November 9, 2016 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 001‑33892

AMC ENTERTAINMENT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	26‑0303916 (I.R.S. Employer Identification No.)
One AMC Way 11500 Ash Street, Leawood, KS (Address of principal executive offices)	66211 (Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☒	Non‑accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐

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

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

Title of each class of common stock		Number of shares outstanding as of October 24, 2016
Class A common stock Class B common stock		21,613,532 75,826,927

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AMC ENTERTAINMENT HOLDINGS, INC.

INDEX

		Page Number
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Operations	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	55
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
	Signatures	61

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements. (Unaudited)

AMC ENTERTAINMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)


	Three Months Ended				Nine Months Ended
	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
	(unaudited)				(unaudited)
Revenues
Admissions	$	496,729	$	441,262	$	1,460,537	$	1,393,338
Food and beverage		248,889		216,764		736,587		667,804
Other theatre		34,153		30,814		112,626		101,901
Total revenues		779,771		688,840		2,309,750		2,163,043
Operating costs and expenses
Film exhibition costs		259,069		233,390		784,363		751,894
Food and beverage costs		33,949		31,080		102,014		95,395
Operating expense		211,554		195,505		613,893		588,177
Rent		121,904		115,861		369,307		348,804
General and administrative:
Merger, acquisition and transaction costs		4,961		751		15,113		2,590
Other		19,785		18,706		58,935		41,384
Depreciation and amortization		63,025		58,008		185,746		173,034
Operating costs and expenses		714,247		653,301		2,129,371		2,001,278
Operating income		65,524		35,539		180,379		161,765
Other expense (income):
Other expense (income)		79		—		(5)		9,273
Interest expense:
Corporate borrowings		24,679		22,682		74,434		73,478
Capital and financing lease obligations		2,099		2,286		6,441		6,990
Equity in earnings of non-consolidated entities		(12,030)		(10,850)		(28,143)		(21,536)
Investment expense (income)		176		163		(9,602)		(5,039)
Total other expense		15,003		14,281		43,125		63,166
Earnings before income taxes		50,521		21,258		137,254		98,599
Income tax provision		20,085		9,080		54,560		36,360
Net earnings	$	30,436	$	12,178	$	82,694	$	62,239
Earnings per share:
Basic	$	0.31	$	0.12	$	0.84	$	0.64
Diluted	$	0.31	$	0.12	$	0.84	$	0.63
Average shares outstanding:
Basic		98,194		97,978		98,196		97,959
Diluted		98,284		98,073		98,211		98,024
Dividends declared per basic and diluted common share	$	0.20	$	0.20	$	0.60	$	0.60

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Three Months Ended				Nine Months Ended
	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
	(unaudited)				(Unaudited)
Net earnings	$	30,436	$	12,178	$	82,694	$	62,239
Unrealized foreign currency translation adjustment, net of tax		160		700		766		981
Pension and other benefit adjustments:
Net loss arising during the period, net of tax		—		—		—		(45)
Prior service credit arising during the period, net of tax		—		—		—		746
Amortization of net (gain) loss reclassified into general and administrative: other, net of tax		5		7		13		(1,686)
Amortization of prior service credit reclassified into general and administrative: other, net of tax		—		—		—		(1,762)
Curtailment gain reclassified into general and administrative: other, net of tax		—		—		—		(7,239)
Settlement gain reclassified into general and administrative: other, net of tax		—		—		—		(175)
Marketable securities:
Unrealized net holding gain (loss) arising during the period, net of tax		144		(2,311)		557		(1,868)
Realized net (gain) loss reclassified into investment income, net of tax		(1)		(5)		(1,783)		(154)
Equity method investees' cash flow hedge:
Unrealized net holding gain arising during the period, net of tax		80		(465)		(562)		(847)
Realized net loss reclassified into equity in earnings of non-consolidated entities, net of tax		86		112		275		351
Other comprehensive income (loss)		474		(1,962)		(734)		(11,698)
Total comprehensive income	$	30,910	$	10,216	$	81,960	$	50,541

