AMC ENTERTAINMENT INC - 10-Q Quarterly Report

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

FORM 10-Q

(Mark One)

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

For the quarterly period ended October 2, 2003

[ ] 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 1-8747

AMC ENTERTAINMENT INC.

(Exact name of registrant as specified in its charter)

Delaware				43-1304369
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
920 Main Kansas City, Missouri				64105
(Address of principal executive offices)				(Zip Code)

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

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 x No ____

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes x 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 2, 2003
Common Stock, 66 2/3 ¢ par value		33,700,610
Class B Stock, 66 2/3 ¢ par value		3,051,597

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

INDEX

		Page Number
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Consolidated Statements of Operations		3
	Consolidated Balance Sheets		4
	Consolidated Statements of Cash Flows		5
	Notes to Consolidated Financial Statements		7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22
Item 4.	Controls and Procedures		23

	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		23
Item 4.	Submission of Matters to a Vote of Security Holders		24
Item 6.	Exhibits and Reports on Form 8-K		25
	Signatures		27

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

	Thirteen Weeks Ended		Twenty-six Weeks Ended
	October 2,	September 26,	October 2,	September 26,
	2003	2002	2003	2002
	(Unaudited)		(Unaudited)
Revenues

Admissions	$ 301,035	$ 307,234	$ 623,223	$ 616,701
Concessions	112,425	120,145	237,006	246,316
Other theatre	12,608	10,505	25,082	23,259
NCN and other	12,144	13,214	26,115	26,448
Total revenues	438,212	451,098	911,426	912,724
Expenses
Film exhibition costs	162,595	169,338	341,056	344,058
Concession costs	12,584	13,684	27,011	29,647
Theatre operating expense	104,444	111,576	212,818	221,584
Rent	78,875	74,162	157,792	148,112
NCN and other	10,387	11,861	22,708	24,352
General and administrative expense:
Stock-based compensation	876	503	1,169	1,012
Other	11,597	9,658	23,431	41,439
Preopening expense	389	451	1,431	1,248
Theatre and other closure expense	1,116	1,459	1,734	1,230
Depreciation and amortization	28,767	31,985	57,244	61,417
Disposition of assets and other gains	(1,956)	(1,236)	(1,956)	(1,422)
Total costs and expenses	409,674	423,441	844,438	872,677
Interest expense
Corporate borrowings	16,435	16,668	31,929	33,358
Capital and financing lease obligations	2,705	2,653	5,510	5,430
Investment income	(611)	(783)	(1,262)	(1,785)
Total other expense	18,529	18,538	36,177	37,003
Earnings before income taxes	10,009	9,119	30,811	3,044
Income tax provision	4,400	11,900	13,400	6,700
Net earnings (loss)	$ 5,609	$ (2,781)	$ 17,411	$ (3,656)
Preferred dividends	9,662	5,228	17,453	14,647
Net loss for common shares	$ (4,053)	$ (8,009)	$ (42)	$(18,303)
Net loss per share:
Basic	$ (.11)	$ (.22)	$ -	$ (.50)
Diluted	$ (.11)	$ (.22)	$ -	$ (.50)
Average shares outstanding:
Basic	36,744	36,302	36,586	36,289
Diluted	36,744	36,302	36,586	36,289

See Notes to Consolidated Financial Statements.

AMC ENTERTAINMENT INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

	October 2,	April 3,
	2003	2003
	(Unaudited)
ASSETS
Current assets
Cash and equivalents	$ 241,685	$ 244,412
Receivables, net of allowance for doubtful accounts of $1,694
as of October 2, 2003 and $1,581 as of April 3, 2003	32,951	27,545
Other current assets	54,489	50,732
Total current assets	329,125	322,689
Property, net	852,409	856,463
Intangible assets, net	26,854	30,050
Goodwill	60,698	60,698
Deferred income taxes	171,862	171,152
Other long-term assets	52,290	50,646
Total assets	$1,493,238	$1,491,698
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$ 101,359	$ 116,269
Accrued expenses and other liabilities	166,767	179,393
Current maturities of capital and financing lease obligations	2,607	2,565
Total current liabilities	270,733	298,227
Corporate borrowings	668,842	668,661
Capital and financing lease obligations	58,939	56,536
Other long-term liabilities	178,865	176,370
Total liabilities	1,177,379	1,199,794
Commitments and contingencies
Stockholders' equity:
Series A Convertible Preferred Stock, 66 2/3¢ par value; 289,630 shares issued and outstanding as of October 2, 2003 and 280,107 shares issued and outstanding as of April 3, 2003 (aggregate liquidation preference of $294,513 as of October 2, 2003 and $284,828 as of April 3, 2003)	193	187
Common Stock, 66 2/3¢ par value; 33,778,493 shares issued as of October 2, 2003
and 33,286,173 shares issued as of April 3, 2003	22,519	22,191
Convertible Class B Stock, 66 2/3¢ par value; 3,051,597 shares
issued and outstanding as of October 2, 2003 and April 3, 2003	2,035	2,035
Additional paid-in capital	468,127	464,663
Accumulated other comprehensive loss	(5,596)	(8,773)
Accumulated deficit	(170,406)	(187,817)
Common Stock in treasury, at cost, 77,883 shares as of
October 2, 2003 and 35,387 shares as of April 3, 2003	(1,013)	(582)
Total stockholders' equity	315,859	291,904
Total liabilities and stockholders' equity	$1,493,238	$1,491,698

