percentage of food and beverage revenues, food and beverage costs were 13.6% for the three months ended September 30, 2016 and 14.3% for the three months ended September 30, 2015 due to increases in retail selling prices at the start of the fourth quarter of 2015 in excess of cost increases for our food and beverage products. The increase in food and beverage costs was primarily due to the increase in food and beverage revenues,  partially offset by the decrease in food and beverage costs as a percentage of food and beverage revenues. Food and beverage gross profit per patron increased 5.3%, and is calculated as food and beverage revenues less food and beverage costs divided by attendance.

 

As a percentage of revenues, operating expense was 27.1% for the three months ended September 30, 2016 as compared to 28.4% for the three months ended September 30, 2015, primarily due to the increase in revenues, partially offset by increases in repairs and maintenance expense and equipment rentals related to our enhanced food and beverage initiatives and increases in payment processing costs and professional and consulting expenses. Rent expense increased 5.2%, or $6,043,000 during the three months ended September 30, 2016 compared to the three months ended September 30, 2015, primarily from the increase in the number of theatres operated including the acquisition of Starplex Cinemas, and an increase in percentage rentals based on revenues.

 

General and Administrative Expense:

 

Merger, acquisition and transaction costs.  Merger, acquisition and transaction costs were $4,961,000 during the three months ended September 30, 2016 compared to $751,000 during the three months ended September 30, 2015, primarily due to an increase in legal and professional and consulting costs and increased merger and acquisition activity associated with our proposed Carmike merger and Odeon acquisition.

 

Other.  Other general and administrative expense increased $1,079,000, during the three months ended September 30, 2016 compared to the three months ended September 30, 2015, due primarily to increases in salary and benefits of $900,000, legal expenses of $700,000, and professional and consulting expenses of $300,000, partially offset by a $1,000,000 decrease in development costs.

 

Depreciation and amortization.  Depreciation and amortization increased 8.6%, or $5,017,000, during the three months ended September 30, 2016 compared to the three months ended September 30, 2015, primarily due to the increase in depreciable assets resulting from capital expenditures of $256,599,000 and $333,423,000 during the nine months ended September 30, 2016 and the twelve months ended December 31, 2015, respectively and the acquisition of Starplex Cinemas.

 

Other Expense (Income):

 

Other expense (income).    Other income during the three months ended September 30, 2016 was $79,000 compared to $0 during the three months ended September 30, 2015.  

 

Interest expense.  Interest expense for the three months ended September 30, 2016 increased 7.2% or $1,810,000 compared to the three months ended September 30, 2015, primarily due to additional term loans of

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$125,000,000. During the three months ended September 30, 2016 we borrowed $20,000,000 on our Revolving Credit Facility.

 

Equity in earnings of non‑consolidated entities.  Equity in earnings of non-consolidated entities were $12,030,000 for the three months ended September 30, 2016 compared to $10,850,000 for the three months ended September 30, 2015. The increase in equity in earnings of non-consolidated entities of $1,180,000 was primarily due to increases in earnings from DCIP of $1,691,000 partially offset by a decrease in earnings from NCM of $1,081,000. During the three months ended September 30, 2016, we continued to suspend equity method accounting for our investment in Open Road Films as the investment in Open Road Films had reached our remaining commitment. The cash distributions from non-consolidated entities were $3,401,000 during the three months ended September 30, 2016, and $8,557,000 during the three months ended September 30, 2015. See Note 3—Investments of the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q for further information.

 

Investment expense (income).  Investment expense was $176,000 for the three months ended September 30, 2016 compared to investment expense of $163,000 for the three months ended September 30, 2015.

 

Income tax provision.  The income tax provision from continuing operations was $20,085,000 for the three months ended September 30, 2016 and $9,080,000 for the three months ended September 30, 2015. See Note 5—Income Taxes of the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q for further information.

 

Net earnings.  Net earnings were $30,436,000 and $12,178,000 during the three months ended September 30, 2016 and September 30, 2015, respectively. Net earnings during the three months ended September 30, 2016 compared to the three months ended September 30, 2015 were positively impacted by the increases in attendance, average ticket price, food and beverage per patron and an increase in equity in earnings from non-consolidated entities. Net earnings were negatively impacted by increases in rent, depreciation and amortization, merger, acquisition and transaction costs, general and administrative: other, increases in interest expense and income tax provision. 