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	September 30, 2016		December 31, 2015
	(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	46,312	$	211,250
Receivables, net		57,741		105,509
Other current assets		91,574		97,608
Total current assets		195,627		414,367
Property, net		1,537,951		1,401,928
Intangible assets, net		231,179		237,376
Goodwill		2,410,713		2,406,691
Deferred tax asset		75,557		126,198
Other long-term assets		518,229		501,757
Total assets	$	4,969,256	$	5,088,317
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	261,447	$	313,025
Accrued expenses and other liabilities		151,573		158,664
Deferred revenues and income		162,737		221,679
Current maturities of corporate borrowings and capital and financing lease obligations		19,400		18,786
Total current liabilities		595,157		712,154
Corporate borrowings		1,843,339		1,902,598
Capital and financing lease obligations		86,289		93,273
Exhibitor services agreement		363,833		377,599
Other long-term liabilities		513,857		462,626
Total liabilities		3,402,475		3,548,250
Commitments and contingencies
Class A common stock (temporary equity) ($.01 par value, 140,014 shares issued and 103,245 shares outstanding as of September 30, 2016; 167,211 shares issued and 130,442 shares outstanding as of December 31, 2015)		1,080		1,364
Stockholders’ equity:
Class A common stock ($.01 par value, 524,173,073 shares authorized; 21,510,287 shares issued and outstanding as of September 30, 2016; 21,445,090 shares issued and outstanding as of December 31, 2015)		215		214
Class B common stock ($.01 par value, 75,826,927 shares authorized; 75,826,927 shares issued and outstanding as of September 30, 2016 and December 31, 2015)		758		758
Additional paid-in capital		1,187,244		1,182,923
Treasury stock (36,769 shares as of September 30, 2016 and December 31, 2015, at cost)		(680)		(680)
Accumulated other comprehensive income		2,070		2,804
Accumulated earnings		376,094		352,684
Total stockholders’ equity		1,565,701		1,538,703
Total liabilities and stockholders’ equity	$	4,969,256	$	5,088,317

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Nine Months Ended
	September 30, 2016		September 30, 2015
	(unaudited)
Cash flows from operating activities:
Net earnings	$	82,694	$	62,239
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		185,746		173,034
Amortization of net premium on corporate borrowings		174		674
Deferred income taxes		45,636		17,671
Theatre and other closure expense		3,576		3,911
Loss (gain) on dispositions		(2,658)		281
Stock-based compensation		4,509		9,377
Equity in earnings and losses from non-consolidated entities, net of distributions		(13,689)		(2,561)
Landlord contributions		77,348		43,224
Deferred rent		(23,452)		(18,272)
Net periodic benefit credit		597		(18,089)
Change in assets and liabilities, excluding acquisitions:
Receivables		51,723		52,532
Other assets		303		205
Accounts payable		(116,950)		(69,844)
Accrued expenses and other liabilities		(87,227)		(42,277)
Other, net		3,004		(2,880)
Net cash provided by operating activities		211,334		209,225
Cash flows from investing activities:
Capital expenditures		(256,599)		(215,574)
Acquisition of Starplex Cinemas, net of cash acquired		681		—
Investments in non-consolidated entities, net		(10,480)		(958)
Proceeds from disposition of long-term assets		19,365		604
Other, net		(1,252)		(1,158)
Net cash used in investing activities		(248,285)		(217,086)
Cash flows from financing activities:
Proceeds from issuance of Senior Subordinated Notes due 2025		—		600,000
Payments under revolver credit facility, net of borrowings		(55,000)		—
Repurchase of Senior Subordinated Notes due 2020		—		(626,114)
Cash used to pay dividends		(59,081)		(59,012)
Deferred financing costs		(821)		(11,978)
Principal payments under capital and financing lease obligations		(6,370)		(5,811)
Principal payments under Term Loan		(6,605)		(5,813)
Principal amount of coupon payment under Senior Subordinated Notes due 2020		—		(3,357)
Net cash used in financing activities		(127,877)		(112,085)
Effect of exchange rate changes on cash and equivalents		(110)		(321)
Net decrease in cash and equivalents		(164,938)		(120,267)
Cash and equivalents at beginning of period		211,250		218,206
Cash and equivalents at end of period	$	46,312	$	97,939
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized of $142 and $122)	$	67,873	$	76,301
Income taxes paid (refunded), net		4,592		(1,028)
Schedule of non-cash operating and investing activities:
Investment in NCM (See Note 3-Investments)	$	—	$	6,812

