AMC ENTERTAINMENT INC - FORM 10-Q

Attached files

file	filename
EX-31.1 - EX-31.1 - AMC ENTERTAINMENT INC	a2195409zex-31_1.htm
EX-32.1 - EX-32.1 - AMC ENTERTAINMENT INC	a2195409zex-32_1.htm
EX-31.2 - EX-31.2 - AMC ENTERTAINMENT INC	a2195409zex-31_2.htm

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

FORM 10-Q


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 2009
OR
o		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 (State or other jurisdiction of incorporation or organization)		43-1304369 (I.R.S. Employer Identification No.)
920 Main Kansas City, Missouri (Address of principal executive offices)		64105 (Zip Code)

(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 ý No o

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

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

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

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 1, 2009

Common Stock, 1¢ par value		1

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

INDEX

		Page Number

PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Consolidated Statements of Operations	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4T.	Controls and Procedures	50
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 4.	Submission of Matters to a Vote of Security Holders	51
Item 6.	Exhibits	52
	Signatures	54

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements. (Unaudited)

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

				Thirteen Weeks Ended						Twenty-six Weeks Ended

				October 1, 2009			October 2, 2008			October 1, 2009			October 2, 2008
				(unaudited)						(unaudited)
Revenues
	Admissions			$	390,498		$	404,517		$	836,725		$	821,448
	Concessions				147,381			159,916			321,041			329,750
	Other revenue				13,173			15,577			28,598			31,031

		Total revenues			551,052			580,010			1,186,364			1,182,229

Costs and Expenses
	Film exhibition costs				208,328			218,376			457,429			450,112
	Concession costs				15,905			16,580			35,070			35,017
	Operating expense				142,559			149,365			291,780			294,081
	Rent				108,311			112,814			220,684			225,149
	General and administrative:
		Merger, acquisition and transaction costs			43			235			221			252
		Management fee			1,250			1,250			2,500			2,500
		Other			13,033			11,847			26,071			23,041
	Preopening expense				565			1,185			1,434			3,060
	Theatre and other closure expense (income)				478			(2,319	)		615			(2,333	)
	Depreciation and amortization				46,689			50,470			95,477			101,056
	Disposition of assets and other gains				(211	)		(374	)		(261	)		(355	)

		Total costs and expenses			536,950			559,429			1,131,020			1,131,580

	Other expense (income)
		Other			(6,938	)		(7,701	)		1,835			(9,904	)
		Interest expense
			Corporate borrowings		32,981			29,556			61,280			58,668
			Capital and financing lease obligations		1,413			1,498			2,826			2,995
		Equity in earnings of non-consolidated entities			(4,348	)		(5,321	)		(10,610	)		(9,706	)
		Investment income			(33	)		(289	)		(131	)		(552	)

			Total other expense		23,075			17,743			55,200			41,501

Earnings (loss) from continuing operations before income taxes					(8,973	)		2,838			144			9,148
Income tax provision (benefit)					(1,150	)		1,538			50			4,318

Earnings (loss) from continuing operations					(7,823	)		1,300			94			4,830
Earnings (loss) from discontinued operations, net of income taxes					(181	)		2,528			542			6,832

Net earnings (loss)				$	(8,004	)	$	3,828		$	636		$	11,662

See Notes to Consolidated Financial Statements.

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

			October 1, 2009			April 2, 2009

			(unaudited)
ASSETS
Current assets:
	Cash and equivalents		$	390,047		$	534,009
	Receivables, net of allowance for doubtful accounts of $1,633 as of October 1, 2009 and $1,564 as of April 2, 2009			23,428			29,782
Other current assets				75,613			80,919

		Total current assets		489,088			644,710
Property, net				915,790			964,668
Intangible assets, net				154,922			162,366
Goodwill				1,814,738			1,814,738
Other long-term assets				157,054			139,115

		Total assets	$	3,531,592		$	3,725,597

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
	Accounts payable		$	130,381		$	155,553
	Accrued expenses and other liabilities			121,697			98,298
	Deferred revenues and income			105,456			121,628
	Current maturities of corporate borrowings and capital and financing lease obligations			10,193			9,923

		Total current liabilities		367,727			385,402
Corporate borrowings				1,829,053			1,681,441
Capital and financing lease obligations				55,304			57,286
Deferred revenues—for exhibitor services agreement				251,648			253,164
Other long-term liabilities				312,082			308,701

		Total liabilities	$	2,815,814		$	2,685,994

Commitments and contingencies
Stockholder's equity:
	Common Stock, 1 share issued as of October 1, 2009 and April 2, 2009 with 1¢ par value			—			—
	Additional paid-in capital			842,771			1,157,284
	Accumulated other comprehensive earnings			7,113			17,061
	Accumulated deficit			(134,106	)		(134,742	)

		Total stockholder's equity		715,778			1,039,603

		Total liabilities and stockholder's equity	$	3,531,592		$	3,725,597

See Notes to Consolidated Financial Statements.

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

			Twenty-six Weeks Ended

			October 1, 2009			October 2, 2008
			(unaudited)
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
Cash flows from operating activities:
Net earnings			$	636		$	11,662
Adjustments to reconcile net earnings to net cash provided by operating activities:
	Depreciation and amortization			95,477			116,114
	Non-cash portion of stock-based compensation			838			1,549
	Non-cash portion of pension and postretirement expense (income)			1,288			(298	)
	Write-off of deferred charges for Fixed Notes due 2012			3,468			—
	Deferred income taxes			(1,500	)		2,255
	Equity in earnings and losses from non-consolidated entities, net of distributions			3,818			1,371
	Disposition of assets and other gains			—			118
	Gain on disposition of Cinemex			(592	)		—
	Change in assets and liabilities:
		Receivables		1,803			3,706
		Other assets		122			(5,628	)
		Accounts payable		(29,751	)		(30,466	)
		Accrued expenses and other liabilities		6,038			(16,017	)
	Other, net			(5,171	)		(6,873	)

	Net cash provided by operating activities			76,474			77,493

Cash flows from investing activities:
	Capital expenditures			(29,781	)		(60,501	)
	Net change in reimbursable construction advances			(347	)		2,073
	Investments in non-consolidated entities			(5,963	)		(1,550	)
	Proceeds from disposition of Cinemex			2,898			—
	LCE screen integration			(81	)		(3,990	)
	Other, net			730			1,520

	Net cash used in investing activities			(32,544	)		(62,448	)

Cash flows from financing activities:
	Repayment under revolving credit facility			(185,000	)		—
	Repurchase of Fixed Notes due 2012			(250,000	)		—
	Proceeds from issuance of Senior Notes due 2019			585,492			—
	Deferred financing costs			(15,941	)		—
	Principal payments under capital and financing lease obligations			(1,712	)		(1,817	)
	Principal payments under Term Loan B			(3,250	)		(3,250	)
	Change in construction payables			(437	)		(9,439	)
	Dividends paid to Marquee Holdings Inc.			(315,351	)		(18,420	)

	Net cash used in financing activities			(186,199	)		(32,926	)
	Effect of exchange rate changes on cash and equivalents			(1,693	)		(972	)

Net decrease in cash and equivalents				(143,962	)		(18,853	)
Cash and equivalents at beginning of period				534,009			106,181

Cash and equivalents at end of period			$	390,047		$	87,328

See Notes to Consolidated Financial Statements.

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 1, 2009

(Unaudited)

NOTE 1—BASIS OF PRESENTATION

AMC Entertainment Inc. ("AMC Entertainment", "AMCE", or the "Company") is organized as an intermediate holding company. Our principal directly owned subsidiaries are American Multi-Cinema, Inc. ("AMC") and AMC Entertainment International, Inc. ("AMCEI"). The Company conducts its theatrical exhibition business through AMC and its subsidiaries and AMCEI.

All of AMCE's capital stock is currently owned directly by Marquee Holdings Inc. ("Holdings"). On June 11, 2007, Marquee Merger Sub Inc. ("merger sub"), a wholly-owned subsidiary of AMC Entertainment Holdings, Inc. ("Parent"), merged with and into Holdings, with Holdings continuing as the surviving corporation (the "holdco merger"). As a result of the holdco merger, (i) Holdings became a wholly owned subsidiary of Parent, a newly formed entity controlled by J.P. Morgan Partners, LLC, Apollo Management, L.P. and certain related investment funds and affiliates of Bain Capital Partners, The Carlyle Group and Spectrum Equity Investors (collectively with J.P. Morgan Partners, LLC and Apollo Management, L.P., the "Sponsors"), (ii) each share of Holdings' common stock that was issued and outstanding immediately prior to the effective time of the holdco merger was automatically converted into the right to receive substantially identical shares of common stock of Parent, and (iii) as further described in this report, each of Holdings' governance agreements was superseded by a substantially identical governance agreement entered into by and among Parent, the Sponsors and Holdings' other stockholders. The holdco merger was effected by the Sponsors to facilitate a previously announced debt financing by Parent and a related dividend to Holdings' stockholders.

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 ended April 2, 2009. In the opinion of management, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the Company's financial position and results of operations. Due to the seasonal nature of the Company's business, results for the twenty-six weeks ended October 1, 2009 are not necessarily indicative of the results to be expected for the fiscal year (52 weeks) ending April 1, 2010. The Company manages its business under one operating segment called Theatrical Exhibition.

The preparation of consolidated 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. Actual results could differ from those estimates.

The April 2, 2009 consolidated balance sheet data was derived from the audited balance sheet included in the Form 10-K, but does not include all disclosures required by generally accepted accounting principles.

The Company has evaluated subsequent events through November 12, 2009, the date of filing this Form 10-Q.

Film Exhibition Costs: Effective April 3, 2009, certain advertising costs related to film exhibition were reclassified from operating expense to film exhibition costs with a conforming reclassification made for the prior year presentation.

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 2—DISCONTINUED OPERATIONS

On December 29, 2008, the Company sold all of its interests in Grupo Cinemex, S.A. de C.V. ("Cinemex"), which then operated 44 theatres with 493 screens primarily in the Mexico City Metropolitan Area, to Entretenimiento GM de Mexico S.A. de C.V. The operations and cash flows of the Cinemex theatres have been eliminated from the Company's ongoing operations as a result of the disposal transaction. As of October 1, 2009, the amount due from Cinemex for tax payments and refunds associated with the sale was $10,815,000, and $9,325,000 has been classified by the Company as a long-term asset. The receivables for these taxes are recorded in pesos and translated to U.S. dollars each week. Any currency translation gains or losses on these receivables are recorded in discontinued operations as part of the gain on disposition of Cinemex. The Company does not have any significant continuing involvement in the operations of the Cinemex theatres after the disposition. The results of operations of the Cinemex theatres have been classified as discontinued operations, and information presented for all periods reflects the new classification.

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

Statements of operations data:

			Thirteen Weeks Ended						Twenty-six Weeks Ended

			October 1, 2009			October 2, 2008			October 1, 2009			October 2, 2008
			(unaudited)						(unaudited)
Revenues
	Admissions		$	—		$	24,799		$	—		$	47,082
	Concessions			—			18,000			—			34,024
	Other revenue			—			7,708			—			15,204

		Total revenues		—			50,507			—			96,310

Costs and Expenses
	Film exhibition costs			—			10,994			—			20,936
	Concession costs			—			4,267			—			7,778
	Operating expense			—			11,654			—			23,331
	Rent			—			5,435			—			10,561
	General and administrative:
		Other		—			2,724			—			6,296
	Depreciation and amortization			—			7,627			—			15,058
	Disposition of assets and other (gains) loss			231			—			(592	)		—

		Total costs and expenses		231			42,701			(592	)		83,960

	Other expense (income)			—			(53	)		—			(522	)
	Interest expense
		Corporate borrowings		—			2,668			—			5,220
		Capital and financing lease obligations		—			230			—			409
	Investment income			—			(329	)		—			(771	)

		Total other expense		—			2,516			—			4,336

Earnings (loss) before income taxes				(231	)		5,290			592			8,014
Income tax provision (benefit)				(50	)		2,762			50			1,182

Net earnings (loss)			$	(181	)	$	2,528		$	542		$	6,832

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 3—COMPREHENSIVE EARNINGS (LOSS)

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

	Thirteen Weeks Ended						Twenty-six Weeks Ended

	October 1, 2009			October 2, 2008			October 1, 2009			October 2, 2008
Net earnings (loss)	$	(8,004	)	$	3,828		$	636		$	11,662
Foreign currency translation adjustment		(3,063	)		(10,220	)		(10,802	)		(2,964	)
Pension and other benefit adjustments		(214	)		(514	)		(261	)		5,654
Change in fair value of cash flow hedges		—			(90	)		(6	)		665
Losses on interest rate swaps reclassified to interest expense: corporate borrowings		—			1,164			558			2,409
Decrease (increase) in unrealized loss on marketable securities		308			(459	)		563			(684	)

Total comprehensive earnings (loss)	$	(10,973	)	$	(6,291	)	$	(9,312	)	$	16,742

NOTE 4—GOODWILL AND OTHER INTANGIBLE ASSETS

Activity of goodwill by operating segment is presented below.

(In thousands)	Total

Balance as of April 2, 2009 and October 1, 2009	$	1,814,738

Activity of other intangible assets is presented below.

			October 1, 2009					April 2, 2009

(In thousands)		Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Acquired Intangible Assets:
	Amortizable Intangible Assets:
	Favorable leases	1 to 12 years	$	104,646	$	(40,038	)	$	104,646	$	(35,949	)
	Loyalty program	4 years		46,000		(36,892	)		46,000		(34,914	)
	LCE trade name	2 years		2,300		(1,690	)		2,300		(1,460	)
	LCE advertising and management contracts	13 to 21 years		35,400		(29,028	)		35,400		(27,893	)
	Other intangible assets	1 to 13 years		13,654		(13,430	)		13,654		(13,418	)

	Total, amortizable		$	202,000	$	(121,078	)	$	202,000	$	(113,634	)

	Unamortizable Intangible Assets:
	Total, unamortizable		$	74,000				$	74,000

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 4—GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

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

	Thirteen Weeks Ended				Twenty-six Weeks Ended

(In thousands)	October 1, 2009		October 2, 2008		October 1, 2009		October 2, 2008
Recorded amortization	$	3,245	$	5,545	$	7,444	$	11,339

Estimated amortization expense for the next five fiscal years for intangible assets owned as of October 1, 2009 is projected below:

(In thousands)		2010			2011			2012			2013			2014

Projected amortization expense		$	13,934		$	11,980		$	10,856		$	10,147		$	7,769

NOTE 5—STOCKHOLDER'S EQUITY

AMCE has one share of Common Stock issued as of October 1, 2009 which is owned by Holdings. Holdings has one share of Common Stock issued as of October 1, 2009 which is owned by Parent.

During April and May of 2009, AMCE made dividend payments to its stockholder, Holdings and Holdings made dividend payments to its stockholder, Parent totaling $300,000,000, which were treated as a reduction of additional paid-in capital. Parent made payments to purchase term loans and reduced the principal balance of its Parent Term Loan Facility from $466,936,000 to $193,290,000 with a portion of the dividend proceeds.

During September of 2009, AMCE used cash on hand to pay a dividend distribution to Holdings in an aggregate amount of $15,351,000. Holdings and Parent used the available funds to make a cash interest payment on the 12% Senior Discount Notes due 2014 and pay corporate overhead expenses incurred in the ordinary course of business.