 

Results of Operations— For the Nine Months Ended September 30, 2016 and September 30, 2015

 

Revenues.  Total revenues increased 6.8%, or $146,707,000, during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. Admissions revenues increased 4.8%, or $67,199,000 during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, primarily due to a 5.0% increase in attendance partially offset by a 0.1% decrease in average ticket price. The increase in attendance was primarily due to the acquisition of Starplex Cinemas in December of 2015. Total admissions revenues were increased by rewards redeemed, net of deferrals, of $832,000 and were increased by rewards redeemed, net of deferrals of $11,000 related to rewards accumulated under AMC Stubs during the nine months ended September 30, 2016 and the nine months ended September 30, 2015, respectively. The rewards accumulated under AMC Stubs are deferred and recognized in future periods upon redemption or expiration of customer rewards.

 

Food and beverage revenues increased 10.3%, or $68,783,000, during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, primarily due to the increase in food and beverage revenues per patron of 5.0% and the increase in attendance. The increase in food and beverage revenues per patron reflects increased prices effective at the start of the fourth quarter of calendar 2015 and the contribution of our food and beverage strategic initiatives. Total food and beverage revenues were increased by rewards redeemed, net of deferrals, of $1,648,000 and were increased by rewards redeemed, net of deferrals, of $98,000 related to rewards accumulated under AMC Stubs during the nine months ended September 30, 2016 and the nine months ended September 30, 2015, respectively.

 

Total other theatre revenues increased 10.5%, or $10,725,000 during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, primarily due to increases in income from internet ticketing fees, advertising revenues, and gift card income.

 

Operating costs and expenses.  Operating costs and expenses increased 6.4%, or $128,093,000, during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. Film exhibition costs increased 4.3%, or $32,469,000, during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, primarily due to the increase in admissions revenues. As a percentage of admissions revenues, film

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exhibition costs were 53.7% for the nine months ended September 30, 2016 and 54.0% for the nine months ended September 30, 2015.

 

Food and beverage costs increased 6.9%, or $6,619,000, during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. As a percentage of food and beverage revenues, food and beverage costs were 13.8% for the nine months ended September 30, 2016 and 14.3% for the nine months ended September 30, 2015 due to increases in retail selling prices at the start of the fourth quarter of 2015 in excess of cost increases for our food and beverage products. The increase in food and beverage costs was primarily due to the increase in food and beverage revenues. Food and beverage gross profit per patron increased 5.6%, and is calculated as food and beverage revenues less food and beverage costs divided by attendance.

 

As a percentage of revenues, operating expense was 26.6% for the nine months ended September 30, 2016 as compared to 27.2% for the nine months ended September 30, 2015, primarily due to the increase in attendance, partially offset by increases in repairs and maintenance expenses and equipment rentals related to our enhanced food and beverage initiatives. Rent expense increased 5.9%, or $20,503,000 during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, primarily from the increase in the number of theatres operated including the acquisition of Starplex Cinemas.

 

General and Administrative Expense:

 

Merger, acquisition and transaction costs.  Merger, acquisition and transaction costs were $15,113,000 during the nine months ended September 30, 2016 compared to $2,590,000 during the nine months ended September 30, 2015, primarily due to an increase in professional and consulting costs and increased merger and acquisition activity associated with our proposed Carmike merger and Odeon acquisition.

 

Other.  Other general and administrative expense increased $17,551,000, during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, due primarily to the net periodic benefit credit of $18,118,000 related to the termination and settlement of the AMC Postretirement Medical Plan recorded in the prior year and an increase in legal expenses of $3,700,000 partially offset by declines in stock-based compensation expense of $4,868,000 due to an increase in vesting periods compared to the prior year. See Note 9—Employee Benefit Plans of the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q for further information regarding the components of net periodic benefit credit, including recognition of the prior service credits and net actuarial gains recorded in accumulated other comprehensive income, curtailment gains, and settlement gains during the nine months ended September 30, 2015.