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2016

(Unaudited)

NOTE 1—BASIS OF PRESENTATION

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

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

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

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

Principles of Consolidation: The accompanying unaudited consolidated financial statements include the accounts of Holdings and all subsidiaries, as discussed above, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2015. The accompanying consolidated balance sheet as of December 31, 2015, which was derived from audited financial statements, and the unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the Company’s financial position and results of operations. All significant intercompany balances and transactions have been eliminated in consolidation. There are no noncontrolling (minority) interests in the Company’s consolidated subsidiaries; consequently, all of its stockholders’ equity, net earnings and total comprehensive income for the periods presented are attributable to controlling interests. Due to the seasonal nature of the Company’s business, results for the nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the twelve months ending December 31, 2016. The Company manages its business under one reportable segment called Theatrical Exhibition.

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



	Three Months Ended				Nine Months Ended
(In thousands)	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Loss on redemption of 9.75% Senior Subordinated Notes due 2020	$	—	$	—	$	—	$	9,273
Other		79		—		(5)		—
Other expense (income)	$	79	$	—	$	(5)	$	9,273

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

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



(In thousands)	As Filed		Updated
Additional paid-in capital	$	1,183,218	$	1,182,923
Accumulated earnings		352,389		352,684

NOTE 2—ACQUISITION

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

The acquisition is being treated as a purchase in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. The allocation of purchase price is based on management’s judgment after evaluating several factors, including bid prices from potential buyers and a preliminary valuation assessment. The allocation of purchase price is preliminary and subject to changes as an appraisal of both tangible and intangible assets and liabilities is finalized, working capital and other purchase price adjustments are completed and additional information regarding the tax bases of assets and liabilities becomes available. The following is a summary of a preliminary allocation of the purchase price:

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(In thousands)	December 31, 2015		Changes		September 30, 2016
Cash	$	2,119	$	400	$	2,519
Receivables		2,001		(140)		1,861
Other current assets		4,806		(178)		4,628
Property (1)		50,810		1,329		52,139
Intangible assets (2)		21,080		400		21,480
Goodwill (3)		116,891		4,022		120,913
Other long-term assets		290		—		290
Accounts payable		(4,211)		—		(4,211)
Accrued expenses and other liabilities		(4,689)		(466)		(5,155)
Deferred revenues and income		(2,295)		(172)		(2,467)
Deferred tax liability		(10,610)		(5,476)		(16,086)
Other long-term liabilities (4)		(1,220)		—		(1,220)
Total estimated purchase price	$	174,972	$	(281)	$	174,691

(1)

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

(2)

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

(3)

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

(4)

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

The fair value measurement of tangible and intangible assets and liabilities were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows, appraisals, and market comparables.

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

Activity of goodwill is presented below:


(In thousands)	Total
Balance as of December 31, 2015	$	2,406,691
Adjustments to acquisition of Starplex Cinemas (see table above)		4,022
Balance as of September 30, 2016	$	2,410,713

NOTE 3—INVESTMENTS

Investments in non-consolidated affiliates and certain other investments accounted for under the equity method generally include all entities in which the Company or its subsidiaries have significant influence, but not more than 50% voting control, and are recorded in the Consolidated Balance Sheets in other long-term assets. Investments in non-consolidated affiliates as of September 30, 2016, include a 17.40% interest in National CineMedia, LLC (“NCM” or “NCM LLC”), a 29% interest in Digital Cinema Implementation Partners, LLC (“DCIP”), a 15.45% interest in Digital Cinema Distribution Coalition, LLC (“DCDC”), a 50% interest in Open Road Releasing, LLC, operator of Open Road Films, LLC (“Open Road Films”), a 32% interest in AC JV, LLC (“AC JV”), owner of Fathom Events, and a 50% interest in two U.S. motion picture theatres and one IMAX screen. Indebtedness held by equity method investees is non-recourse to the Company.