Stock-Based Compensation

The Company has no stock-based compensation arrangements of its own, but Parent has adopted a stock-based compensation plan that permits a maximum of 49,107.44681 options to be issued on Parent's stock. On October 1, 2009, approximately 9,325 options were available for grant under the plan. The stock options have a ten year term and generally step vest in equal amounts from one to three or five years from the date of the grant. Vesting may accelerate for certain participants if there is a change of control (as defined in the plan). All outstanding options have been granted to employees and one director of the Company. The Company accounts for stock options using the fair value method of accounting and has elected to use the simplified method for estimating the expected term of "plain vanilla" share option grants as it does not have enough historical experience to provide a reasonable estimate.

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 5—STOCKHOLDER'S EQUITY (Continued)

On May 28, 2009, Parent granted options on 4,786 of its shares that step vest in equal amounts over five years with final vesting occurring on May 28, 2014. The following table reflects the weighted average fair value per option granted during the thirteen weeks ended July 2, 2009, as well as the significant weighted average assumptions used in determining fair value using the Black-Scholes option-pricing model:

	July 2, 2009(1)

Weighted average fair value on grant date	$	135.71
Risk-free interest rate		2.6	%
Expected life (years)		6.5
Expected volatility(2)		35.0	%
Expected dividend yield		—

(1): Represents assumptions for stock options granted to certain employees of the Company.
(2): The Company uses share values of its publicly traded competitor peer group for purpose of calculating volatility.

The Company has recorded stock-based compensation expense of $427,000 and $786,000 within general and administrative: other during the thirteen weeks ended October 1, 2009, and October 2, 2008, respectively. The Company has recorded stock-based compensation expense of $838,000 and $1,549,000 within general and administrative: other during the twenty-six weeks ended October 1, 2009 and October 2, 2008, respectively. AMCE's financial statements reflect an increase to additional paid-in capital related to stock-based compensation for all outstanding options of $838,000 during fiscal 2010. As of October 1, 2009, there was approximately $2,713,000 of total estimated unrecognized compensation cost related to nonvested stock-based compensation arrangements under the Parent's plan expected to be recognized over 5 years.

NOTE 6—INVESTMENTS

Investments in non-consolidated affiliates and certain other investments accounted for under the equity method generally include all entities in which the Company or its subsidiaries have significant influence, but not more than 50% voting control. Investments in non-consolidated affiliates as of October 1, 2009, include an 18.53% interest in National CineMedia, LLC ("NCM"), a 50% interest in three U.S. motion picture theatres, a 26% equity interest in Movietickets.com ("MTC"), a 50% interest in Midland Empire Partners, LLC ("MEP") and a 33.3% interest in Digital Cinema Implementation Partners, LLC ("DCIP").

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

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 6—INVESTMENTS (Continued)

Operating Results(1):

For the thirteen weeks ended October 1, 2009 (in thousands)	NCM			MTC			DCIP			MEP			Other			Total

Revenues	$	95,712		$	7,172		$	—		$	2,901		$	3,315		$	109,100
Operating costs and expenses		62,410			5,791			3,092			4,571			3,652			79,516

Net earnings (loss)	$	33,302		$	1,381		$	(3,092	)	$	(1,670	)	$	(337	)	$	29,584

The Company's recorded equity in (earnings) loss	$	(5,900	)	$	(362	)	$	1,031		$	765		$	118		$	(4,348	)

For the twenty-six weeks ended October 1, 2009 (in thousands)	NCM			MTC			DCIP			MEP			Other			Total

Revenues	$	188,610		$	12,511		$	—		$	3,096		$	7,432		$	211,649
Operating costs and expenses		122,848			10,930			5,605			5,387			7,684			152,454

Net earnings (loss)	$	65,762		$	1,581		$	(5,605	)	$	(2,291	)	$	(252	)	$	59,195

The Company's recorded equity in (earnings) loss	$	(13,266	)	$	(458	)	$	1,868		$	1,218		$	28		$	(10,610	)

For the thirteen weeks ended October 2, 2008 (in thousands)	NCM			MTC			DCIP			MEP		Other			Total

Revenues	$	107,709		$	5,359		$	—		$	—	$	4,907		$	117,975
Operating costs and expenses		60,700			2,089			2,882			—		4,410			70,081

Net earnings (loss)	$	47,009		$	3,270		$	(2,882	)	$	—	$	497		$	47,894

The Company's recorded equity in (earnings) loss	$	(5,221	)	$	(764	)	$	960		$	—	$	(296	)	$	(5,321	)

For the twenty-six weeks ended October 2, 2008 (in thousands)	NCM			MTC			DCIP			MEP		Other			Total

Revenues	$	194,445		$	10,741		$	—		$	—	$	8,937		$	214,123
Operating costs and expenses		120,766			6,104			5,009			—		8,305			140,184

Net earnings (loss)	$	73,679		$	4,637		$	(5,009	)	$	—	$	632		$	73,939

The Company's recorded equity in (earnings) loss	$	(9,876	)	$	(1,121	)	$	1,702		$	—	$	(411	)	$	(9,706	)

(1): Certain differences in the Company's recorded investment over its proportional ownership share are amortized to equity in (earnings) or losses over the estimated useful life of the underlying assets or liabilities. The recorded equity in earnings of NCM on common membership units owned immediately following the IPO of NCM, Inc. (Tranche 1 Investment) does not include undistributed equity in earnings.. The Company considered the excess distribution received following NCM, Inc.'s IPO as an advance on NCM's future earnings. As a result, the Company will not recognize any undistributed equity in earnings of NCM on the original common membership units (Tranche 1 Investment) until NCM's future net earnings equal the amount of the excess distribution.

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 6—INVESTMENTS (Continued)

As of October 1, 2009, the Company owns 18,821,114 units, or an 18.53% interest, in NCM accounted for using the equity method of accounting. The fair market value of the units in National CineMedia, LLC was approximately $310,360,000, based on a price for shares of National CineMedia, Inc. on October 1, 2009 of $16.49 per share.

As of October 1, 2009 and April 2, 2009, the Company has recorded $1,028,000 and $1,342,000 respectively, of amounts due from NCM related to on-screen advertising revenue. As of October 1, 2009 and April 2, 2009, the Company had recorded $979,000 and $1,657,000 respectively, of amounts due to NCM related to the ESA and the Loews Screen Integration Agreement. The Company recorded revenues for advertising from NCM of $4,799,000 and $4,626,000 during the thirteen weeks ended October 1, 2009 and October 2, 2008, respectively and $10,215,000 and $10,025,000 during the twenty-six weeks ended October 1, 2009 and October 2, 2008, respectively. The Company recorded advertising expenses related to a beverage advertising agreement paid to NCM of $2,787,000 and $4,164,000 during the thirteen weeks ended October 1, 2009 and October 2, 2008, respectively and $5,993,000 and $8,509,000 during the twenty-six weeks ended October 1, 2009 and October 2, 2008, respectively.

The Company recorded the following changes in the carrying amount of its investment in NCM and equity in (earnings) losses of NCM during the twenty-six weeks ended October 1, 2009:

(in thousands)	Investment in NCM(1)			Deferred Revenue(2)			Due to NCM(3)			Cash Received (Paid)			Equity in Earnings			Advertising (Revenue)

Beginning balance April 2, 2009	$	26,733		$	(253,164	)	$	(81	)	$	—		$	—		$	—
Receipt under Tax Receivable Agreement		—			—			—			4,328			(4,328	)		—
Receipt of excess cash distribution		(625	)		—			—			8,741			(8,116	)		—
Payment on Loews Screen Integration Agreement		—			—			81			(81	)		—			—
Amortization of deferred revenue		—			1,516			—			—			—			(1,516	)
Equity in earnings(4)		822			—			—			—			(822	)		—

Ending balance October 1, 2009	$	26,930		$	(251,648	)	$	—		$	12,988		$	(13,266	)	$	(1,516	)

(1): Represents AMC's investment in 939,853 common membership units originally valued at March 27, 2008 and 406,371 common membership units originally valued at March 17, 2009 received under the Common Unit Adjustment Agreement dated as of February 13, 2007 (Tranche 2 Investments). AMC's investment in 17,474,890 common membership units (Tranche 1 Investment) is carried at zero cost.
(2): Represents the unamortized portion of the Exhibitors Services Agreement (ESA) modifications payment received from NCM.
(3): Represents the amount due to NCM under the Loews Screen Integration Agreement that was fully paid in April 2009.
(4): Represents equity in earnings on the Tranche 2 Investments only.

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 7—FAIR VALUE OF FINANCIAL INSTRUMENTS

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. 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.

The following table summarizes the fair value hierarchy of the Company's financial assets and liabilities carried at fair value on a recurring basis:

					Fair Value Measurements at October 1, 2009 Using

(In thousands)			Total Carrying Value at October 1, 2009		Quoted prices in active market (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
*Assets:*
	Money market mutual funds		$	205,180	$	205,180	$	—	$	—
	Equity securities, available-for-sale:
		Deferred compensation plan assets		3,443		3,443		—		—
		Non-qualified defined benefit plan assets		106		106		—		—

Total assets at fair value			$	208,729	$	208,729	$	—	$	—

*Liabilities:*
Total liabilities at fair value			$	—	$	—	$	—	$	—

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 primarily consist of mutual funds invested in equity, fixed income, and international funds. The money market funds are classified within Level 1 of the valuation hierarchy. The deferred compensation plan and non-qualified defined benefit plan assets are measured at fair value using quoted market prices and are classified within Level 1 of the valuation hierarchy. The amortized cost basis of the equity securities held as of October 1, 2009 is $3,253,000.

The Company is required to disclose the fair value of financial instruments that are not recognized in the statement of financial position, for which it is practicable to estimate that value. At October 1, 2009, the carrying amount of the Company's liabilities for corporate borrowings was approximately

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 7—FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

$1,835,553,000 and the fair value was approximately $1,836,091,000. At April 2, 2009, the carrying amount of the corporate borrowings was approximately $1,687,941,000 and the fair value of was approximately $1,529,319,000. Quoted market prices were used to value publicly held corporate borrowings. The carrying value of cash and equivalents approximates fair value because of the short duration of those instruments.

NOTE 8—THEATRE AND OTHER CLOSURE AND DISPOSITION OF ASSETS

A roll forward of estimated liabilities recorded for theatre and other closure is as follows (in thousands):

		Theatre and Other

		Twenty-six Weeks Ended October 1, 2009			Twenty-six Weeks Ended October 2, 2008
Beginning balance		$	7,386		$	10,844
	Theatre and other closure (income) expense		615			(2,333	)
	Transfer of property tax liability		279			7
	Transfer of deferred rent and capital lease obligations		9			2,824
	Cash payments		(1,118	)		(1,236	)

Ending balance		$	7,171		$	10,106

The ending balance is included with accrued expenses and other liabilities in the accompanying consolidated balance sheets.

NOTE 9—INCOME TAXES

Effective income tax rate

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

	Twenty-six Weeks Ended

	October 1, 2009			October 2, 2008
Federal statutory rate		35.0	%		35.0	%
Valuation allowance		(709.5	)		3.6
State income taxes, net of federal tax benefit		977.9			8.1
Permanent items		(271.3	)		1.5
Other, net		2.6			(1.0	)

Effective tax rate		34.7	%		47.2	%

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 9—INCOME TAXES (Continued)

The accounting for income taxes requires that deferred tax assets and liabilities be recognized, using enacted tax rates, for the tax effect of temporary differences between the financial reporting and tax bases of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized.

Parent began negotiations with certain of its debt holders during fiscal 2009 and completed the repurchase of certain term loans under the Parent Term Loan Facility in fiscal 2010. Based upon the historical tax sharing arrangement, Parent will utilize the Company's net operating losses in future years. During fiscal 2009, the Company reversed $31,000,000 of its valuation allowance through Goodwill in anticipation of future utilization by Parent. During fiscal 2010, the Company reversed an additional $1,500,000 of valuation allowance through income tax expense in anticipation of future utilization by Parent. The Company continues to record a valuation allowance against its remaining net deferred tax assets due to the uncertainty regarding the ultimate realization of these assets in all taxing jurisdictions.

Uncertain tax positions

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. An IRS examination of the tax years February 28, 2002 through December 31, 2003 of the former Loews Cineplex Entertainment Corporation and subsidiaries was concluded during fiscal 2007. An IRS examination for the tax years ended March 31, 2005 and March 30, 2006 was completed during 2009. As of October 1, 2009, the IRS has notified the Company that it is not currently under consideration for examination. Generally, tax years beginning after March 28, 2002 are still open to examination by various taxing authorities. Additionally, the Company has net operating loss ("NOL") carryforwards for tax years ended October 31, 2000 through March 28, 2002 in the U.S. and various state jurisdictions which have carryforwards of varying lengths of time. These NOLs are subject to adjustment based on the statute of limitations of the return in which they are utilized, not the year in which they are generated. Various state, local and foreign income tax returns are also under examination by taxing authorities. The Company does not believe that the outcome of any examination will have a material impact on its financial statements.

The Company has reviewed all of its historical tax positions as well as new positions adopted during fiscal 2010. The net change in the reserve for uncertain tax positions from April 3, 2009 to October 1, 2009 is a net increase of approximately $700,000 related to current positions adopted.

NOTE 10—EMPLOYEE BENEFIT PLANS

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

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 10—EMPLOYEE BENEFIT PLANS (Continued)

eligibility for these benefits is based upon a participant's age and service as of January 1, 2009. The Company also sponsors a postretirement deferred compensation plan.

The Company made pension contributions of approximately $3,486,000 during the second quarter of fiscal 2010. In addition, the Company expects to make pension contributions of approximately $486,000 in both the third and fourth quarters of fiscal 2010.

Net periodic benefit cost recognized for the plans during the thirteen weeks ended October 1, 2009 and October 2, 2008 consists of the following:

		Pension Benefits						Other Benefits

(In thousands)		October 1, 2009			October 2, 2008			October 1, 2009			October 2, 2008
Components of net periodic benefit cost:
	Service cost	$	45		$	113		$	52		$	58
	Interest cost		1,101			1,097			324			313
	Expected return on plan assets		(747	)		(1,275	)		—			—
	Amortization of gain		(9	)		(403	)		(69	)		(23	)
	Amortization of prior service credit		—			—			(136	)		(136	)
	Amortization of transition obligation		—			10			—			—

Net periodic benefit cost (income)		$	390		$	(458	)	$	171		$	212

Net periodic benefit cost recognized for the plans during the twenty-six weeks ended October 1, 2009 and October 2, 2008 consists of the following:

		Pension Benefits						Other Benefits

(In thousands)		October 1, 2009			October 2, 2008			October 1, 2009			October 2, 2008
Components of net periodic benefit cost:
	Service cost	$	90		$	226		$	104		$	284
	Interest cost		2,202			2,199			648			487
	Expected return on plan assets		(1,495	)		(2,549	)		—			—
	Amortization of (gain) loss		149			(806	)		(138	)		(23	)
	Amortization of prior service credit		—			—			(272	)		(136	)
	Amortization of transition obligation		—			20			—			—

Net periodic benefit cost (income)		$	946		$	(910	)	$	342		$	612

NOTE 11—CORPORATE BORROWINGS

On June 9, 2009, the Company completed the offering of $600,000,000 aggregate principal amount of its 8.75% Senior Notes due 2019 (the "Notes due 2019"). Concurrently with the initial notes offering, the Company launched a cash tender offer and consent solicitation for any and all of its then outstanding $250,000,000 aggregate principal amount 8⁵/8% Senior Notes due 2012 (the "Fixed Notes

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 11—CORPORATE BORROWINGS (Continued)

due 2012") at a purchase price of $1,000 plus a $30 consent fee for each $1,000 of principal amount of currently outstanding Fixed Notes due 2012 validly tendered and accepted by the Company on or before the early tender date (the "Cash Tender Offer"). The Company used the net proceeds from the issuance of the Notes due 2019 to pay the consideration for the Cash Tender Offer plus accrued and unpaid interest on the $238,065,000 principal amount of the Fixed Notes due 2012. The Company recorded a loss on extinguishment related to the Cash Tender Offer of $10,826,000 in Other expense during the thirteen weeks ended July 2, 2009, which included previously capitalized deferred financing fees of $3,312,000, a consent fee paid to the holders of $7,142,000 and other expenses of $372,000. On August 15, 2009, the Company redeemed the remaining $11,935,000 of Fixed Notes due 2012 at a price of $1,021.56 per $1,000 principal in accordance with the terms of the indenture. The Company recorded a loss of $450,000 in Other expense related to the extinguishment of the remaining Fixed Notes due 2012 principal during the second quarter of fiscal 2010, which included previously capitalized deferred financing fees of $157,000, consent fee paid to the holders of $257,000 and other expenses of $36,000.