 

Depreciation and amortization.  Depreciation and amortization increased 7.3%, or $12,712,000, during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, primarily due to the increase in depreciable assets resulting from capital expenditures of $256,599,000 and $333,423,000 during the nine months ended September 30, 2016 and the twelve months ended December 31, 2015, respectively and the acquisition of Starplex Cinemas.

 

Other Expense (Income):

 

Other expense (income).    Other expense during the nine months ended September 30, 2015 was due to a loss on extinguishment of indebtedness related to the cash tender offer and redemption of the Notes due 2020 of $9,273,000.

 

Interest expense.  Interest expense increased 0.5%, or $407,000, for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 primarily due to borrowings on our Revolving Credit Facility.

 

Equity in earnings of non‑consolidated entities.  Equity in earnings of non-consolidated entities were $28,143,000 for the nine months ended September 30, 2016 compared to $21,536,000 for the nine months ended September 30, 2015. The increase in equity in earnings of non-consolidated entities of $6,607,000 was primarily due to improvement in earnings from DCIP of $3,722,000, increases in earnings from NCM of $2,842,000 and decreases in losses from Open Road Films of $430,000. During the nine months ended September 30, 2016, we continued to suspend equity method accounting for our investment in Open Road Films as the investment in Open Road Films had reached our commitment. The cash distributions from non-consolidated entities were $21,672,000 during the nine months ended

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September 30, 2016, and $24,328,000 during the nine months ended September 30, 2015, which includes payments related to the NCM tax receivable agreement recorded in investment income. See Note 3—Investments of the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q for further information.

 

Investment income.  Investment income was $9,602,000 for the nine months ended September 30, 2016 compared to investment income of $5,039,000 for the nine months ended September 30, 2015. Investment income for the nine months ended September 30, 2016 includes payments received of $7,218,000 related to the NCM tax receivable agreement compared to payments received of $5,352,000 during the nine months ended September 30, 2015. Investment income for the nine months ended September 30, 2016 also includes a $3,008,000 gain on sale of all of our 1,222,780 common shares held in RealD Inc.

 

Income tax provision.  The income tax provision was $54,560,000 for the nine months ended September 30, 2016 and $36,360,000 for the nine months ended September 30, 2015. See Note 5—Income Taxes of the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q for further information.

 

Net earnings.  Net earnings were $82,694,000 and $62,239,000 during the nine months ended September 30, 2016 and September 30, 2015, respectively. Net earnings during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 were positively impacted by the increase in attendance, and food and beverage revenue per patron, the increase in investment income, and the increase in equity in earnings of non-consolidated entities, partially offset by the decrease in average ticket price, increases in rent, depreciation and amortization expense general and administrative: other, merger, acquisition and transaction costs, and income tax provision. 

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our consolidated revenues are primarily collected in cash, principally through box office admissions and food and beverage 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.

 

We had working capital deficit as of September 30, 2016 and December 31, 2015 of $(399,530,000) and  $(297,787,000), respectively. Working capital included $162,737,000 and  $221,679,000 of deferred revenues and income as of September 30, 2016 and December 31, 2015, respectively. We have the ability to borrow under 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). As of September 30, 2016, we had $117,389,000 available for borrowing, net of letters of credit, under our revolving Senior Secured Credit Facility.

 

We believe that cash obtained from recent financing, generated from operations and existing cash and equivalents and “float” will be sufficient to fund operations, pay dividends and make planned capital expenditures currently and for at least the next 12 months, enable us complete the planned acquisitions and enable us to maintain compliance with covenants related to the Senior Secured Credit Facility, the Notes due 2022, the Notes due 2025, the Dollar Notes due 2026 and the Sterling Notes due 2024.

 

As of September 30, 2016, we were in compliance with all financial covenants relating to the Senior Secured Credit Facility, the Notes due 2022, and the Notes due 2025.

 

Cash Flows from Operating Activities

 

Cash flows provided by operating activities, as reflected in the Consolidated Statements of Cash Flows, were $211,334,000 and $209,225,000 during the nine months ended September 30, 2016 and September 30, 2015, respectively. The increase in cash flows provided by operating activities was primarily due to an increase in payments for working capital items partially offset by an increase in landlord contributions.