See Notes to Consolidated Financial Statements.

AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

&n bsp;
	Twenty-six Weeks Ended
	October 2,		September 26,
		2003	2002
		(Unaudited)
DECREASE IN CASH AND EQUIVALENTS
Cash flows from operating activities:

Net earnings (loss)		$ 17,411		$ (3,656	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization		57,244		61,417
Non-cash portion of special and stock-based compensation		1,169		11,550
Deferred income taxes		(710	)	4,400
Disposition of assets and other gains		(1,956	)	(1,422	)
Change in assets and liabilities, net of effects from acquisition of GC Companies, Inc.:
Receivables		(422	)	(3,417	)
Other current assets		(3,757	)	7,516
Accounts payable		(4,253	)	(11,704	)
Accrued expenses and other liabilities		(13,174	)	(20,964	)
Other, net		6,004		2,427
Net cash provided by operating activities		57,556		46,147
Cash flows from investing activities:
Capital expenditures	(43,274		)	(44,959	)
Proceeds from sale/leasebacks	-			21,771
Construction project costs:
Reimbursable by landlord	-			(21,656	)
Reimbursed by landlord	-			13,655
Acquisition of GC Companies, Inc., net of cash acquired and proceeds from sale of venture capital investments	-			(46,253	)
Additional costs related to Gulf States acquisition	-			(701	)
Purchase of leased furniture, fixtures and equipment	-			(7,052	)
Proceeds from disposition of long-term assets	1,017			3,338
Other, net	(8,167		)	(2,563	)
Net cash used in investing activities	(50,424		)	(84,420	)

Cash flows from financing activities:
Construction project costs reimbursed by landlord	-		1,404
Principal payments under capital and financing lease obligations	(1,072	)	(1,369	)
Change in cash overdrafts	(9,945	)	5,226
Change in construction payables	(712	)	(3,030	)
Proceeds from exercise of stock options	3,186		-
Treasury stock purchases and other	(440	)	66
Net cash provided by (used in) financing activities	(8,983	)	2,297
Effect of exchange rate changes on cash and equivalents	(876	)	1,010
Net decrease in cash and equivalents	(2,727	)	(34,966	)
Cash and equivalents at beginning of period	244,412		219,432
Cash and equivalents at end of period	$ 241,685		$ 184,466
&n bsp;

AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)

		Twenty-six Weeks Ended
		October 2,	September 26,
		2003		2002
		(Unaudited)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
	Cash paid during the period for:
	Interest (including amounts capitalized of $1,887 and $1,632)	$ 38,632		$ 38,224
	Income taxes paid (refunded)	10,130		(11,395)

	Schedule of non-cash investing and financing activities:
	Preferred dividends	$ 17,453		$ 14,647

The following is a summary of the allocation of the purchase price as of September 26, 2002 to the assets and liabilities of GC Companies, Inc. based on management’s estimates of fair value:

(In thousands)
Cash and equivalents			$ 10,725
Current assets			11,503
Property, net			142,402
Intangible assets			27,699
Goodwill			32,518
Deferred income taxes			27,500
Other long-term assets			7,738
Current liabilities			(34,228)
Other long-term liabilities			(57,188)
Total purchase price			$ 168,669

See Notes to Consolidated Financial Statements.

AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 2, 2003
(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

AMC Entertainment Inc. ("AMCE") is a holding company which, through its direct and indirect subsidiaries, including American Multi-Cinema, Inc. ("AMC") and its subsidiaries, AMC Entertainment International, Inc. (“AMCEI”) and National Cinema Network, Inc. ("NCN") (collectively with AMCE, unless the context otherwise requires, the "Company"), is principally involved in the theatrical exhibition business throughout North America and in China (Hong Kong), Japan, France, Portugal, Spain, Sweden and the United Kingdom. The Company's North American theatrical exhibition business is conducted through AMC and AMCEI. The Company's International theatrical exhibition business is conducted through AMCEI. The Company is also involved in the business of providing on-screen advertising and other services to AMC and other theatre circuits through a wholly owned subsidiary, NCN.