The Notes due 2019 mature on June 1, 2019, pursuant to an indenture dated as of June 9, 2009, among the Company, the Guarantors named therein and U.S. Bank National Association, as trustee (the "Indenture"). The Indenture provides that the Notes due 2019 are general unsecured senior obligations of the Company and are fully and unconditionally guaranteed on a joint and several senior unsecured basis by all of its existing and future domestic restricted subsidiaries that guarantee its other indebtedness.

The Company will pay interest on the Notes due 2019 at 8.75% per annum, semi-annually in arrears on June 1 and December 1, commencing on December 1, 2009.

The Company may redeem some or all of the Notes due 2019 at any time on or after June 1, 2014, at the redemption prices set forth in the Indenture. The Company may redeem the Notes on or after June 1, 2017 at a price equal to 100% of the principal amount of the Notes due 2019 plus accrued and unpaid interest to the redemption date. In addition, the Company may redeem up to 35% of the aggregate principal amount of the Notes due 2019 using net proceeds from certain equity offerings completed prior to June 1, 2012.

As of October 1, 2009, the Company was in compliance with all financial covenants relating to the Senior Secured Credit Facility, the Notes due 2016, the Notes due 2014, and the Notes due 2019.

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 12—CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10 "Financial statements of guarantors and issuers of guaranteed securities registered or being registered." Each of the subsidiary guarantors are 100% owned by AMCE. The subsidiary guarantees of the Company's debt are full and unconditional and joint and several. The Company and its subsidiary guarantors' investments in its Consolidated Subsidiaries are presented under the equity method of accounting.

Thirteen weeks ended October 1, 2009:

(In thousands)			Parent Obligor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Consolidated AMC Entertainment Inc.

Revenues
	Admissions		$	—		$	387,301		$	3,197		$	—		$	390,498
	Concessions			—			146,142			1,239			—			147,381
	Other revenue			—			12,926			247			—			13,173

		Total revenues		—			546,369			4,683			—			551,052

Costs and Expenses
	Film exhibition costs			—			206,904			1,424			—			208,328
	Concession costs			—			15,686			219			—			15,905
	Operating expense			—			140,779			1,780			—			142,559
	Rent			—			106,338			1,973			—			108,311
	General and administrative:
		Merger, acquisition and transaction costs		—			43			—			—			43
		Management fee		—			1,250			—			—			1,250
		Other		—			13,030			3			—			13,033
Preopening expense				—			565			—			—			565
Theatre and other closure expense				—			469			9			—			478
Depreciation and amortization				—			46,515			174			—			46,689
Disposition of assets and other gains				—			(211	)		—			—			(211	)

Total costs and expenses				—			531,368			5,582			—			536,950

Other expense (income)
	Equity in net loss of subsidiaries			11,745			2,691			—			(14,436	)		—
	Other income			—			(6,938	)		—			—			(6,938	)
	Interest expense
		Corporate borrowings		32,843			40,918			—			(40,780	)		32,981
		Capital and financing lease obligations		—			1,413			—			—			1,413
	Equity in (earnings) loss of non-consolidated entities			(362	)		(5,781	)		1,795			—			(4,348	)
	Investment income			(35,762	)		(5,048	)		(3	)		40,780			(33	)

Total other expense				8,464			27,255			1,792			(14,436	)		23,075

Loss from continuing operations before income taxes				(8,464	)		(12,254	)		(2,691	)		14,436			(8,973	)
Income tax benefit				(460	)		(690	)		—			—			(1,150	)

Loss from continuing operations				(8,004	)		(11,564	)		(2,691	)		14,436			(7,823	)
Loss from discontinued operations, net of income taxes				—			(181	)		—			—			(181	)

Net loss			$	(8,004	)	$	(11,745	)	$	(2,691	)	$	14,436		$	(8,004	)

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 12—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Twenty-six weeks ended October 1, 2009:

(In thousands)			Parent Obligor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Consolidated AMC Entertainment Inc.

Revenues
	Admissions		$	—		$	830,602		$	6,123		$	—		$	836,725
	Concessions			—			318,633			2,408			—			321,041
	Other revenue			—			28,027			571			—			28,598

		Total revenues		—			1,177,262			9,102			—			1,186,364

Costs and Expenses
	Film exhibition costs			—			454,646			2,783			—			457,429
	Concession costs			—			34,633			437			—			35,070
	Operating expense			—			288,502			3,278			—			291,780
	Rent			—			216,850			3,834			—			220,684
	General and administrative:
		Merger, acquisition and transaction costs		—			221			—			—			221
		Management fee		—			2,500			—			—			2,500
		Other		—			26,040			31			—			26,071
Preopening expense				—			1,434			—			—			1,434
Theatre and other closure (income) expense				—			661			(46	)		—			615
Depreciation and amortization				—			95,151			326			—			95,477
Disposition of assets and other gains				—			(261	)		—			—			(261	)

Total costs and expenses				—			1,120,377			10,643			—			1,131,020

Other expense (income)
	Equity in net loss of subsidiaries			5,626			4,613			—			(10,239	)		—
	Other			—			1,835			—			—			1,835
	Interest expense
		Corporate borrowings		61,111			77,436			—			(77,267	)		61,280
		Capital and financing lease obligations		—			2,826			—			—			2,826
	Equity in earnings and losses of non-consolidated entities			(458	)		(13,240	)		3,088			—			(10,610	)
	Investment income			(66,915	)		(10,467	)		(16	)		77,267			(131	)

Total other expense (income)				(636	)		63,003			3,072			(10,239	)		55,200

Earnings (loss) from continuing operations before income taxes				636			(6,118	)		(4,613	)		10,239			144
Income tax provision				—			50			—			—			50

Earnings (loss) from continuing operations				636			(6,168	)		(4,613	)		10,239			94
Earnings from discontinued operations, net of income taxes				—			542			—			—			542

Net earnings (loss)			$	636		$	(5,626	)	$	(4,613	)	$	10,239		$	636

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 12—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Thirteen weeks ended October 2, 2008:

(In thousands)			Parent Obligor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Consolidated AMC Entertainment Inc.

Revenues
	Admissions		$	—		$	397,122		$	7,395		$	—		$	404,517
	Concessions			—			156,680			3,236			—			159,916
	Other revenue			—			15,228			349			—			15,577

		Total revenues		—			569,030			10,980			—			580,010

Costs and Expenses
	Film exhibition costs			—			214,861			3,515			—			218,376
	Concession costs			—			16,039			541			—			16,580
	Operating expense			—			145,344			4,021			—			149,365
	Rent			—			109,457			3,357			—			112,814
	General and administrative:
		Merger, acquisition and transaction costs		—			235			—			—			235
		Management fee		—			1,250			—			—			1,250
		Other		(39	)		11,868			18			—			11,847
Preopening expense				—			1,185			—			—			1,185
Theatre and other closure income				—			(2,209	)		(110	)		—			(2,319	)
Depreciation and amortization				—			49,907			563			—			50,470
Disposition of assets and other gains				—			(374	)		—						(374	)

Total costs and expenses				(39	)		547,563			11,905			—			559,429

Other expense (income)
	Equity in net earnings of subsidiaries			(1,227	)		(1,707	)		—			2,934			—
	Other income			—			(7,701	)		—			—			(7,701	)
	Interest expense
		Corporate borrowings		29,570			38,040			—			(38,054	)		29,556
		Capital and financing lease obligations		—			1,498			—			—			1,498
	Equity in earnings (loss) of non-consolidated entities			(763	)		(5,519	)		961			—			(5,321	)
	Investment income			(33,169	)		(4,971	)		(203	)		38,054			(289	)

Total other expense (income)				(5,589	)		19,640			758			2,934			17,743

Earnings (loss) from continuing operations before income taxes				5,628			1,827			(1,683	)		(2,934	)		2,838
Income tax provision (benefit)				1,800			600			(862	)		—			1,538

Earnings (loss) from continuing operations				3,828			1,227			(821	)		(2,934	)		1,300
Earnings from discontinued operations, net of income taxes				—			—			2,528			—			2,528

Net earnings			$	3,828		$	1,227		$	1,707		$	(2,934	)	$	3,828

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 12—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Twenty-six weeks ended October 2, 2008:

(In thousands)			Parent Obligor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Consolidated AMC Entertainment Inc.

Revenues
	Admissions		$	—		$	806,955		$	14,493		$	—		$	821,448
	Concessions			—			323,388			6,362			—			329,750
	Other revenue			—			30,139			892			—			31,031

		Total revenues		—			1,160,482			21,747			—			1,182,229

Costs and Expenses
	Film exhibition costs			—			443,233			6,879			—			450,112
	Concession costs			—			33,922			1,095			—			35,017
	Operating expense			—			286,838			7,243			—			294,081
	Rent			—			218,012			7,137			—			225,149
	General and administrative:
		Merger, acquisition and transaction costs		—			252			—			—			252
		Management fee		—			2,500			—			—			2,500
		Other		—			22,969			72			—			23,041
Preopening expense				—			3,060			—			—			3,060
Theatre and other closure income				—			(2,236	)		(97	)		—			(2,333	)
Depreciation and amortization				—			99,918			1,138			—			101,056
Disposition of assets and other gains				—			(355	)		—			—			(355	)

Total costs and expenses				—			1,108,113			23,467			—			1,131,580

Other expense (income)
	Equity in net earnings (loss) of subsidiaries			(6,880	)		(3,117	)		—			9,997			—
	Other income			—			(9,904	)		—			—			(9,904	)
	Interest expense
		Corporate borrowings		58,920			76,865			—			(77,117	)		58,668
		Capital and financing lease obligations		—			2,812			183			—			2,995
	Equity in earnings (loss) of non-consolidated entities			(1,121	)		(10,288	)		1,703			—			(9,706	)
	Investment income			(65,781	)		(11,479	)		(409	)		77,117			(552	)

Total other expense (income)				(14,862	)		44,889			1,477			9,997			41,501

Earnings (loss) from continuing operations before income taxes				14,862			7,480			(3,197	)		(9,997	)		9,148
Income tax provision				3,200			600			518			—			4,318

Earnings (loss) from continuing operations				11,662			6,880			(3,715	)		(9,997	)		4,830
Earnings from discontinued operations, net of income taxes				—			—			6,832			—			6,832

Net earnings			$	11,662		$	6,880		$	3,117		$	(9,997	)	$	11,662

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 12—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

As of October 1, 2009:

(In thousands)		Parent Obligor			Subsidiary Guarantors			Subsidiary Non-Guarantors		Consolidating Adjustments		Consolidated AMC Entertainment Inc.

Assets
Current assets:
Cash and equivalents		$	—		$	351,922		$	38,125	$	—	$	390,047
Receivables, net			24			22,585			819		—		23,428
Other current assets			—			73,590			2,023		—		75,613

Total current assets			24			448,097			40,967		—		489,088
Investment in equity of subsidiaries			(187,813	)		104,836			—		82,977		—
Property, net			—			914,673			1,117		—		915,790
Intangible assets, net			—			154,922			—		—		154,922
Intercompany advances			2,726,308			(2,808,449	)		82,141		—		—
Goodwill			—			1,814,738			—		—		1,814,738
Other long-term assets			34,500			110,043			12,511		—		157,054

	Total assets	$	2,573,019		$	738,860		$	136,736	$	82,977	$	3,531,592

Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable		$	—		$	129,806		$	575	$	—	$	130,381
Accrued expenses and other liabilities			21,688			99,351			658		—		121,697
Deferred revenues and income			—			104,901			555		—		105,456
Current maturities of corporate borrowings and capital and financing lease obligations			6,500			3,693			—		—		10,193

	Total current liabilities		28,188			337,751			1,788		—		367,727
Corporate borrowings			1,829,053			—			—		—		1,829,053
Capital and financing lease obligations			—			55,304			—		—		55,304
Deferred revenues—for exhibitor services agreement			—			251,648			—		—		251,648
Other long-term liabilities			—			281,970			30,112		—		312,082

	Total liabilities		1,857,241			926,673			31,900		—		2,815,814
	Stockholder's equity (deficit)		715,778			(187,813	)		104,836		82,977		715,778

	Total liabilities and stockholder's equity	$	2,573,019		$	738,860		$	136,736	$	82,977	$	3,531,592

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 12—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

As of April 2, 2009:

(In thousands)		Parent Obligor			Subsidiary Guarantors			Subsidiary Non-Guarantors		Consolidating Adjustments		Consolidated AMC Entertainment Inc.

Assets
Current assets:
Cash and equivalents		$	—		$	488,800		$	45,209	$	—	$	534,009
Receivables, net			1,165			27,864			753		—		29,782
Other current assets			—			79,113			1,806		—		80,919

Total current assets			1,165			595,777			47,768		—		644,710
Investment in equity of subsidiaries			(183,134	)		113,351			—		69,783		—
Property, net			—			963,386			1,282		—		964,668
Intangible assets, net			—			162,366			—		—		162,366
Intercompany advances			2,894,898			(2,980,250	)		85,352		—		—
Goodwill			—			1,814,738			—		—		1,814,738
Other long-term assets			24,031			105,598			9,486		—		139,115

	Total assets	$	2,736,960		$	774,966		$	143,888	$	69,783	$	3,725,597

Liabilities and Stockholder's Equity
Current liabilities
Accounts payable		$	—		$	152,697		$	2,856	$	—	$	155,553
Accrued expenses and other liabilities			8,864			89,259			175		—		98,298
Deferred revenues and income			—			121,198			430		—		121,628
Current maturities of corporate borrowings and capital and financing lease obligations			6,500			3,423			—		—		9,923

	Total current liabilities		15,364			366,577			3,461		—		385,402
Corporate borrowings			1,681,441			—			—		—		1,681,441
Capital and financing lease obligations			—			57,286			—		—		57,286
Deferred revenues—for exhibitor services agreement			—			253,164			—		—		253,164
Other long-term liabilities			552			281,073			27,076		—		308,701

	Total liabilities		1,697,357			958,100			30,537		—		2,685,994
	Stockholder's equity (deficit)		1,039,603			(183,134	)		113,351		69,783		1,039,603

	Total liabilities and stockholder's equity	$	2,736,960		$	774,966		$	143,888	$	69,783	$	3,725,597

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 12—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Twenty-six weeks ended October 1, 2009:

(In thousands)	Parent Obligor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments		Consolidated AMC Entertainment Inc.