 

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Cash Flows from Investing Activities

 

Cash flows used in investing activities, as reflected in the Consolidated Statements of Cash Flows, were $248,285,000 and $217,086,000, during the nine months ended September 30, 2016 and September 30, 2015, respectively. Cash outflows from investing activities include capital expenditures of $256,599,000 and $215,574,000 during the nine months ended September 30, 2016 and September 30, 2015, respectively. Our capital expenditures primarily consisted of strategic growth initiatives and remodels, capital improvements to existing locations in our theatre circuit, and technology upgrades. We expect that our gross cash outflows for capital expenditures will be approximately $400,000,000 to $420,000,000 for 2016, before giving effect to expected landlord contributions of approximately $120,000,000 to $130,000,000, resulting in a net cash outlay of approximately $280,000,000 to $300,000,000.

 

During the nine months ended September 30, 2016 we received proceeds from the sale of our shares in RealD Inc. of $13,451,000 and proceeds from the sale of two Starplex divestiture theatres of $5,390,000. During the nine months ended September 30, 2016 we made capital contributions to Open Road Films of $10,000,000.

 

We fund the costs of constructing, maintaining and remodeling our theatres through existing cash balances; cash generated from operations, landlord contributions, 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. See Commitments and Contingencies below for additional discussion of the potential cash outflows due to our proposed acquisition activity and future sources of liquidity.

 

Cash Flows from Financing Activities

 

Cash flows used in financing activities, as reflected in the Consolidated Statements of Cash Flows, were $127,877,000 and $112,085,000 during the nine months ended September 30, 2016 and September 30, 2015, respectively. Financing activities for the current period consisted of dividend payments and repayments of $55,000,000 related to our revolving Senior Secured Credit Facility and capital and financing lease obligations. On February 25, 2016, our Board of Directors declared a cash dividend in the amount of $0.20 per share of Class A and Class B common stock, payable on March 21, 2016 to stockholders of record on March 7, 2016. On April 27, 2016, our Board of Directors declared a cash dividend in the amount of $0.20 per share of Class A and Class B common stock, payable on June 20, 2016 to stockholders of record on June 6, 2016. On July 25, 2016, our Board of Directors declared a cash dividend in the amount of $0.20 per share of Class A and Class B common stock, payable on September 19, 2016 to stockholders of record on September 6, 2016. We paid dividends and dividend equivalents of $59,081,000 during the nine months ended September 30, 2016 and $59,012,000 during the nine months ended September 30, 2015.

 

On June 5, 2015, we issued $600,000,000 aggregate principal amount of its Notes due 2025 and used the net proceeds to pay for the tender offer for the Notes due 2020, plus any accrued and unpaid interest and related transaction fees and expenses. The deferred financing costs paid related to the issuance of the Notes due 2025 were $11,378,000, during the nine months ended September 30, 2015. We repaid principal and recorded premium related to approximately 96.9% of the Notes due 2020 during the nine months ended September 30, 2015 of $626,114,000, comprised of $581,324,000 principal amount and $44,790,000 recorded premium. See Note 1—Basis of Presentation of the Notes to Consolidated Financial Statements in Item 1 of Part I for further information.

 

Investment in NCM LLC

 

We hold an investment of 17.4% in NCM LLC and 200,000 shares of NCM, Inc. accounted for under the equity method as of September 30, 2016. The estimated fair market value of our investment in NCM and NCM, Inc. was approximately $354,207,000, based upon the publically quoted price per share of NCM, Inc. on September 30, 2016 of $14.72 per share. We have little tax basis in these units, therefore the sale of all these units at September 30, 2016 would require us to report taxable income of approximately $428,505,000, including distributions received from NCM LLC that were previously deferred. Our investment in NCM LLC is a source of liquidity for us and we expect that any sales we may make of NCM LLC 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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Commitments and Contingencies

 

We have commitments and contingencies for capital and financing leases, corporate borrowings, operating leases, capital related betterments and pension funding that were summarized in a table in our Annual Report on Form 10-K for the year ended December 31, 2015. Since December 31, 2015, material changes to the commitments and contingencies of the Company outside the ordinary course of business are discussed below.