The accompanying unaudited consolidated financial statements have been prepared in response to the requirements of Form 10-Q and should be read in conjunction with the Company's annual report on Form 10-K for the year (53 weeks) ended April 3, 2003. In the opinion of management, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the Company's financial position and results of operations. Due to the seasonal nature of the Company's business, results for the twenty-six weeks ended October 2, 2003 are not necessarily indicative of the results to be expected for the fiscal year (52 weeks) ending April 1, 2004.

The April 3, 2003 consolidated balance sheet data was derived from the audited balance sheet, but does not include all disclosures required by generally accepted accounting principles.

Certain amounts have been reclassified from prior period consolidated financial statements to conform with the current period presentation.

NOTE 2 - LOSS PER COMMON SHARE

Basic loss per share is computed by dividing net loss for common shares by the weighted-average number of common shares outstanding. The dilutive effect of Series A Convertible Preferred Stock is considered in the computation of basic loss per common share in accordance with EITF Topic No. D-95 Effect of Participating Convertible Securities on the Computation of Basic Earnings Per Share. Diluted loss per share includes the effects of outstanding stock options, stock awards, deferred stock units and Series A Convertible Preferred Stock, if dilutive.

The Company has two classes of common stock outstanding which do not provide for different dividend rates or other preferences, other than voting rights.

The following table sets forth the computation of basic and diluted loss per common share (in thousands, except per share data):

	Thirteen Weeks Ended		Twenty-six Weeks Ended
	October 2,	September 26	October 2,	September 26,
	2003	2002	2003	2002

Numerator:
Net earnings (loss)	$ 5,609	$ (2,781)	$ 17,411	$ (3,656)
Dividends on Series A Preferred	9,662	5,228	17,453	14,647
Loss for common shares	$ (4,053)	$ (8,009)	$ (42)	$ (18,303)
Denominator:
Average common shares outstanding	36,744	36,302	36,586	36,289
Series A Preferred	-	-	-	-
Shares for basic earnings per common share	36,744	36,302	36,586	36,289
Stock options	-	-	-	-
Stock awards	-	-	-	-
Deferred stock units	-	-	-	-
Shares for diluted earnings per common share	36,744	36,302	36,586	36,289
Loss per common share	$ (.11)	$ (.22)	$ -	$ (.50)
Further dilution from applying the "two-class" method	-	-	-	-
Basic loss per common share	$ (.11)	$ (.22)	$ -	$ (.50)
Diluted loss per common share	$ (.11)	$ (.22)	$ -	$ (.50)

During the thirteen weeks ended October 2, 2003 and September 26, 2002, shares of Common Stock of 40,485,551 and 37,887,692, respectively, and $9,662,000 and $5,228,000, respectively, of dividends from the assumed conversion of Series A Preferred were excluded from the computation of diluted loss per common share because they were anti-dilutive. During the twenty-six weeks ended October 2, 2003 and September 26, 2002, shares of Common Stock of 40,131,794 and 37,573,636, respectively, and dividends from the assumed conversion of Series A Preferred of $17,453,000 and $14,647,000, respectively, were excluded from the computation of diluted loss per common share because they were anti-dilutive.

During the thirteen weeks ended October 2, 2003 and September 26, 2002, incremental shares from stock awards and options to purchase common shares of 138,844 and 386,845, respectively, were excluded from the computation of diluted loss per common share because they were anti-dilutive. During the twenty-six weeks ended October 2, 2003 and September 26, 2002, incremental shares from stock awards and options to purchase common shares of 199,232 and 513,165, respectively, were excluded from the computation of diluted loss per common share because they were anti dilutive.

During the thirteen and twenty-six weeks ended October 2, 2003, contingently issuable deferred stock units of 94,254 and 47,127, respectively, were excluded from the computation of diluted loss per common share because the conditions for issuance had not been met at the end of the period.

NOTE 3 - COMPREHENSIVE EARNINGS (LOSS)

The components of comprehensive earnings (loss) are as follows (in thousands):

	Thirteen Weeks Ended		Twenty-six Weeks Ended
< /p>	October 2,	September 26,	October 2,	September 26,
	2003	2002	2003	2002

Net earnings (loss)	$ 5,609	$ (2,781)	$ 17,411	$ (3,656)
Foreign currency translation adjustment	678	875	2,868	6,197
Unrealized gain on marketable equity securities	86	-	309	-
Total comprehensive earnings (loss)	$ 6,373	$ (1,906)	$ 20,588	$ 2,541
			&nbs