Cash flows from operating activities:
Net cash provided by operating activities	$	26,631		$	52,361		$	(2,518	)	$	—	$	76,474

Cash flows from investing activities:
Capital expenditures		—			(29,697	)		(84	)		—		(29,781	)
Net change in reimbursable construction advances		—			(347	)		—			—		(347	)
Investments in non-consolidated entities		—			37			(6,000	)		—		(5,963	)
Proceeds from disposition of Cinemex		—			2,898			—			—		2,898
LCE screen integration		—			(81	)		—			—		(81	)
Other, net		—			730			—			—		730

Net cash used in investing activities		—			(26,460	)		(6,084	)		—		(32,544	)

Cash flows from financing activities:
Repayment under revolving credit facility		(185,000	)		—			—			—		(185,000	)
Repurchase of Fixed Notes due 2012		(250,000	)		—			—			—		(250,000	)
Proceeds from issuance of Senior Notes due 2019		585,492			—			—			—		585,492
Deferred financing costs		(15,941	)		—			—			—		(15,941	)
Principal payments under capital and financing lease obligations		—			(1,712	)		—			—		(1,712	)
Principal payments on Term Loan B		(3,250	)		—			—			—		(3,250	)
Change in construction payables		—			(437	)		—			—		(437	)
Dividends paid to Marquee Holdings Inc.		(315,351	)		—			—			—		(315,351	)
Change in intercompany advances		157,419			(160,630	)		3,211			—		—

Net cash provided by (used in) financing activities		(26,631	)		(162,779	)		3,211			—		(186,199	)

Effect of exchange rate changes on cash and equivalents		—			—			(1,693	)		—		(1,693	)

Net decrease in cash and equivalents		—			(136,878	)		(7,084	)		—		(143,962	)
Cash and equivalents at beginning of period		—			488,800			45,209			—		534,009

Cash and equivalents at end of period	$	—		$	351,922		$	38,125		$	—	$	390,047

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 12—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

Twenty-six weeks ended October 2, 2008:

(In thousands)	Parent Obligor			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments		Consolidated AMC Entertainment Inc.

Cash flows from operating activities:
Net cash provided by operating activities	$	4,058		$	58,235		$	15,200		$	—	$	77,493

Cash flows from investing activities:
Capital expenditures		—			(49,818	)		(10,683	)		—		(60,501	)
Net change in reimbursable construction advances		—			2,073			—			—		2,073
Investments in non-consolidated entities		—			(1,550	)		—			—		(1,550	)
LCE screen integration		—			(3,990	)		—			—		(3,990	)
Other, net		—			1,830			(310	)		—		1,520

Net cash used in investing activities		—			(51,455	)		(10,993	)		—		(62,448	)

Cash flows from financing activities:
Principal payments under mortgages and capital and financing lease obligation		—			(1,535	)		(282	)		—		(1,817	)
Principal payments on Term Loan B		(3,250	)		—			—			—		(3,250	)
Change in construction payables		—			(9,439	)		—			—		(9,439	)
Dividends paid Marquee Holdings Inc.		(18,420	)		—			—			—		(18,420	)
Change in intercompany advances		17,612			(4,179	)		(13,433	)		—		—

Net cash used in financing activities		(4,058	)		(15,153	)		(13,715	)		—		(32,926	)

Effect of exchange rate changes on cash and equivalents		—			—			(972	)		—		(972	)

Net decrease in cash and equivalents		—			(8,373	)		(10,480	)		—		(18,853	)
Cash and equivalents at beginning of period		—			35,312			70,869			—		106,181

Cash and equivalents at end of period	$	—		$	26,939		$	60,389		$	—	$	87,328

NOTE 13—COMMITMENTS AND CONTINGENCIES

The Company, in the normal course of business, is party to various legal actions. Except as described below, management believes that the potential exposure, if any, from such matters would not have a material adverse effect on the financial condition, cash flows or results of operations of the Company.

United States of America v. AMC Entertainment Inc. and American Multi Cinema, Inc. (No. 99 01034 FMC (SHx), filed in the U.S. District Court for the Central District of California). On January 29, 1999, the Department of Justice (the "Department") filed suit alleging that AMCE's stadium style theatres violated the ADA and related regulations. The Department alleged that AMCE had failed to provide persons in wheelchairs seating arrangements with lines-of-sight comparable to the general public. The Department alleged various non-line-of-sight violations as well. The Department sought declaratory and injunctive relief regarding existing and future theatres with stadium-style seating, compensatory damages in the approximate amount of $75,000 and a civil penalty of $110,000.

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 13—COMMITMENTS AND CONTINGENCIES (Continued)

As to line-of-sight matters, the trial court entered summary judgment in favor of the Justice Department as to both liability and as to the appropriate remedy. On December 5, 2008, the Ninth Circuit Court of Appeals reversed the trial court as to the appropriate remedy and remanded the case back to the trial court for findings consistent with its decision. AMCE estimates that the cost of betterments related to the remaining remedies required for line-of-sight violations will be approximately $4,300,000 over a 4-5 year term. The Justice Department moved for reconsideration and was denied by the Ninth Circuit Court of Appeals. The case reverts to the trial court this spring.

As to the non-line-of-sight aspects of the case, on January 21, 2003, the trial court entered summary judgment in favor of the Department on matters such as parking areas, signage, ramps, location of toilets, counter heights, ramp slopes, companion seating and the location and size of handrails. On December 5, 2003, the trial court entered a consent order and final judgment on non-line of sight issues under which AMCE agreed to remedy certain violations at its stadium-style theatres and at certain theatres it may open in the future. Currently AMCE estimates that these betterments will be required at approximately 140 stadium-style theatres. AMC estimates that the total cost of these betterments will be approximately $52,000,000, and through October 1, 2009 AMCE has incurred approximately $26,997,000 of these costs. The estimate is based on actual costs incurred on remediation work completed to date. The actual costs of betterments may vary based on the results of surveys of the remaining theatres.

AMCE has recorded a liability of approximately $349,000 for estimated fines related to this matter.

Michael Bateman v. American Multi-Cinema, Inc. (No. CV07-00171). In January 2007, a class action complaint was filed against the Company in the Central District of the United States District Court of California (the "District Court") alleging violations of the Fair and Accurate Credit Transactions Act ("FACTA"). FACTA provides in part that neither expiration dates nor more than the last 5 numbers of a credit or debit card may be printed on receipts given to customers. FACTA imposes significant penalties upon violators where the violation is deemed to have been willful. Otherwise damages are limited to actual losses incurred by the card holder. On October 24, 2008, the District Court denied plaintiff's renewed motion for class certification. Plaintiff has appealed this decision and the case is stayed pending this appeal.

On May 14, 2009, Harout Jarchafjian filed a similar lawsuit alleging that the Company willfully violated FACTA and seeking statutory damages, but without alleging any actual injury (Jarchafian v. American Multi-Cinema, Inc. (C.D. Cal. Case No. CV09-03434)). The Jarchafjian case has been deemed related to the Bateman case and is stayed pending a Ninth Circuit decision in the Bateman case. The Company believes the plaintiff's allegations in both these cases, particularly those asserting AMC's willfulness, are without merit.

Union Sponsored Pension Plan. On November 7, 2008, the Company received notice of a written demand for payment of a partial withdrawal liability assessment from a collectively bargained multiemployer pension plan that covers certain of its unionized theatre employees. Based on a payment schedule that the Company received from this plan in December 2008, the Company began making quarterly payments on January 1, 2009 related to the $5,279,000 in partial withdrawal liability. In the second quarter of fiscal 2010, the Company made a complete withdrawal from the plan which triggered

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 13—COMMITMENTS AND CONTINGENCIES (Continued)

an additional liability estimated to be $1,400,000. However, the Company also estimates that approximately $2,839,000 of the total liability was discharged in bankruptcy by companies it acquired. As of October 1, 2009, the Company has recorded a liability related to this matter in the amount of $4,863,000 and has made contributions of approximately $1,937,000. The final withdrawal liability amount may be adjusted based on a legal review of the plan's assessment, the Company's records and ensuing discussions with the plan's trustees.

In addition to the cases noted above, the Company is also currently a party to various ordinary course claims from vendors (including concession suppliers, software technology vendors, and motion picture distributors), landlords and suppliers 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. Except as described above, management believes that the ultimate outcome of such other matters, individually and in the aggregate, will not have a material adverse effect on the Company's financial position or overall trends in results of operations. However, litigation and claims are subject to inherent uncertainties and unfavorable outcomes could occur. An unfavorable outcome could include monetary damages. If an unfavorable outcome were to occur, there exists the possibility of a material adverse impact on the results of operations in the period in which the outcome occurs or in future periods.

NOTE 14—NEW ACCOUNTING PRONOUNCEMENTS

In October 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2009-13, Revenue Recognition (Topic 605)—Multiple-Deliverable Revenue Arrangements-A Consensus of the FASB Emerging Issues Task Force, ("ASU 2009-13"). This Update provides amendments to the criteria in Subtopic 605-25 that addresses how to separate multiple-deliverable arrangements and how to measure and allocate arrangement consideration to one or more units of accounting. In addition, this amendment significantly expands the disclosure requirements related to multiple-deliverable revenue arrangements. ASU 2009-13 will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and is effective for the Company as of the beginning of fiscal 2012. Early adoption is permitted.

In August 2009, the FASB issued ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820)—Measuring Liabilities at Fair Value, ("ASU 2009-05"). ASU 2009-05 provides clarification in measuring the fair value of liabilities in circumstances in which a quoted price in an active market for the identical liability is not available and in circumstances in which a liability is restricted from being transferred. This ASU also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. ASU 2009-05 is effective for the first interim period beginning after issuance and is effective for the Company in the third quarter of fiscal 2010. As the Company did not elect the fair value option for our financial liabilities not already within the scope of ASC 820, Fair Value Measurements and Disclosures, the Company does not believe the implementation of this ASU will have a significant impact on its consolidated financial statements.

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 14—NEW ACCOUNTING PRONOUNCEMENTS (Continued)

In June 2009, the FASB issued the Accounting Standards Codification™ 105, Generally Accepted Accounting Principles, ("ASC 105") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities. Generally, ASC 105 is not expected to change U.S. Generally Accepted Accounting Principles. The Company adopted ASC 105 in the second quarter of fiscal 2010 and any references to authoritative accounting literature in the financial statements are referenced in accordance with the Codification, unless the literature has not been codified.

In June 2009, the FASB amended guidance for determining whether an entity is a variable interest entity and requires an analysis to determine whether the variable interest gives a company a controlling financial interest in the variable interest entity. This guidance is included in ASC 810, Consolidation, which will require an ongoing reassessment and eliminates the quantitative approach previously required for determining whether a company is the primary beneficiary. This guidance is effective as of the beginning of the first fiscal year beginning after November 15, 2009 and is effective for the Company in the first quarter of fiscal 2011. The Company is in the process of determining what effects the application of this guidance may have on its consolidated financial position, including its investments currently accounted for following the equity method of accounting.

In May 2009, the FASB issued ASC 855, Subsequent Events, ("ASC 855"), which sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. ASC 855 became effective for the Company in the first quarter of fiscal 2010 and did not have a material impact on the Company's consolidated financial statements. See Note 1—Basis of Presentation for required disclosure.

In April 2009, the FASB issued ASC 820-10-65, determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. This standard provides guidance on estimating fair value when market activity has decreased and on identifying transactions that are not orderly. Additionally, entities are required to disclose in interim and annual periods the inputs and valuation techniques used to measure fair value. The guidance became effective for the Company in the first quarter of fiscal 2010 and did not have a material impact on the Company's consolidated financial statements.

In April 2009, the FASB issued ASC 320-10-65, guidance on the recognition and presentation of other-than-temporary impairments. The existing accounting guidance was modified to demonstrate the intent and ability to hold a debt security for a period of time sufficient to allow for any anticipated recovery in fair value. When the fair value of a debt security has declined below the amortized cost at the measurement date, an entity that intends to sell a security or is more-likely-than-not to sell the security before the recovery of the security's cost basis must recognize the other-than-temporary impairment in earnings. This standard expands and increases the frequency of existing disclosures about other-than-temporary impairments for debt and equity securities. This guidance became effective for the Company in the first quarter of fiscal 2010 and did not have a material impact on the Company's consolidated financial statements.

In April 2009, the FASB issued ASC 825-10-65, guidance for interim disclosures about fair value of financial instruments. This guidance was amended to require an entity to provide disclosures about fair value of financial instruments in interim financial statements. The Company adopted this provision in

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 14—NEW ACCOUNTING PRONOUNCEMENTS (Continued)

the first quarter of fiscal 2010. See Note 7—Fair Value of Financial Instruments for required disclosures.

In December 2008, the FASB issued ASC 715-20-65, guidance for employers' disclosures about postretirement benefit plan assets, which requires additional fair value disclosures about employers' defined benefit pension or other postretirement plan assets. Specifically, employers will be required to disclose information about how investment allocation decisions are made, the fair value of each major category of plan assets and information about the inputs and valuation techniques used to develop the fair value measurements of plan assets. This guidance is effective for financial statements issued for fiscal years ending after December 15, 2009 and is effective for the Company in fiscal 2010. The Company will include the disclosures required in its annual consolidated financial statements and notes for the fiscal year ending April 1, 2010.

In April 2008, the FASB issued ASC 350-30, guidance for the determination of the useful life of intangible assets. This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. In developing assumptions about renewal or extension, an entity should consider its own historical experience (or, if no experience, market participant assumptions) adjusted for entity specific factors. The guidance for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after the effective date and expands the disclosure requirements. The guidance became effective for the Company in the first quarter of fiscal 2010 and did not have a material impact on the Company's consolidated financial position.

In December 2007, the FASB revised ASC 805, Business Combinations, which addresses the accounting and disclosure for identifiable assets acquired, liabilities assumed, and noncontrolling interests in a business combination. This statement requires all business combinations completed after the effective date to be accounted for by applying the acquisition method (previously referred to as the purchase method); expands the definition of transactions and events that qualify as business combinations; requires that the acquired assets and liabilities, including contingencies, be recorded at the fair value determined on the acquisition date and changes thereafter reflected in income, not goodwill; changes the recognition timing for restructuring costs; and requires acquisition costs to be expensed as incurred rather than being capitalized as part of the cost of acquisition. This standard became effective in the first quarter of fiscal 2010. The Company changed its accounting treatment for business combinations on a prospective basis. In addition, the reversal of valuation allowance for deferred tax assets related to business combinations will flow through the Company's income tax provision, on a prospective basis, as opposed to goodwill.

NOTE 15—RELATED PARTY TRANSACTIONS

Amended and Restated Fee Agreement

In connection with the merger with LCE Holdings Inc., Holdings, AMCE and the Sponsors entered into an Amended and Restated Fee Agreement, which provides for an annual management fee of $5,000,000, payable quarterly and in advance to each Sponsor, on a pro rata basis, until the earliest of (i) the twelfth anniversary from December 23, 2004; (ii) such time as the sponsors own less than

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 15—RELATED PARTY TRANSACTIONS (Continued)

20% in the aggregate of Parent; and (iii) such earlier time as Holdings, AMCE and the Requisite Stockholder Majority agree. In addition, the fee agreement provided for reimbursements by AMCE to the Sponsors for their out-of-pocket expenses and to Holdings of up to $3,500,000 for fees payable by Holdings in any single fiscal year in order to maintain AMCE's and its corporate existence, corporate overhead expenses and salaries or other compensation of certain employees. The Amended and Restated Fee Agreement terminated on June 11, 2007, the date of the holdco merger, and was superseded by a substantially identical agreement entered into by AMC Entertainment Holdings, Inc., Holdings, AMCE, the Sponsors and Holdings' other stockholders.