 

On July 24, 2016, we, Congress Merger Subsidiary, Inc., our indirect wholly owned subsidiary, and Carmike entered into an amended and restated merger agreement, which amends and restates that certain Agreement and Plan of Merger, dated March 3, 2016, and pursuant to which we will acquire all of the outstanding shares of Carmike for either $33.06 in cash or 1.0819 shares of Class A common stock, at the election of the Carmike stockholders, and subject to a customary proration mechanism to achieve an aggregate consideration mix of 70% cash and 30% in shares of our Class A common stock. The merger is subject to customary closing conditions, including regulatory approval and approval by Carmike’s shareholders.

 

On July 12, 2016, we entered into a definitive agreement to acquire the equity of Odeon from private equity firm Terra Firma for a total consideration of (i) cash in the amount of GBP £375.0 million ($460.8 million), (ii) shares of AMC Class A common stock valued at GBP £125.0 million ($153.6 million) and (iii) the repayment of indebtedness of approximately GBP £478.6 million ($588.1 million) as of October 19, 2016. The US Dollar amounts set forth in the preceding sentence assume a Euro/USD exchange rate of 1.0973 and a GBP/USD exchange rate of 1.2289 as of October 19, 2016. Odeon is a leading European cinema operator with 242 cinemas and 2,236 screens. Odeon operates in four major markets: the United Kingdom, Spain, Italy and Germany; and three smaller markets: Austria, Portugal, and Ireland. The closing of the acquisition is subject to clearance by the European Commission and the UK Competition and Markets Authority.

 

New Accounting Pronouncements

 

See Note 11—New Accounting Pronouncements of the Notes to our Consolidated Financial Statements in Item 1 of Part I for further information regarding recently issued accounting standards.

 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

We are exposed to various market risks.

 

Market risk on variable‑rate financial instruments.  At September 30, 2016, we maintained a Senior Secured Credit Facility comprised of a $150,000,000 revolving credit facility and $900,000,000 of Senior Secured Term Loans due 2022. The Senior Secured Credit Facility provides for borrowings at a rate equal to an applicable margin plus, at our option, either a base rate or LIBOR, with a minimum base rate of 1.75% and a minimum rate for LIBOR borrowings of 0.75%. The rate in effect at September 30, 2016 for the outstanding Senior Secured Term Loan due 2022 was a LIBOR-based rate of 4.00% per annum. Increases in market interest rates would cause interest expense to increase and earnings before income taxes to decrease. The change in interest expense and earnings before income taxes would be dependent upon the weighted average outstanding borrowings during the reporting period following an increase in market interest rates. At September 30, 2016, we had $20,000,000 variable-rate borrowings outstanding under our revolving credit facility and had an aggregate principal balance of $874,020,000 outstanding under the Senior Secured Term Loan due 2022. A 100 basis point change in market interest rates would have increased or decreased interest expense on the Senior Secured Credit Facility by $6,723,000 during the nine months ended September 30, 2016.

 

Market risk on fixed‑rate financial instruments.  Included in long-term corporate borrowings at September 30, 2016 were principal amounts of $600,000,000 of our Notes due 2025 and $375,000,000 of our Notes due 2022. Increases in market interest rates would generally cause a decrease in the fair value of the Notes due 2025 and Notes due 2022 and a decrease in market interest rates would generally cause an increase in fair value of the Notes due 2025 and Notes due 2022.

 

Item 4.  Controls and Procedures.

 

(a)Evaluation of disclosure controls and procedures.

 

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The Company maintains a set of disclosure controls and procedures designed to ensure that material information required to be disclosed in its filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that material information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated these disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q and have determined that such disclosure controls and procedures were effective.

 

(b)Changes in internal controls.

 

There has been no change in our internal control over financial reporting during our most recent calendar quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II—OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

Reference is made to Note 10-Commitments and Contingencies of the Notes to the Company’s Consolidated Financial Statements contained elsewhere in this quarterly report on Form 10‑Q for information on certain litigation to which we are a party.