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

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Equity in Earnings (Losses) of Non‑Consolidated Entities

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


	Three Months Ended				Nine Months Ended
(In thousands)	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Revenues	$	161,774	$	154,838	$	438,775	$	433,831
Operating costs and expenses		110,924		99,850		321,447		341,178
Net earnings	$	50,850	$	54,988	$	117,328	$	92,653

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


	Three Months Ended				Nine Months Ended
(In thousands)	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
National CineMedia, LLC	$	3,350	$	4,431	$	6,202	$	3,360
Digital Cinema Implementation Partners, LLC		7,944		6,253		20,566		16,844
Open Road Releasing, LLC		—		—		—		(430)
AC JV, LLC		107		(243)		186		983
Other		629		409		1,189		779
The Company’s recorded equity in earnings	$	12,030	$	10,850	$	28,143	$	21,536

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

The Company recorded the following transactions with NCM:


	As of		As of
(In thousands)	September 30, 2016		December 31, 2015
Due from NCM for on-screen advertising revenue	$	1,585	$	2,406
Due to NCM for Exhibitor Services Agreement		763		1,226
Promissory note payable to NCM		5,555		5,555


	Three Months Ended				Nine Months Ended
(In thousands)	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Other theatre revenues:
Net NCM screen advertising revenues	$	10,441	$	8,756	$	31,123	$	26,727
Operating expense:
NCM beverage advertising expense		1,532		1,321		4,516		6,836

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


					Accumulated
			Exhibitor		Other
	Investment		Services		Comprehensive		Cash		Equity in		Advertising
(In thousands)	in NCM(1)		Agreement(2)		(Income)		Received		Earnings		(Revenue)
Ending balance at December 31, 2015	$	327,471	$	(377,599)	$	(4,014)
Receipt of excess cash distributions		(13,703)		—		—	$	13,703	$	—	$	—
Reclassify book value of NCM, Inc. shares		408		—		—		—		—		—
Amortization of deferred revenue		—		13,766		—		—		—		(13,766)
Equity in earnings and loss from amortization of basis difference (3)(4)		6,202		—		—		—		(6,202)		—
For the period ended or balance as of September 30, 2016	$	320,378	$	(363,833)	$	(4,014)	$	13,703	$	(6,202)	$	(13,766)

(1)

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


	Common
	Membership Units
	Tranche 1	Tranche 2 (a)
Beginning balance at December 31, 2012	17,323,782	—
Additional units received in June 30, 2013	—	1,728,988
Additional units received in June 30, 2014	—	141,731
Additional units received in June 30, 2015	—	469,163
Additional units received in December 31, 2015	—	4,399,324
Units exchanged for NCM, Inc. shares in December 2015	—	(200,000)
Ending balance at September 30, 2016	17,323,782	6,539,206

(a)

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

(2)

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

(3)

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

(4)

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

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

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

The Company recorded the following transactions with DCIP:


	As of		As of
(In thousands)	September 30, 2016		December 31, 2015

Due from DCIP for equipment and warranty purchases	$	1,943	$	1,460
Deferred rent liability for digital projectors		8,495		8,725

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	Three Months Ended				Nine Months Ended
(In thousands)	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Operating expense:
Digital equipment rental expense	$	1,375	$	1,350	$	3,839	$	4,026

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

The Company recorded the following transactions with Open Road Films:


	As of		As of
(In thousands)	September 30, 2016		December 31, 2015
Due from Open Road Films	$	4,394	$	2,472
Film rent payable to Open Road Films		1,313		1,061


	Three Months Ended				Nine Months Ended
(In thousands)	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Film exhibition costs:
Gross film exhibition cost on Open Road Films	$	1,400	$	660	$	7,100	$	4,100

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


	As of		As of
(In thousands)	September 30, 2016		December 31, 2015
Due from AC JV	$	42	$	109
Due to AC JV for Fathom Events programming		642		445

Three Months Ended

Nine Months Ended

(In thousands)

September 30, 2016

September 30, 2015

September 30, 2016

September 30, 2015

Film exhibition costs:

Gross exhibition cost on Fathom Events programming

2,058