Upon the consummation of a change in control transaction or an initial public offering, each of the Sponsors will receive, in lieu of quarterly payments of the annual management fee, a fee equal to the net present value of the aggregate annual management fee that would have been payable to the Sponsors during the remainder of the term of the fee agreement (assuming a twelve year term from the date of the original fee agreement), calculated using the treasury rate having a final maturity date that is closest to the twelfth anniversary of the date of the original fee agreement date.

The fee agreement also provides that AMCE will indemnify the Sponsors against all losses, claims, damages and liabilities arising in connection with the management services provided by the Sponsors under the fee agreement.

Control Arrangement

The Sponsors have the ability to control the Company's affairs and policies and the election of directors and appointment of management. Reference is made to Note 18—Related Party Transactions in the Company's annual report on Form 10-K for the year (52 weeks) ended April 2, 2009 for additional disclosures about its governance agreements with the Sponsors.

Market Making Transactions

On August 18, 2004, Holdings sold $304,000,000 in aggregate principal amount at maturity of its 12% Senior Discount Notes due 2014 (the "Holdco Notes"). On June 9, 2009, AMCE sold $600,000,000 in aggregate principal amount of its 8.75% Senior Notes due 2019. J.P. Morgan Securities Inc., an affiliate of J.P. Morgan Partners, LLC which owns approximately 20.8% of Parent, was an initial purchaser of both the Holdco Notes and the Notes due 2019.

On January 26, 2006, AMCE sold $325,000,000 in aggregate principal amount of its 11% Senior Subordinated Notes due 2016. JP Morgan Securities Inc., an affiliate of J.P. Morgan Partners, LLC which owns approximately 20.8% of Holdings, was an initial purchaser of these notes. Credit Suisse Securities (USA) LLC, whose affiliates own approximately 1.6% of Parent, was also an initial purchaser of these notes.

AMCE Dividends to Holdings

During April and May of 2009, AMCE made dividend payments to its stockholder Holdings and Holdings made dividend payments to its stockholder Parent totaling $300,000,000, which were treated

Table of Contents

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 1, 2009

(Unaudited)

NOTE 15—RELATED PARTY TRANSACTIONS (Continued)

as a reduction of additional paid-in capital. Parent made payments to purchase term loans and reduce the principal balance of its Parent Term Loan Facility from $466,936,000 to $193,290,000 with a portion of the dividend proceeds.

Table of Contents

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

Forward Looking Statements

In addition to historical information, this Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the "Securities Act," and Section 21E of the Securities Exchange Act of 1934, as amended, or the "Exchange Act." The words "forecast," "estimate," "project," "intend," "expect," "should," "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, including those discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations of AMC Entertainment Inc.," 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:

•: national, regional and local economic conditions that may affect the markets in which we or our joint venture investees operate;
•: the levels of expenditures on entertainment in general and movie theatres in particular;
•: increased competition within movie exhibition or other competitive entertainment mediums;
•: technological changes and innovations, including alternative methods for delivering movies to consumers;
•: the popularity of theatre attendance and major motion picture releases;
•: shifts in population and other demographics;
•: our ability to renew expiring contracts at favorable rates, or to replace them with new contracts that are comparably favorable to us;
•: our need for, and ability to obtain, additional funding for acquisitions and operations;
•: our ability to successfully collect amounts we are contractually entitled to from the sale of Cinemex;
•: risks and uncertainties relating to our significant indebtedness;
•: fluctuations in operating costs;
•: capital expenditure requirements;
•: changes in interest rates; and
•: changes in accounting principles, policies or guidelines.

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, see Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended April 2, 2009 and in this Quarterly Report on Form 10-Q.

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

Table of Contents

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

We are one of the world's leading theatrical exhibition companies. During the twenty-six weeks ended October 1, 2009, we opened one new managed theatre with 6 screens in the U.S. pursuant to a joint venture arrangement and closed four theatres with 44 screens in the U.S. As of October 1, 2009, we owned, operated or had interests in 304 theatres and 4,574 screens, with 99%, or 4,519, of our screens in the U.S. and Canada and 1%, or 55, of our screens in China (Hong Kong), France and the United Kingdom.

Our principal direct and indirect owned subsidiaries are American Multi-Cinema, Inc. ("AMC") and AMC Entertainment International, Inc. ("AMCEI"). We conduct our theatrical exhibition business through AMC and its subsidiaries and AMCEI and its subsidiaries.

Our Theatrical Exhibition revenues are generated primarily from box office admissions and theatre concession sales. The balance of our revenues are generated from ancillary sources, including on-screen advertising, rental of theatre auditoriums, fees and other revenues generated from the sale of gift cards and packaged tickets and arcade games located in theatre lobbies.

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

Concessions sales are our second largest source of revenue after box office admissions. Concessions items include popcorn, soft drinks, candy, hot dogs and other products. We negotiate prices for our concessions products and supplies directly with concessions vendors on a national or regional basis to obtain high volume discounts or bulk rates and marketing incentives.

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

During fiscal 2009, films licensed from our 6 largest distributors based on revenues accounted for approximately 81% of our admissions revenues. Our revenues attributable to individual distributors may vary significantly from year to year depending upon the commercial success of each distributor's motion pictures in any given year.

During the period from 1990 to 2008, the annual number of first-run motion pictures released by distributors in the United States ranged from a low of 370 in 1995 to a high of 606 in 2008, according to Motion Picture Association 2008 MPA Market Statistics.

Table of Contents

We continually upgrade the quality of our theatre circuit by adding new screens through new builds (including expansions) and acquisitions, converting existing screens to 3D and IMAX and by disposing of older screens through closures and sales. We are an industry leader in the development and operation of megaplex theatres, typically defined as a theatre having 14 or more screens and offering amenities to enhance the movie-going experience, such as stadium seating providing unobstructed viewing, digital sound and enhanced seat design. We have increased our 3D screens by 131 screens and our IMAX screens by 40 screens since October 2, 2008; and as of October 1, 2009, approximately 5.4% of our screens were 3D screens and 1.3% of our screens were IMAX screens.

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

On December 29, 2008, we sold all of our interests in Grupo Cinemex, S.A. de C.V. ("Cinemex"), which then operated 44 theatres with 493 screens primarily in the Mexico City Metropolitan Area, to Entretenimiento GM de Mexico S.A. de C.V. ("Entretenimiento"). The purchase price received at the date of the sale and in accordance with the Stock Purchase Agreement was $248,141,000 and costs related to the disposition were $4,137,000. During the twenty-six weeks ended October 1, 2009, we received payments of $2,898,000 of purchase price related to tax payments and refunds, and a working capital calculation and post closing adjustments. Additionally, we estimate that we are contractually entitled to receive an additional $10,815,000 of the purchase price related to tax payments and refunds. While we expect to ultimately recover all amounts we are contractually entitled to from Cinemex, the collection may require prolonged resolution of various amounts. As of October 1, 2009, the amount due from Cinemex for tax payments and refunds associated with the sale was $10,815,000 and $9,325,000 has been classified by us as a long-term asset.

We acquired Cinemex in January 2006 as part of a larger acquisition of Loews Cineplex Entertainment Corporation. We do not operate any other theatres in Mexico and have divested of the majority of our other investments in international theatres in Japan, Hong Kong, Spain, Portugal, Sweden, Argentina, Brazil, Chile, and Uruguay over the past several years as part of our overall business strategy.

The operations and cash flows of the Cinemex theatres have been eliminated from our ongoing operations as a result of the disposal transaction. We will not have any significant continuing involvement in the operations of the Cinemex theatres after the disposition. The results of operations of the Cinemex theatres have been classified as discontinued operations, and information presented for all periods reflects the new classification.

On June 9, 2009, we completed the offering of $600,000,000 aggregate principal amount of our 8.75% Senior Notes due 2019 (the "Notes due 2019"). Concurrently with the initial notes offering, we launched a cash tender offer and consent solicitation for any and all of our then outstanding $250,000,000 aggregate principal amount of 8⁵/8% Senior Notes due 2012 (the "Fixed Notes due 2012") at a purchase price of $1,000 plus a $30 consent fee for each $1,000 of principal amount of currently outstanding Fixed Notes due 2012 validly tendered and accepted by us on or before the early tender date (the "Cash Tender Offer"). We used the net proceeds from the issuance of the Notes due 2019 to pay the consideration for the Cash Tender Offer plus accrued and unpaid interest on the $238,065,000 principal amount of the Fixed Notes due 2012. We recorded a loss on extinguishment related to the Cash Tender Offer of $10,826,000 in Other expense during the thirteen weeks ended July 2, 2009, which included previously capitalized deferred financing fees of $3,312,000, consent fee paid to holders of $7,142,000, and other expenses of $372,000. On August 15, 2009, we redeemed the remaining $11,935,000 of Fixed Notes due 2012 at a price of $1,021.56 per $1,000 principal in accordance with the

Table of Contents

terms of the indenture. We recorded a loss of $450,000 in Other expense related to the extinguishment of the remaining Fixed Notes due 2012 principal during the second quarter of fiscal 2010, which included previously capitalized deferred financing fees of $157,000, consent fee paid to the holder of $257,000 and other expenses of $36,000.

Stock-Based Compensation

We account for stock-based employee compensation arrangements using the fair value method. The fair value of each stock option was estimated on the grant date using the Black-Scholes option pricing model using the following assumptions: common stock value on the grant date, risk-free interest rate, expected term, expected volatility, and dividend yield. We have elected to use the simplified method for estimating the expected term of "plain vanilla" share option grants as we do not have enough historical experience to provide a reasonable estimate. Compensation cost is calculated on the date of the grant and then amortized over the vesting period.

We granted 38,876.72873 options on December 23, 2004, 600 options on January 26, 2006, 15,980.45 options on March 6, 2009, and 4,786 options on May 28, 2009 to employees to acquire our common stock. The fair value of these options on their respective grant dates was $22,373,000, $138,000, $2,069,000, and $650,000, respectively. All of these options currently outstanding are equity classified.

The common stock value used to estimate the fair value of each option on the December 23, 2004 grant date was based upon a contemporaneous third party arms-length transaction on December 23, 2004 in which we sold 769,350 shares of our common stock for $1,000 per share to unrelated parties. The common stock value used to estimate the fair value of each option on the March 6, 2009 grant date was based upon a contemporaneous valuation reflecting market conditions as of January 1, 2009, a purchase of 2,542 shares by Parent for $323.95 per share from our former Chief Executive Officer pursuant to his Separation and General Release Agreement dated February 23, 2009 and a sale of 385.862 shares by Parent to our current Chief Executive Officer pursuant to his Employment Agreement dated February 23, 2009 for $323.95 per share.

On June 11, 2007, Marquee Merger Sub Inc. ("merger sub"), a wholly-owned subsidiary of AMC Entertainment Holdings, Inc. ("Parent"), merged with and into Holdings, with Holdings continuing as the surviving corporation (the "holdco merger"). In connection with this, Parent adopted an amended and restated 2004 stock option plan (formerly known as the 2004 Stock Option Plan of Marquee Holdings Inc.). The option exercise price per share of $1,000 was adjusted to $491 pursuant to the antidilution provisions of the 2004 Stock Option Plan to give effect to the payment of a one time non-recurring dividend paid by Parent on June 15, 2007 of $652,800,000 to the holders of its 1,282,750 shares of common stock. The Company determined that there was no incremental value transferred as a result of the modification and as a result, no additional compensation cost to recognize.

The common stock value of $339.59 per share used to estimate the fair value of each option on the May 28, 2009 grant date was based upon a valuation prepared by management on behalf of the Compensation Committee of the Board of Directors. Management chose not to obtain a contemporaneous valuation performed by an unrelated valuation specialist as management believed that the valuation obtained at January 1, 2009 and the subsequent stock sales and purchases were recent and could easily be updated and rolled forward without engaging a third party and incurring additional costs. Additionally, management considered that the number of options granted generated a relatively low amount of annual expense over 5 years ($130,100) and that any differences in other estimates of fair value would not be expected to materially impact the related annual expense. The common stock value was estimated based on current estimates of annual operating cash flows multiplied by the current average peer group multiple for similar publicly traded competitors of 6.7x

Table of Contents

less net indebtedness and the current fair value of our investment in NCM. Management compared the estimated stock value of $339.59 per share with the $323.95 value per share discussed above related to the March 6, 2009 option grant and noted the overall increase in value was primarily due the following:


March 6, 2009 grant value per share	$	323.95

Decline in net indebtedness		20.15
Increase in value of investment in NCM		37.10
Increase due to peer group multiple		47.89
Decrease in annual operating cash flows		(89.50	)

May 28, 2009 grant value per share	$	339.59

Certain Critical Accounting Estimates Impacted by Capital and Credit Market Crisis

Certain accounting estimates identified below are critical to our business operations and the understanding of our results of operations. The impact of, and any associated risks related to, these estimates on our business operations are discussed throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations where such estimates affect our reported and expected financial results. For a detailed discussion on the application of these estimates and other accounting policies, see the notes to our consolidated financial statements included in our Annual Report on Form 10-K. The methods and judgments we use in applying our accounting estimates have a significant impact on the results we report in our financial statements. Some of our accounting estimates require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Certain of our most critical accounting estimates include the assessment of recoverability of long-lived assets, including intangibles, which impacts impairment of long-lived assets when we impair assets or accelerate their depreciation; recoverability of goodwill, which creates the potential for write-offs of goodwill; and recognition and measurement of net periodic benefit costs for our pension and other defined benefit programs, which impacts general and administrative expense. Below, we discuss these areas further, as well as the estimates and judgments involved and how they may be impacted in the future.

Impairments. We review long-lived assets, including intangibles and investments in unconsolidated subsidiaries accounted for under the equity method, marketable equity securities and internal use software for impairment as part of our annual budgeting process and whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We identify impairments related to internal use software when management determines that the remaining carrying value of the software will not be realized through future use. We review internal management reports on a quarterly basis as well as monitor current and potential future competition in the markets where we operate for indicators of triggering events or circumstances that indicate impairment of individual theatre assets. We evaluate theatres using historical and projected data of theatre level cash flow as our primary indicator of potential impairment and consider the seasonality of our business when evaluating theatres for impairment. We perform our annual impairment analysis during the fourth quarter because Christmas and New Year's holiday results comprise a significant portion of our operating cash flow and the actual results from this period, which are available during the fourth quarter of each fiscal year, are an integral part of our impairment analysis. Under these analyses, if the sum of the estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount of the asset, an impairment loss is recognized in the amount by which the carrying value of the asset exceeds its estimated fair value. Assets are evaluated for impairment on an individual theatre basis, which we believe is the lowest level for which there are identifiable cash flows. The impairment evaluation is based on the estimated cash flows from continuing use until the expected disposal date or the fair value of furniture, fixtures and equipment. The expected disposal date does not exceed the remaining lease period unless it is probable the lease period will be extended and may be less than the remaining lease

Table of Contents

period when we do not expect to operate the theatre to the end of its lease term. The fair value of assets is determined as either the expected selling price less selling costs (where appropriate) or the present value of the estimated future cash flows. The fair value of furniture, fixtures and equipment has been determined using similar asset sales and in some instances the assistance of third party valuation studies. The discount rate used in determining the present value of the estimated future cash flows was based on management's expected return on assets during fiscal 2009.

There is considerable management judgment necessary to determine the future cash flows, fair value and the expected operating period of our theatre and other long-lived assets, and, accordingly, actual results could vary significantly from such estimates. We have recorded impairments of long-lived assets of $73,547,000, $8,933,000, and $10,686,000 during fiscal 2009, 2008, and 2007, respectively.