 

Item 1A.  Risk Factors

 

Reference is made to Part I Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2015, our quarterly report on Form 10-Q for the quarter ended June 30, 2016, and current report on Form 8-K filed October 24, 2016. Apart from the information in the above referenced Form 10-Q and Form 8-K, there have been no material changes in our risk factors from those previously discussed in our Annual Report on Form 10-K for the year ended December 31, 2015.

 

There may be future dilution of AMC Class A common stock, which could adversely affect the market price of shares of AMC Class A common stock.

 

AMC is not restricted from issuing additional shares of AMC Class A common stock. In the future, AMC may issue shares of AMC Class A common stock to raise cash to refinance indebtedness or for working capital, future activities, acquisitions or other purposes. AMC may also acquire interests in other companies by using a combination of cash and shares of AMC Class A common stock or just shares of AMC Class A common stock. In fact, AMC has agreed to issue shares of AMC Class A common stock as part of the consideration delivered in connection with its acquisitions of Odeon and Carmike. AMC may also issue securities convertible into, or exchangeable for, or that represent the right to receive, shares of AMC Class A common stock. Any of these events may dilute the ownership interests of current AMC stockholders in AMC, reduce AMC's earnings per share or have an adverse effect on the price of shares of AMC Class A common stock.

 

Sales of a substantial amount of shares of AMC Class A common stock in the public market could adversely affect the market price of shares of AMC Class A common stock.

 

Sales of a substantial amount of shares of AMC Class A common stock in the public market, or the perception that these sales may occur, could reduce the market price of shares of AMC Class A common stock. Because the receipt of the merger consideration in AMC’s acquisition of Carmike Cinemas, Inc. will be taxable for U.S. federal income tax purposes, a large number of Carmike stockholders may choose to sell the shares of AMC Class A common stock they receive promptly following the merger. A large number of shares of AMC Class A common stock may be sold in the public market as a result of its acquisition of Odeon. As part of this transaction, AMC has agreed to issue to the seller of Odeon AMC Class A common stock with a value of GBP £125.0 million. AMC has also agreed to file a registration statement registering the shares of AMC Class A common stock issued in connection with its purchase of Odeon within 60 days of the closing of the Odeon transaction. While the Odeon seller has agreed to certain six-month and one-year lockup periods following consummation of the transaction, a large number of shares of AMC Class A common stock could be sold promptly upon the expiration of such lock-up periods. Such sales could reduce the market price of shares of AMC Class A common stock.

 

Pursuant to a Registration Rights Agreement dated December 23, 2013 by and among AMC and Wanda, AMC has agreed to use its best efforts to effect registered offerings upon request from Wanda and to grant incidental or "piggyback" registration rights with respect to any registrable securities held by Wanda. The obligation to effect any demand for registration by Wanda will be subject to certain conditions, including limitations on the number of demand registrations and limitations on the minimum value of securities to be registered.

 

Following consummation of the acquisition of Odeon, AMC has agreed to use its best efforts to grant certain incidental or "piggyback" registration rights with respect to securities issued in connection with the Odeon transaction.

 

The exercise of such registration rights by Wanda and/or the seller of Odeon may substantially increase the amount of shares of AMC Class A common stock in the public market and could reduce the market price of shares of AMC Class A common stock.

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We are subject to complex taxation, changes in tax rates, adoption of new U.S. or international tax legislation and disagreements with tax authorities that could adversely affect our business, financial condition or results of operations.

 

We are subject to many different forms of taxation in both the U.S. and in foreign jurisdictions where we operate. Current economic and political conditions, including the recent United Kingdom (U.K.) referendum in which voters approved an exit from the E.U., make tax rates and policy in any jurisdiction, including the U.S., U.K. and E.U., subject to significant change. Recent examples include the Organization for Economic Co-operation and Development’s (“OECD”) recommendations on Base Erosion and Profit Shifting (“BEPS”), the European Comission’s Anti-Tax Avoidance Package, and the U.S. Treasury issuance of proposed SS 385 regulation (debt characterization as equity). The costs of compliance with these laws and regulations are high and are likely to increase in the future. Any failure on our part to comply with these laws and regulations can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities and other penalties.