Goodwill and Other Intangible Assets. Our recorded goodwill was $1,814,738,000 as of October 1, 2009 and April 2, 2009 and unamortized trademark intangible assets were $74,000,000 as of October 1, 2009 and as of April 2, 2009. We evaluate goodwill and our trademark for impairment annually as of the beginning of the fourth fiscal quarter and any time an event occurs or circumstances change that would more likely than not reduce the fair value for a reporting unit below its carrying amount. Our goodwill is recorded in our U.S. and Canada operating segment which represents 99% of the screens in our Theatrical Exhibition operating segment used for financial reporting purposes. The reporting unit for purposes of evaluating recorded goodwill for impairment is our U.S. and Canada operating segment. If the carrying value of the reporting unit exceeds its fair value we are required to reallocate the fair value of the reporting unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. We determine fair value by using an enterprise valuation methodology determined by using the income approach and the market approach as discussed below which we believe are appropriate methods to determine fair value. There is considerable management judgment with respect to cash flow estimates and appropriate multiples and discount rates to be used in determining fair value.

We performed an interim impairment analysis during the third quarter of fiscal 2009 as a result of downturns in the economic operating environment related to the credit and capital market crisis and declines in equity values for our publicly traded peer group competitors. While the fair value of our Theatrical Exhibition operations exceed the carrying value at the present time and management does not believe that impairment is probable, the performance of our Theatrical Exhibition operations requires continued improvement in future periods to sustain its carrying value and small changes in certain assumptions can have a significant impact on fair value. In the future, if the carrying value of our reporting unit exceeds the estimated fair value, we are required to reallocate the fair value of the reporting unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit for purposes of measuring goodwill. As a result of this hypothetical allocation, the carrying value of goodwill could be reduced to the hypothetically recomputed amount. If the performance of our Theatrical Exhibition operations does not continue to improve, a future impairment could result for a portion or all of the goodwill or trademark intangibles noted previously.

We evaluated our enterprise value for fiscal 2009 and 2008 based on a contemporaneous valuation reflecting market conditions as of January 1, 2009 and December 27, 2007, respectively. Two valuation approaches were utilized; the income approach and the market approach. The income approach provides an estimate of enterprise value by measuring estimated annual cash flows over a discrete projection period and applying a present value rate to the cash flows. The present value of the cash flows is then added to the present value equivalent of the residual value of the business to arrive at an estimated fair value of the business. The residual value represents the present value of the projected cash flows beyond the discrete projection period. The discount rate is carefully determined using a rate of return deemed appropriate for the risk of achieving the projected cash flows. The market approach used publicly traded peer companies and reported transactions in the industry. Due to market

Table of Contents

conditions and the relatively few sale transactions, the market approach was used to provide additional support for the value achieved in the income approach.

Key rates used in the income approach for fiscal 2009 and 2008 follow:

Description

Discount rate	10.0%	8.5%
Market risk premium	6.0%	5.0%
Hypothetical capital structure: Debt/Equity	40%/60%	40%/60%

The discount rate is an estimate of the weighted average cost of debt and equity capital. The required return on common equity was estimated by adding the risk-free required rate of return, the market risk premium (which is adjusted for the Company's estimated market volatility, or beta), and small stock premium. The discount rate used for fiscal 2008 was 8.5% as compared to the 10.0% discount rate used for the fiscal 2009 impairment test. The higher discount rate was due to a number of factors, such as an increase in corporate bond yields, increase in betas, and increase in market risk premiums, given current market conditions.

The aggregate annual cash flows were determined based on management projections on a theatre-by-theatre basis further adjusted by non-theatre cash flows. The projections considered various factors, including theatre lease terms, a reduction in attendance, and a reduction in capital investments in new theatres, given current market conditions and the resulting difficulty with obtaining contracts for new-builds. Because Cinemex was sold in December 2008, cash flows for the fiscal 2009 study did not include results from Cinemex. Cash flows were projected through fiscal 2015 and it was assumed revenues would increase approximately 1.7% annually primarily due to projected increases in ticket and concession pricing. The residual value is a function of the estimated cash flow for fiscal 2016 divided by a capitalization rate (discount rate less long-term growth rate of 2%), then discounted back to represent the present value of the cash flows beyond the discrete projection period.

As the expectations of the average investor are not directly observable, the market risk premium must be inferred. One approach is to use the long-run historical arithmetic average premiums that investors have historically earned over and above the returns on long-term Treasury bonds. The premium obtained using the historical approach is sensitive to the time period over which one calculates the average. Depending on the time period chosen, the historical approach yields an average premium in a range of 5.0% to 8.0%. Another approach is to look at projected rates of return obtained from analysts who follow the stock market. Again, this approach will lead to differing estimates depending upon the source. The published expected returns from firms such as Merrill Lynch, Value Line, and Greenwich Associates collectively tend to indicate a premium in a range of 3.0% to 5.0%. Under normal market conditions, we have utilized a market risk premium of 5.0%; however, given the current economic conditions, we utilized a market risk premium of 6.0% for fiscal 2009.

There was no goodwill impairment as of April 2, 2009. During the fourth fiscal quarter of 2009 the equity values of our publicly traded peer group competitors increased by approximately 40% from the third fiscal quarter ended on January 1, 2009. Based on the results of the study conducted at the end of the third quarter of fiscal 2009, our fair value exceeded the book value by 1.2%.

Table of Contents

Following, for illustrative purposes, are the percentages at which our fair value exceeds the carrying value assuming hypothetical reductions in the fair value as of January 1, 2009 (in thousands):


Carrying Value		$	2,641,360

Hypothetical Reduction of Fair Value	Fair Value

0.0%	$	2,673,796	1.2	%
2.5%		2,606,951	(1.3	)%
5.0%		2,540,106	(3.8	)%
7.5%		2,473,261	(6.4	)%
10.0%		2,406,416	(8.9	)%

Pension and Postretirement Assumptions. Pension and postretirement benefit obligations and the related effects on operations are calculated using actuarial models. Two critical assumptions, discount rate and expected return on assets, are important elements of plan expense and/or liability measurement. We evaluate these critical assumptions at least annually. In addition, medical trend rates are an important assumption in projecting the medical claim levels for our postretirement benefit plan. The assumptions affecting our pension and postretirement obligations involve demographic factors such as retirement, expected increases in compensation, mortality and turnover. These assumptions are evaluated periodically and are updated to reflect our experience. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors. Reference is made to our Annual Report on Form 10-K Part II Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for additional discussion about our pension and postretirement assumptions under the heading Critical Accounting Estimates.

We believe that the oversight of the investments held under our frozen defined benefit pension plans is rigorous and that the investment strategies are prudent. The market value of the investments within the frozen pension plan trusts declined by approximately 36% during the fifteen months ended April 2, 2009, which was partially offset by an increase of approximately 20% during the six months ended September 30, 2009. The benefit plan assets and obligations of our frozen plans are remeasured annually and any future reductions in plan assets from investment losses will result in an increase to the plans' unfunded status and a decrease in stockholder's equity upon actuarial revaluation of the plan for the upcoming year. Changes in the value of our frozen plan assets (during fiscal 2010) will not have an impact on the income statement for fiscal 2010; however, any additional reductions in benefit plan assets will result in increased benefit costs in future years and may increase the amount and accelerate the timing of required future funding contributions. We have recorded net periodic benefit cost (income) for our pension and postretirement plans of $(1,890,000), $1,461,000, and $(4,454,000) during the periods ended April 2, 2009, April 3, 2008, and March 29, 2007, respectively and expect to record net periodic benefit expense for our pension and post retirement plans of $2,412,000 during fiscal 2010.

Table of Contents

Operating Results

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

		Thirteen Weeks Ended									Twenty-six Weeks Ended

		October 1, 2009			October 2, 2008			% Change			October 1, 2009			October 2, 2008			% Change
		(Dollars in thousands, except operating data)
Revenues
	Admissions	$	390,498		$	404,517			(3.5	)%	$	836,725		$	821,448			1.9	%
	Concessions		147,381			159,916			(7.8	)%		321,041			329,750			(2.6	)%
	Other theatre		13,173			15,577			(15.4	)%		28,598			31,031			(7.8	)%

	Total revenues	$	551,052		$	580,010			(5.0	)%	$	1,186,364		$	1,182,229			0.3	%

Cost of Operations
	Film exhibition costs	$	208,328		$	218,376			(4.6	)%	$	457,429		$	450,112			1.6	%
	Concession costs		15,905			16,580			(4.1	)%		35,070			35,017			0.2	%
	Operating expense		142,559			149,365			(4.6	)%		291,780			294,081			(0.8	)%
	Rent		108,311			112,814			(4.0	)%		220,684			225,149			(2.0	)%
	Preopening expense		565			1,185			(52.3	)%		1,434			3,060			(53.1	)%
	Theatre and other closure (income) expense		478			(2,319	)		*	%		615			(2,333	)		*	%

			476,146			496,001			(4.0	)%		1,007,012			1,005,086			0.2	%

General and administrative expense:
	Merger, acquisition and transaction costs		43			235			(81.7	)%		221			252			(12.3	)%
	Management Fee		1,250			1,250			—	%		2,500			2,500			—	%
	Other		13,033			11,847			10.0	%		26,071			23,041			13.2	%
Depreciation and amortization			46,689			50,470			(7.5	)%		95,477			101,056			(5.5	)%
Disposition of assets and other gains			(211	)		(374	)		43.6	%		(261	)		(355	)		26.5	%

	Total costs and expenses	$	536,950		$	559,429			(4.0	)%	$	1,131,020		$	1,131,580			—	%

*: Percentage change in excess of 100%

		Thirteen Weeks Ended				Twenty-six Weeks Ended

		October 1, 2009		October 2, 2008		October 1, 2009		October 2, 2008
Operating Data—Continuing Operations (at period end):
	Screen additions		—		22		6		60
	Screen dispositions		36		34		44		54
	Average screens—(1)		4,509		4,546		4,521		4,542
	Number of screens operated(2)						4,574		4,612
	Number of theatres operated						304		309
	Screens per theatre						15.0		14.9
	Attendance—(1) (in thousands)		46,782		50,455		100,485		102,849

(1): Includes consolidated theatres only.
(2): Includes 248 3D screens and 61 IMAX screens as of October 1, 2009 and 117 3D screens and 21 IMAX screens as of October 2, 2008.

Table of Contents

A reconciliation of earnings (loss) from continuing operations before income taxes to Adjusted EBITDA is as follows (in thousands):

			Thirteen Weeks Ended						Twenty-six Weeks Ended

			October 1, 2009			October 2, 2008			October 1, 2009			October 2, 2008
Earnings (loss) from continuing operations before income taxes			$	(8,973	)	$	2,838		$	144		$	9,148
Plus:
	Interest expense			34,394			31,054			64,106			61,663
	Depreciation and amortization			46,689			50,470			95,477			101,056
	Preopening expense			565			1,185			1,434			3,060
	Theatre and other closure income			478			(2,319	)		615			(2,333	)
	Disposition of assets and other gains			(211	)		(374	)		(261	)		(355	)
	Equity in earnings of non-consolidated entities			(4,348	)		(5,321	)		(10,610	)		(9,706	)
	Investment income			(33	)		(289	)		(131	)		(552	)
	Other expense(1)			450			—			11,276			—
	General and administrative expense:
		Merger and acquisition costs		43			235			221			252
		Management fee		1,250			1,250			2,500			2,500
		Stock-based compensation expense		427			786			838			1,549

Adjusted EBITDA			$	70,731		$	79,515		$	165,609		$	166,282

(1): Other expense is comprised of the loss on extinguishment of indebtedness related to the Cash Tender Offer and remaining redemption.

Thirteen Weeks Ended October 1, 2009 and October 2, 2008

Revenues. Total revenues decreased 5.0%, or $28,958,000, during the thirteen weeks ended October 1, 2009 compared to the thirteen weeks ended October 2, 2008. Admissions revenues decreased 3.5%, or $14,019,000, during the thirteen weeks ended October 1, 2009 compared to the thirteen weeks ended October 2, 2008, due to a 7.3% decrease in attendance partially offset by a 4.1% increase in average ticket prices. Admissions revenues at comparable theatres (theatres opened on or before the second quarter of fiscal 2009) decreased 3.2%, or $12,998,000, during the thirteen weeks ended October 1, 2009 from the comparable period last year. The increase in average ticket price was primarily due to our practice of periodically reviewing ticket prices and making selective adjustments based upon such factors as general inflationary trends and conditions in local markets as well as an increase in the number of IMAX and 3D screens operated by us where we are able to charge more per ticket than for a standard 2D film. Attendance was negatively impacted by less favorable film product during the thirteen weeks ended October 1, 2009 as compared to the thirteen weeks ended October 2, 2008. Based upon available industry sources, box office revenues of our comparable theatres performed in line with the overall industry comparable theatres in the markets where we operate. Concessions revenues decreased 7.8%, or $12,535,000, during the thirteen weeks ended October 1, 2009 compared to the thirteen weeks ended October 2, 2008, due primarily to the decrease in attendance. Other theatre revenues decreased 15.4%, or $2,404,000 during the thirteen weeks ended October 1, 2009 compared to the thirteen weeks ended October 2, 2008, primarily due to declines in non-presentment income from package ticket sales and theatre rentals.

Costs and expenses. Total costs and expenses decreased 4.0%, or $22,479,000, during the thirteen weeks ended October 1, 2009 compared to the thirteen weeks ended October 2, 2008. Film exhibition costs decreased 4.6%, or $10,048,000, during the thirteen weeks ended October 1, 2009 compared to

Table of Contents

the thirteen weeks ended October 2, 2008 due to the decrease in admissions revenues and a decrease in film exhibition costs as a percentage of admissions revenues. As a percentage of admissions revenues, film exhibition costs were 53.3% in the current period and 54.0% in the prior year period. Concession costs decreased 4.1%, or $675,000, during the thirteen weeks ended October 1, 2009 compared to the thirteen weeks ended October 2, 2008 due to a decrease in concession revenues partially offset by an increase in concession costs as a percentage of concessions revenues. As a percentage of concessions revenues, concession costs were 10.8% in the current period compared with 10.4% in the prior period. As a percentage of revenues, operating expense was 25.9% in the current period as compared to 25.8% in the prior period. Rent expense decreased 4.0%, or $4,503,000, during the thirteen weeks ended October 1, 2009 compared to the thirteen weeks ended October 2, 2008 primarily due to rent reductions resulting from co-tenancy provisions in certain lease agreements not being met in certain locations. Rent reductions related to co-tenancy may not continue should our landlords meet the related co-tenancy provisions in the future. Preopening expense decreased $620,000 during the thirteen weeks ended October 1, 2009 due to a decline in screen additions. During the thirteen weeks ended October 1, 2009, we recognized $478,000 of theatre and other closure expense due primarily to the closure of one theatre and accretion of the closure liability related to theatres closed during prior periods.

General and Administrative Expense:

Merger, acquisition and transaction costs. Merger, acquisition and transaction costs decreased $192,000 during the thirteen weeks ended October 1, 2009 compared to the thirteen weeks ended October 2, 2008.

Management fees. Management fees were unchanged during the thirteen weeks ended October 1, 2009. Management fees of $1,250,000 are paid quarterly, in advance, to our Sponsors in exchange for consulting and other services.

Other. Other general and administrative expense increased 10.0%, or $1,186,000, during the thirteen weeks ended October 1, 2009 compared to the thirteen weeks ended October 2, 2008 due primarily to increases in expected annual incentive compensation, salaries expense and net periodic pension expense, partially offset by a decrease in expense related to a union-sponsored pension plan. During the thirteen weeks ended October 2, 2008, we recorded $2,440,000 of expense related to our estimated partial withdrawal liability for a union-sponsored pension plan. During the thirteen weeks ended October 1, 2009, we recorded $1,400,000 of expense related to our estimated complete withdrawal from the union-sponsored pension plan.

Depreciation and Amortization. Depreciation and amortization decreased 7.5%, or $3,781,000, compared to the prior period due primarily to the impairment of long-lived assets in fiscal 2009.

Disposition of Assets and Other Gains. Disposition of assets and other gains were $211,000 in the current period compared to $374,000 in the prior period.

Other (Income) Expense. Other (income) expense includes $(7,369,000) and $(7,701,000) of income related to the derecognition of gift card liabilities, as to which we believe future redemption to be remote, during the thirteen weeks ended October 1, 2009 and October 2, 2008, respectively. Other (income) expense includes a loss of $450,000 related to the Cash Tender Offer during the thirteen weeks ended October 1, 2009.

Interest Expense. Interest expense increased 10.8%, or $3,340,000, primarily due to an increase in interest expense related to the issuance of the Notes due 2019, partially offset by a decrease in interest rates on the Senior Secured Credit Facility and extinguishment of debt from the Cash Tender Offer.

Table of Contents

Equity in Earnings of Non-Consolidated Entities. Equity in earnings of non-consolidated entities was $4,348,000 in the current period compared to $5,321,000 in the prior period. Equity in earnings related to our investment in National CineMedia, LLC were $5,900,000 and $5,221,000 for the thirteen weeks ended October 1, 2009 and October 2, 2008, respectively.

Investment Income. Investment income was $33,000 for the thirteen weeks ended October 1, 2009 compared to $289,000 for the thirteen weeks ended October 2, 2008.

Income Tax Provision (Benefit). The income tax provision (benefit) from continuing operations was $(1,150,000) for the thirteen weeks ended October 1, 2009 and $1,538,000 for the thirteen weeks ended October 2, 2008.

Earnings (Loss) from Discontinued Operations, Net. On December 29, 2008, we sold our operations in Mexico, including 44 theatres and 493 screens. The results of operations of the Cinemex theatres have been classified as discontinued operations, and information presented for all periods reflects the new classification. See Note 2—Discontinued Operations for the components of the earnings (loss) from discontinued operations.

Net Earnings (Loss). Net earnings (loss) were $(8,004,000) and $3,828,000 for the thirteen weeks ended October 1, 2009 and October 2, 2008, respectively. Net earnings were negatively impacted by the decline in attendance during the thirteen weeks ended October 1, 2009.

Twenty-six Weeks Ended October 1, 2009 and October 2, 2008

Revenues. Total revenues increased 0.3%, or $4,135,000, during the twenty-six weeks ended October 1, 2009 compared to the twenty-six weeks ended October 2, 2008. Admissions revenues increased 1.9%, or $15,277,000, during the twenty-six weeks ended October 1, 2009 compared to the twenty-six weeks ended October 2, 2008, due to a 4.3% increase in average ticket prices, partially offset by a 2.3% decrease in attendance. Admissions revenues at comparable theatres (theatres opened on or before the first quarter of fiscal 2009) increased 1.6%, or $12,784,000, during the twenty-six weeks ended October 1, 2009 from the comparable period last year. The increase in average ticket price was primarily due to our practice of periodically reviewing ticket prices and making selective adjustments based upon such factors as general inflationary trends and conditions in local markets as well as an increase in the number of IMAX and 3D screens operated by us where we are able to charge more per ticket than for a standard 2D film. Attendance was negatively impacted by less favorable film product during the twenty-six weeks ended October 1, 2009 as compared to the twenty-six weeks ended October 2, 2008. Based upon available industry sources, box office revenues of our comparable theatres slightly underperformed the overall industry comparable theatres in the markets where we operate. We believe our underperformance is primarily due to a year-over-year change in product genre which was more favorable in the prior year period in which we outperformed the industry and the competitive impact of increasing industry screen counts while our screen counts remained relatively unchanged. Concessions revenues decreased 2.6%, or $8,709,000, during the twenty-six weeks ended October 1, 2009 compared to the twenty-six weeks ended October 2, 2008, due primarily to the decrease in attendance. Other theatre revenues decreased 7.8%, or $2,433,000, during the twenty-six weeks ended October 1, 2009 compared to the twenty-six weeks ended October 2, 2008, primarily due to a reduction in theatre rentals.

Costs and expenses. Total costs and expenses were essentially unchanged during the twenty-six weeks ended October 1, 2009 compared to the twenty-six weeks ended October 2, 2008. Film exhibition costs increased 1.6%, or $7,317,000, during the twenty-six weeks ended October 1, 2009 compared to the twenty-six weeks ended October 2, 2008 due to the increase in admissions revenues. As a percentage of admissions revenues, film exhibition costs were 54.7% in the current period and 54.8% in the prior year period. Concession costs increased 0.2%, or $53,000, during the twenty-six weeks ended

Table of Contents

October 1, 2009 compared to the twenty-six weeks ended October 2, 2008 due to the increase in concession costs as a percentage of concessions revenues. As a percentage of concessions revenues, concession costs were 10.9% in the current period compared with 10.6% in the prior period. As a percentage of revenues, operating expense was 24.6% in the current period as compared to 24.9% in the prior period. Rent expense decreased 2.0%, or $4,465,000, during the twenty-six weeks ended October 1, 2009 compared to the twenty-six weeks ended October 2, 2008 primarily due to rent reductions from landlords related to co-tenancy provisions in certain lease agreements. Rent reductions related to co-tenancy may not continue should our landlords meet the related co-tenancy provisions in the future. Preopening expense decreased $1,626,000 during the twenty-six weeks ended October 1, 2009 due to a decline in screen additions. During the twenty-six weeks ended October 1, 2009, we recognized $615,000 of theatre and other closure expense due primarily to the closure of one theatre and accretion of the closure liability related to theatres closed during prior periods.

General and Administrative Expense:

Merger, acquisition and transaction costs. Merger, acquisition and transaction costs decreased $31,000 during the twenty-six weeks ended October 1, 2009 compared to the twenty-six weeks ended October 2, 2008.

Management fees. Management fees were unchanged during the twenty-six weeks ended October 1, 2009. Management fees of $1,250,000 are paid quarterly, in advance, to our Sponsors in exchange for consulting and other services.

Other. Other general and administrative expense increased 13.2%, or $3,030,000, during the twenty-six weeks ended October 1, 2009 compared to the twenty-six weeks ended October 2, 2008 due primarily to certain one-time payments for salaries, expected annual incentive compensation and net periodic pension expense, partially offset by a decrease in expense related to a union-sponsored pension plan. During the twenty-six weeks ended October 2, 2008, we recorded $2,440,000 of expense related to our estimated partial withdrawal liability for a union-sponsored pension plan. During the twenty-six weeks ended October 1, 2009, we recorded $1,400,000 of expense related to our estimated complete withdrawal from the union-sponsored pension plan.

Depreciation and Amortization. Depreciation and amortization decreased 5.5%, or $5,579,000, compared to the prior period due primarily to the impairment of long-lived assets in fiscal 2009.

Disposition of Assets and Other Gains. Disposition of assets and other gains were $261,000 in the current period compared to $355,000 in the prior period.

Other (Income) Expense. Other (income) expense includes $(9,422,000) and $(9,904,000) of income related to the derecognition of gift card liabilities, as to which we believe future redemption to be remote, during the twenty-six weeks ended October 1, 2009 and October 2, 2008, respectively. Other (income) expense includes a loss of $11,276,000 related to the Cash Tender Offer during the twenty-six weeks ended October 1, 2009.

Interest Expense. Interest expense increased 4.0%, or $2,443,000, primarily due to an increase in interest expense related to the issuance of the Notes due 2019, partially offset by a decrease in interest rates on the Senior Secured Credit Facility and extinguishment of debt from the Cash Tender Offer.

Equity in Earnings of Non-Consolidated Entities. Equity in earnings of non-consolidated entities was $10,610,000 in the current period compared to $9,706,000 in the prior period. Equity in earnings related to our investment in National CineMedia, LLC were $13,266,000 and $9,876,000 for the twenty-six weeks ended October 1, 2009 and October 2, 2008, respectively.

Table of Contents

Investment Income. Investment income was $131,000 for the twenty-six weeks ended October 1, 2009 compared to $552,000 for the twenty-six weeks ended October 2, 2008.

Income Tax Provision. The income tax provision from continuing operations was $50,000 for the twenty-six weeks ended October 1, 2009 and $4,318,000 for the twenty-six weeks ended October 2, 2008. See Note 9—Income Taxes for our effective income tax rate reconciliation.

Earnings from Discontinued Operations, Net. On December 29, 2008, we sold our operations in Mexico, including 44 theatres and 493 screens. The results of operations of the Cinemex theatres have been classified as discontinued operations, and information presented for all periods reflects the new classification. See Note 2—Discontinued Operations for the components of the earnings from discontinued operations.

Net Earnings. Net earnings were $636,000 and $11,662,000 for the twenty-six weeks ended October 1, 2009 and October 2, 2008, respectively. Net earnings were negatively impacted by an expense of $11,276,000 related to the Cash Tender Offer during the twenty-six weeks ended October 1, 2009.

LIQUIDITY AND CAPITAL RESOURCES

Our consolidated revenues are primarily collected in cash, principally through box office admissions and theatre concessions sales. We have an operating "float" which partially finances our operations and which generally permits us to maintain a smaller amount of working capital capacity. This float exists because admissions revenues are received in cash, while exhibition costs (primarily film rentals) are ordinarily paid to distributors from 20 to 45 days following receipt of box office admissions revenues. Film distributors generally release the films which they anticipate will be the most successful during the summer and holiday seasons. Consequently, we typically generate higher revenues during such periods.

Cash Flows provided by Operating Activities

Cash flows provided by operating activities, as reflected in the Consolidated Statements of Cash Flows, were $76,474,000 and $77,493,000 during the twenty-six weeks ended October 1, 2009 and October 2, 2008, respectively. Cash flows during the twenty-six weeks ended October 1, 2009 include consent fee payments of $7,399,000 related to the Cash Tender Offer, which reduced our cash flows from operating activities. We had working capital surplus as of October 1, 2009 and April 2, 2009 of $121,361,000 and $259,308,000, respectively. Working capital includes $105,456,000 and $121,628,000 of deferred revenues as of October 1, 2009 and April 2, 2009, respectively. We have the ability to borrow against our credit facility to meet obligations as they come due (subject to limitations on the incurrence of indebtedness in our various debt instruments) and could incur indebtedness of $187,104,000 on our Credit Facility to meet these obligations as of October 1, 2009.

Cash Flows used in Investing Activities

Cash flows used in investing activities, as reflected in the consolidated statements of cash flows, were $(32,544,000) and $(62,448,000), during the twenty-six weeks ended October 1, 2009 and October 2, 2008, respectively. Cash outflows from investing activities include capital expenditures of $29,781,000 and $60,501,000 during the twenty-six weeks ended October 1, 2009 and October 2, 2008, respectively. We expect that our gross capital expenditures cash outflows will be approximately $100,000,000 to $110,000,000 for fiscal 2010.

We have received an additional $2,898,000 of purchase price related to the tax payments and refunds and a working capital calculation and post closing adjustments during the twenty-six weeks ended October 1, 2009, which are included in our gain on disposition from the sale of Cinemex.

Table of Contents

During the twenty-six weeks ended October 1, 2009, we made partnership investments in non-consolidated entities accounted for under the equity method of approximately $5,963,000.

We fund the costs of constructing new theatres using existing cash balances, cash generated from operations 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.

Cash Flows used in Financing Activities

Cash flows used in financing activities, as reflected in the consolidated statement of cash flows, were $(186,199,000) and $(32,926,000) during the twenty-six weeks ended October 1, 2009 and October 2, 2008, respectively.

During the twenty-six weeks ended October 1, 2009 and October 2, 2008, we made dividend payments of $315,351,000 and $18,420,000 to our stockholder, Holdings and Holdings made dividend payments to its stockholder Parent totaling $300,723,000 in fiscal 2010, which was treated as a reduction of additional paid-in capital. Parent made payments to purchase term loans and reduced the principal balance of its Parent Term Loan Facility from $466,936,000 to $193,290,000 with a portion of the dividend proceeds.

Proceeds from the issuance of the Notes due 2019 were $585,492,000 and deferred financing costs paid related to the issuance of the Notes due 2019 were $15,941,000 during the twenty-six weeks ended October 1, 2009.

During the twenty-six weeks ended October 1, 2009, we made principal payments of $250,000,000 in connection with the Cash Tender Offer and additional redemption and repaid $185,000,000 of borrowings under our revolving credit facility.

Issuance of Senior Notes due 2019

On June 9, 2009, we issued $600,000,000 aggregate principal amount of the Notes due 2019, which mature on June 1, 2019, pursuant to an indenture, dated as of June 9, 2009, among ourselves, the Guarantors named therein and U.S. Bank National Association, as trustee (the "Indenture"). The Indenture provides that the Notes due 2019 are general unsecured senior obligations of ours and are fully and unconditionally guaranteed on a joint and several senior unsecured basis by all of our existing and future domestic restricted subsidiaries that guarantee our other indebtedness.

We will pay interest on the Notes at 8.75% per annum, semi-annually in arrears on June 1 and December 1, commencing on December 1, 2009.

We may redeem some or all of the Notes due 2019 at any time on or after June 1, 2014, at the redemption prices set forth in the Indenture. We may redeem the Notes on or after June 1, 2017 at a price equal to 100% of the principal amount of the Notes due 2019 plus accrued and unpaid interest to the redemption date. In addition, we may redeem up to 35% of the aggregate principal amount of the Notes due 2019 using net proceeds from certain equity offerings completed prior to June 1, 2012.

The Indenture contains covenants that limit our (and our restricted subsidiaries') ability to, among other things: (i) incur additional indebtedness, including additional senior indebtedness; (ii) pay dividends on or make other distributions in respect of our capital stock or prepay subordinated obligations; (iii) purchase or redeem capital stock; (iv) enter into certain transactions with our affiliates; (v) incur liens on property or assets that are securing indebtedness; and (vi) merge or consolidate with other companies or transfer all or substantially all of our assets. These covenants are subject to a

Table of Contents

number of important limitations and exceptions. The Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes due 2019 to be due and payable immediately.

Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended April 2, 2009 for certain information about our Senior Secured Credit Facility, our 8% Senior Subordinated Notes due 2014 (the "Notes due 2014"), and 11% Senior Subordinated Notes due 2016 (the "Notes due 2016") and for certain information about Holdings' Discount Notes due 2014 and Parent's Term Loan Facility.

Our Senior Secured Credit Facility is with a syndicate of banks and other financial institutions and provides financing of up to $850,000,000, consisting of a $650,000,000 term loan facility maturing on January 26, 2013 and a $200,000,000 revolving credit facility maturing on January 26, 2012. The revolving credit facility includes borrowing capacity available for letters of credit and for swingline borrowings on same-day notice. As of October 1, 2009, we had no borrowings under the revolving credit facility and $625,625,000 was outstanding under the term loan facility at an interest rate of 1.75%.