 

We may be reviewed by antitrust authorities in connection with acquisition opportunities that would increase

our number of theatres in markets where we have a leading market share.

 

Given our size and market share, pursuit of acquisition opportunities that would increase the number of our theatres in markets where we have a leading market share would likely result in significant review by the Antitrust Division of the United States Department of Justice and States’ Attorneys General, and we may be required to dispose of theatres in order to complete such acquisition opportunities. For example, in connection with the acquisition of Kerasotes, we were required to dispose of 11 theatres located in various markets across the United States, including Chicago, Denver and Indianapolis and in connection with the acquisition of Starplex Cinemas, we were required to dispose of 2 theatres in 2 markets. In addition, our pending acquisitions of Odeon and UCI Cinema Holdings Limited and Carmike Cinemas, Inc. are currently under review by the relevant antitrust authorities. As a result, we may not be able to succeed in acquiring other exhibition companies or we may have to dispose of a significant number of theatres in key markets in order to complete such acquisitions.

 

 

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3.  Defaults Upon Senior Securities

 

None.

 

Item 4.  Mine Safety Disclosures

 

Not applicable.

 

Item 5.  Other Information

 

None.

 

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Item 6.  Exhibits.

 

EXHIBIT INDEX

 

 

 

 

EXHIBIT
NUMBER

 

DESCRIPTION

2.1 

 

Share Purchase Agreement dated as of July 12, 2016, by and among AMC Entertainment Holdings, Inc., AMC (UK) Acquisition Limited,  Monterey Capital III S.A.R.L., Odeon and UCI Cinemas Holdings Limited, Odeon and UCI Cinemas Group Limited and certain Management Shareholders. (incorporated by reference from Exhibit 2.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on July 13, 2016).

 

 

 

2.2 

 

Amended and Restated Agreement and Plan of Merger dated as of July 24, 2016, by and among AMC Entertainment Holdings, Inc., Congress Merger Subsidiary, Inc., and Carmike Cinemas, Inc. (incorporated by reference from Exhibit 2.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on July 25, 2016).

 

 

 

4.1 

 

Indenture, dated as of November 8, 2016, respecting AMC Entertainment Holdings, Inc.’s 5.875% Senior Subordinated Notes due 2026 and 6.375% Senior Subordinated Notes due 2024, among AMC Entertainment Holdings, Inc., the guarantors named therein and U.S. Bank National Association, as trustee. (incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on November 8, 2016).

 

 

 

4.2 

 

Registration Rights Agreement, dated November 8, 2016, respecting AMC Entertainment Holdings, Inc.’s 5.875% Senior Subordinated Notes due 2026 and 6.375% Senior Subordinated Notes due 2024, among AMC Entertainment Holdings, Inc. and Citigroup Global Markets Inc., as representative of the initial purchasers of the 5.875% Senior Subordinated Notes due 2026 and 6.375% Senior Subordinated Notes due 2024.  (incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on November 8, 2016).

 

 

 

4.3 

 

Second Amendment to Credit Agreement, dated as of November 8, 2016, by and among AMC Entertainment Holdings, Inc., as borrower, the other loan parties party thereto, the lenders party thereto and Citicorp North America, Inc., as administrative agent. (incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on November 8, 2016).

 

 

 

10.1 

 

Debt Commitment Letter dated July 12, 2016, by and among AMC Entertainment Inc. and Citigroup Global Markets, Inc. (incorporated by reference from Exhibit 10.1 to the Company's Form 8-K (File No. 1 - 33892) filed on July 13, 2016).

 

 

 

10.2 

 

Second Amended and Restated Debt Commitment Letter July 24, 2016, by and among AMC Entertainment Holdings, Inc. and Citigroup Global Markets, Inc., Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Bank PLC, Credit Suisse AG, Cayman Islands Branch, Credit Suisse Securities (USA) LLC, and HSBC Bank USA, N.A. (incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on July 25, 2016).

 

 

 

*10.3

 

Restated American Multi-Cinema, Inc. Non-Qualified deferred Compensation Plan dated September 29. 2016, by American Multi-Cinema, Inc. effective January 1, 2016. 