Borrowings under the Senior Secured Credit Facility bear interest at a rate equal to an applicable margin plus, at our option, either a base rate or LIBOR. On March 13, 2007, we amended the Senior Secured Credit Facility to, among other things, lower the interest rates related to our term loan, reduce our unused commitment fee and amend the change of control definition so that an initial public offering and related transactions would not constitute a change of control. The current applicable margin for borrowings under the revolving credit facility is 0.50% with respect to base rate borrowings and 1.50% with respect to LIBOR borrowings, and the current applicable margin for borrowings under the term loan facility is 0.50% with respect to base rate borrowings and 1.50% with respect to LIBOR borrowings. The applicable margin for such borrowings may be reduced, subject to AMC Entertainment attaining certain leverage ratios. In addition to paying interest on outstanding principal under the Senior Secured Credit Facility, AMC Entertainment is required to pay a commitment fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder at a rate equal to 0.25%. It will also pay customary letter of credit fees. AMC Entertainment may voluntarily repay outstanding loans under the Senior Secured Credit Facility at any time without premium or penalty, other than customary "breakage" costs with respect to LIBOR loans. AMC Entertainment is required to repay $1,625,000 of the term loan quarterly, beginning March 30, 2006 through September 30, 2012, with any remaining balance due on January 26, 2013.

The indentures relating to our notes (Notes due 2014, Notes due 2016 and Notes due 2019) and the Parent Term Loan Facility allow us to incur specified permitted indebtedness (as defined therein) without restriction. The indentures and the Parent Term Loan Facility also allow us to incur any amount of additional debt, including borrowings under the revolving portion of AMCE's Senior Secured Credit Facility, as long as we can satisfy the applicable coverage ratio of each indenture, after giving effect to the event on a pro forma basis. Under the indentures and the Parent Term Loan Facility, we could borrow approximately $1,593,200,000 (assuming an interest rate of 8.25% per annum on the additional indebtedness) in addition to specified permitted indebtedness. If we cannot satisfy the applicable coverage ratios, generally we can incur no more than $100,000,000 of new "permitted indebtedness" under the terms of the indentures relating to our notes and the Parent Term Loan Facility. In addition, the indenture relating to our Notes due 2019 limits our ability to incur liens, which limits our ability to secure any new indebtedness, including new borrowings under our Senior Secured Credit Facility.

Table of Contents

The indentures relating to the above-described notes also contain covenants limiting dividends, purchases or redemptions of stock, transactions with affiliates, and mergers and sales of assets, and require us to make an offer to purchase the notes upon the occurrence of a change in control, as defined in the indentures. Upon a change of control (as defined in the indentures), we would be required to make an offer to repurchase all of the outstanding Notes due 2019, Notes due 2016, Notes due 2014, and the Discount Notes due 2014, at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase.

As of October 1, 2009, we were in compliance with all financial covenants relating to the Senior Secured Credit Facility, the Notes due 2016, the Notes due 2014, and the Notes due 2019.

We believe that cash generated from operations and existing cash and equivalents will be sufficient to fund operations and planned capital expenditures, software licensing and development for at least the next twelve months and enable us to maintain compliance with covenants related to the Senior Secured Credit Facility and the notes. We are considering various options with respect to the utilization of cash and equivalents on hand in excess of our anticipated operating needs. Such options might include, but are not limited to, acquisitions of theatres or theatre companies, repayment of corporate borrowings of AMCE, Holdings and Parent and payment of dividends.

Investment in NCM

We hold an investment in 18.53% of NCM accounted for following the equity method. The fair market value of the common membership units is approximately $310,360,000 as of October 1, 2009. Because we have little tax basis in these units and because the sale of all these units would require us to report taxable income of $409,375,000 including distributions received from NCM that were previously deferred, we expect that any sales of these units would be made ratably over a period of time to most efficiently manage any related tax liability. We have available net operating loss carryforwards which could reduce any related tax liability.

Commitments and Contingencies

We have commitments and contingencies that were summarized in a table in our Form 10-K for the year ended April 2, 2009. The only material change in our commitments since April 2, 2009 has been as a result of the issuance of the Notes due 2019, the Cash Tender Offer and repayment of amounts borrowed under the revolving credit facility.

Presented below on a pro forma basis to give effect to the financing arrangements described above are minimum annual cash payments required under existing capital and financing lease obligations, maturities of corporate borrowings, future minimum rental payments under existing operating leases,

Table of Contents

FF&E and leasehold purchase provisions, ADA related betterments and pension funding that have initial or remaining non-cancelable terms in excess of one year as of April 2, 2009:

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

2010	$	9,075	$	6,500	$	124,959	$	393,452	$	19,645	$	6,396	$	560,027
2011		9,225		6,500		124,828		393,321		12,754		1,937		548,565
2012		8,023		6,500		124,696		379,991		—		437		519,647
2013		7,055		609,375		122,513		367,166		—		—		1,106,109
2014		6,706		300,000		110,250		345,761		—		—		762,717
Thereafter		68,628		925,000		341,167		2,298,514		—		—		3,633,309

Total	$	108,712	$	1,853,875	$	948,413	$	4,178,205	$	32,399	$	8,770	$	7,130,374

(1): Represents cash requirements for the payment of principal on corporate borrowings. Total amount does not equal carrying amount due to unamortized discounts or premiums on issuance.
(2): Interest expense on the term loan and revolver was estimated at 2.021% based upon the interest rates in effect as of April 2, 2009.
(3): Includes committed capital expenditures including the estimated cost of ADA related betterments. Does not include planned, but non-committed capital expenditures.
(4): Historically we fund our pension plan such that the plan is 90% funded. The plan has been frozen effective December 31, 2006. The funding requirement has been estimated based upon our expected funding amount. Also included are estimated payments due under a partial withdrawal liability for a union sponsored plan. The retiree health plan is not funded.

As discussed in Note 10—Income Taxes in our Form 10-K for the year ended April 2, 2009, we adopted the accounting for uncertainty in income tax guidance provided in Accounting Standards Codification 740, Income Taxes. At April 2, 2009, we had a liability for unrecognized benefits for $28,300,000. There are currently unrecognized tax benefits which we anticipate will be resolved in the next 12 months; however, we are unable at this time to estimate what the impact on our unrecognized tax benefits will be. Any amounts related to these items are not included in the table above.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 14—New Accounting Pronouncements to these condensed consolidated financial statements for further information regarding recently issued accounting standards.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to various market risks including interest rate risk and foreign currency exchange rate risk.

Market risk on variable-rate financial instruments. We maintain an $850,000,000 Senior Secured Credit Facility, comprised of a $200,000,000 revolving credit facility and a $650,000,000 term loan facility, which permits borrowings at a rate equal to an applicable margin plus, at our option, either a base rate or LIBOR. 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. We had no borrowings on our revolving credit facility as of October 1, 2009 and had $625,625,000 outstanding under the term loan facility on

Table of Contents

October 1, 2009. A 100 basis point change in market interest rates would have increased or decreased interest expense on the Senior Secured Credit Facility by $3,391,000 during the twenty-six weeks ended October 1, 2009.

Market risk on fixed-rate financial instruments. Included in long-term debt are $325,000,000 of our Notes due 2016, $300,000,000 of our Notes due 2014, and $600,000,000 of our Notes due 2019. Increases in market interest rates would generally cause a decrease in the fair value of the Notes due 2016; Notes due 2014, and Notes due 2019 and a decrease in market interest rates would generally cause an increase in fair value of the Notes due 2016, Notes due 2014, and Notes due 2019.

Foreign currency exchange rates. We currently operate theatres in Canada, France and the United Kingdom. As a result of these operations, we have assets, liabilities, revenues and expenses denominated in foreign currencies. The strengthening of the U.S. dollar against the respective currencies causes a decrease in the carrying values of assets, liabilities, revenues and expenses denominated in such foreign currencies and the weakening of the U.S. dollar against the respective currencies causes an increase in the carrying values of these items. The increases and decreases in assets, liabilities, revenues and expenses are included in accumulated other comprehensive income. Changes in foreign currency exchange rates also impact the comparability of earnings in these countries on a year-to-year basis. As the U.S. dollar strengthens, comparative translated earnings decrease, and as the U.S. dollar weakens, comparative translated earnings from foreign operations increase. A 10% fluctuation in the value of the U.S. dollar against all foreign currencies of countries where we currently operate theatres would either increase or decrease earnings before income taxes and accumulated other comprehensive income (loss) by approximately $423,000 and $8,327,000, respectively, as of October 1, 2009.

Item 4T. Controls and Procedures.

(a): Evaluation of disclosure controls and procedures.

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 fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Reference is made to Part I. Item 3. Legal Proceedings in our Annual Report on Form 10-K for the fiscal year ended April 2, 2009 for information on certain litigation to which we are a party.

On May 14, 2009, Harout Jarchafjian filed a lawsuit alleging that the Company willfully violated FACTA and seeking statutory damages, but without alleging any actual injury (Jarchafian v. American Multi-Cinema, Inc. (C.D. Cal. Case No. CV09-03434). The Jarchafjian case has been deemed related to the Bateman case and is stayed pending a Ninth Circuit decision in the Bateman case. The Company believes that the plaintiffs' allegations, particularly those asserting the Company's willfulness, are without merit.

On June 8, 2009, the Justice Department moved for reconsideration on the line-of-sight matters and was denied by the Ninth Circuit Court of Appeals. The case reverts to the trial court this spring.

We are a party to various other legal proceedings in the ordinary course of business, none of which is expected to have a material adverse effect on us.

Item 1A. Risk Factors

Reference is made to Part I Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended April 2, 2009.

We depend on motion picture production and performance.

Our ability to operate successfully depends upon the availability, diversity and appeal of motion pictures, our ability to license motion pictures and the performance of such motion pictures in our markets. We mostly license first-run motion pictures, the success of which has increasingly depended on the marketing efforts of the major studios. Poor performance of, or any disruption in the production of (including by reason of a strike) these motion pictures, or a reduction in the marketing efforts of the major studios, could hurt our business and results of operations. In addition, a change in the type and breadth of movies offered by studios may adversely affect the demographic base of moviegoers.

The master contract between film producers and the Screen Actors Guild ("SAG") expired at the beginning of July 2008. A new 2 year contract was reached on June 9, 2009, which will expire on June 20, 2011.

Item 4. Submission of Matters to a Vote of Security Holders

On August 27, 2009, the Requisite Stockholder Majority of AMC Entertainment Holdings, Inc. unanimously approved capital spending of up to $8,700,000 to deploy one hundred fourteen 3D projection systems ahead of a broader digital rollout by Digital Cinema Implementation Partners, LLC., ("DCIP"), and for DCIP general and administrative expenses.

Table of Contents

Item 6. Exhibits.

EXHIBIT INDEX

EXHIBIT NUMBER			DESCRIPTION

	2.1		Agreement and Plan of Merger, dated June 20, 2005, by and among Marquee Holdings Inc. and LCE Holdings, Inc. (incorporated by reference from Exhibit 2.1 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on June 24, 2005).
	2.2		Agreement and Plan of Merger, dated as of July 22, 2004 by and among Marquee Holdings Inc., Marquee Inc. and AMCE (incorporated by reference from Exhibit 2.1 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on July 23, 2004).
	3.1		Restated and Amended Certificate of Incorporation of AMC Entertainment Inc. (as amended on December 2, 1997, September 18, 2001 and December 23, 2004) (incorporated by reference from Exhibit 3.1 to the AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 27, 2004).
	3.2		Amended and Restated By-laws of AMC Entertainment Inc. (incorporated by reference from Exhibit 3.2 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 27, 2004).
			Certificates of Incorporation or corresponding instruments, with amendments, of the following additional registrants:
	3.3.1		Loews Citywalk Theatre Corporation (incorporated by reference from Exhibit 3.3.1 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.3.2		LCE Mexican Holdings, Inc. (incorporated by reference from Exhibit 3.3.9 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.3.3		Loews Cineplex U.S. Callco, LLC (incorporated by reference from Exhibit 3.3.17 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.3.4		Loews Theatre Management Corp. (incorporated by reference from Exhibit 3.3.22 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.3.5		AMC Card Processing Services, Inc. (incorporated by reference from Exhibit 3.3.93 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.3.6		AMC Entertainment International, Inc. (incorporated by reference from Exhibit 3.3.94 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.3.7		American Multi-Cinema, Inc. (incorporated by reference from Exhibit 3.3.10 to AMCE's Form 10-Q (File No. 1-8747) filed on February 8, 2008).
	3.3.8		Club Cinema of Mazza, Inc. (incorporated by reference from Exhibit 3.3.97 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.3.9		Premium Theater of Framingham, Inc. (incorporated by reference from Exhibit 3.3.100 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.4		By-laws of the following Additional Registrants: (incorporated by reference from Exhibit 3.4 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006):
			Loews Citywalk Theatre Corporation
			Loews Theatre Management Corp.

Table of Contents

EXHIBIT NUMBER			DESCRIPTION

	3.5		By-laws of LCE Mexican Holdings, Inc. (incorporated by reference from Exhibit 3.5 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.6		Limited Liability Company Agreement of Loews Cineplex U.S. Callco, LLC (incorporated by reference from Exhibit 3.7 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.7		By-laws of AMC Card Processing Services, Inc. (incorporated by reference from Exhibit 3.20 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.8		By-laws of AMC Entertainment International, Inc. (incorporated by reference from Exhibit 3.21 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.9		By-laws of American Multi-Cinema, Inc. (incorporated by reference from Exhibit 3.9 to AMCE's Form 10-Q (File No. 1-8747) filed on February 8, 2008).
	3.10		By-laws of Club Cinema of Mazza, Inc. (incorporated by reference from Exhibit 3.24 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	3.11		By-laws of Premium Theater of Framingham, Inc. (incorporated by reference from Exhibit 3.26 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006).
	4.1		Indenture, dated as of June 9, 2009, respecting AMCE's 8.75% Senior Notes due 2019, by and among AMCE, a Delaware corporation, the Guarantors party thereto from time to time and U.S. Bank National Association, as Trustee (incorporated by reference from Exhibit 4.1 to AMCE's Current Report on Form 8-K (File No. 001-08747) filed on June 9, 2009).
	4.2		Registration Rights Agreement, dated as of June 9, 2009, respecting AMCE's 8.75% Senior Notes due 2019, by and among AMCE, the Guarantors party thereto from time to time, Credit Suisse Securities (USA) LLC, for itself and on behalf of the other Initial Purchasers, and J.P. Morgan Securities Inc., as Market Maker (incorporated by reference from Exhibit 4.2 to AMCE's Current Report on Form 8-K (File No. 001-08747) filed on June 9, 2009).
	4.3		Fourth Supplemental Indenture, dated as of June 9, 2009, respecting AMC Entertainment Inc.'s 8⁵/8% Senior Notes due 2012, by and among AMC Entertainment Inc., the Guarantor's party thereto and HSBC Bank USA, National Association, as trustee (incorporated by reference from Exhibit 4.1 to AMCE's Current Report on Form 8-K (File No. 001-08747) filed on June 9, 2009).
	*31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 2002.
	*31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 2002.
	*32.1		Section 906 Certifications of Gerardo I. Lopez (Chief Executive Officer) and Craig R. Ramsey (Chief Financial Officer) furnished in accordance with Securities Act Release 33-8212.

*: Filed herewith

Table of Contents

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 INC.
Date: November 12, 2009		/s/ GERARDO I. LOPEZ Gerardo I. Lopez Chief Executive Officer, Director and President
Date: November 12, 2009		/s/ CRAIG R. RAMSEY Craig R. Ramsey Executive Vice President and Chief Financial Officer

Attached files

AMC ENTERTAINMENT INC Reports

Also read