 

 

 

*10.4

 

AMC Entertainment Holdings, Inc. Non-Employee Director Compensation Program Summary Revised November 3, 2016, Effective January 1, 2017.

 

 

 

*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.

 

 

 

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*32.1

 

Section 906 Certifications of Adam M. Aron (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.

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

AMC ENTERTAINMENT HOLDINGS, INC.

 

 

 

 

Date: November 9, 2016

/s/ ADAM M. ARON

 

Adam M. Aron

 

Chief Executive Officer, Director and President

 

 

 

 

Date: November 9, 2016

/s/ CRAIG R. RAMSEY

 

Craig R. Ramsey

 

Executive Vice President and Chief Financial Officer

 

 

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Exhibits

 

EXHIBIT INDEX

 

 

 

 

EXHIBIT
NUMBER

 

DESCRIPTION

2.1 

 

Share Purchase Agreement dated as of July 12, 2016, by and among AMC Entertainment Holdings, Inc., AMC (UK) Acquisition Limited,  Monterey Capital III S.A.R.L., Odeon and UCI Cinemas Holdings Limited, Odeon and UCI Cinemas Group Limited and certain Management Shareholders. (incorporated by reference from Exhibit 2.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on July 13, 2016).

 

 

 

2.2 

 

Amended and Restated Agreement and Plan of Merger dated as of July 24, 2016, by and among AMC Entertainment Holdings, Inc., Congress Merger Subsidiary, Inc., and Carmike Cinemas, Inc. (incorporated by reference from Exhibit 2.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on July 25, 2016).

 

 

 

4.1 

 

Indenture, dated as of November 8, 2016, respecting AMC Entertainment Holdings, Inc.’s 5.875% Senior Subordinated Notes due 2026 and 6.375% Senior Subordinated Notes due 2024, among AMC Entertainment Holdings, Inc., the guarantors named therein and U.S. Bank National Association, as trustee. (incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on November 8, 2016).

 

 

 

4.2 

 

Registration Rights Agreement, dated November 8, 2016, respecting AMC Entertainment Holdings, Inc.’s 5.875% Senior Subordinated Notes due 2026 and 6.375% Senior Subordinated Notes due 2024, among AMC Entertainment Holdings, Inc. and Citigroup Global Markets Inc., as representative of the initial purchasers of the 5.875% Senior Subordinated Notes due 2026 and 6.375% Senior Subordinated Notes due 2024.  (incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on November 8, 2016).

 

 

 

4.3 

 

Second Amendment to Credit Agreement, dated as of November 8, 2016, by and among AMC Entertainment Holdings, Inc., as borrower, the other loan parties party thereto, the lenders party thereto and Citicorp North America, Inc., as administrative agent. (incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on November 8, 2016).

 

 

 

10.1 

 

Debt Commitment Letter dated July 12, 2016, by and among AMC Entertainment Inc. and Citigroup Global Markets, Inc. (incorporated by reference from Exhibit 10.1 to the Company's Form 8-K (File No. 1 - 33892) filed on July 13, 2016).

 

 

 

10.2 

 

Second Amended and Restated Debt Commitment Letter July 24, 2016, by and among AMC Entertainment Holdings, Inc. and Citigroup Global Markets, Inc., Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Bank PLC, Credit Suisse AG, Cayman Islands Branch, Credit Suisse Securities (USA) LLC, and HSBC Bank USA, N.A. (incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K (File No. 1 - 33892) filed on July 25, 2016).

 

 

 

*10.3

 

Restated American Multi-Cinema, Inc. Non-Qualified deferred Compensation Plan dated September 29. 2016, by American Multi-Cinema, Inc. effective January 1, 2016. 

 

 

 

*10.4

 

AMC Entertainment Holdings, Inc. Non-Employee Director Compensation Program Summary Revised November 3, 2016, Effective January 1, 2017.

 

 

 

*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 Adam M. Aron (Chief Executive Officer) and Craig R. Ramsey (Chief Financial Officer) furnished in accordance with Securities Act Release 33-8212.

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**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.

63