May 8, 2017 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

Quarter Ended

(In millions)

March 31, 2017

March 31, 2016

Digital equipment rental expense

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 March 31, 2017
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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” and “emerging growth 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 ☐

Emerging growth company ☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. ☐

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 April 24, 2017

Class A common stock
Class B common stock

55,077,777

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	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	61
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	63
	Signatures	65

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements. (Unaudited)

AMC ENTERTAINMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except share and per share data)


	Quarter Ended
	March 31, 2017		March 31, 2016
	(unaudited)
Revenues
Admissions	$	817.3	$	482.6
Food and beverage		397.9		244.1
Other theatre		68.2		39.3
Total revenues		1,283.4		766.0
Operating costs and expenses
Film exhibition costs		420.7		262.3
Food and beverage costs		60.6		34.0
Operating expense		363.9		202.3
Rent		182.6		124.6
General and administrative:
Merger, acquisition and transaction costs		40.4		4.6
Other		34.5		18.5
Depreciation and amortization		125.3		60.4
Operating costs and expenses		1,228.0		706.7
Operating income		55.4		59.3
Other expense (income):
Other income		(2.7)		—
Interest expense:
Corporate borrowings		51.1		24.9
Capital and financing lease obligations		10.8		2.2
Equity in (earnings) loss of non-consolidated entities		2.3		(4.2)
Investment (income) expense		(5.3)		(10.0)
Total other expense		56.2		12.9
Earnings (loss) before income taxes		(0.8)		46.4
Income tax provision (benefit)		(9.2)		18.1
Net earnings	$	8.4	$	28.3
Earnings per share:
Basic	$	0.07	$	0.29
Diluted	$	0.07	$	0.29
Average shares outstanding:
Basic (in thousands)		121,358		98,200
Diluted (in thousands)		121,401		98,207
Dividends declared per basic and diluted common share	$	0.20	$	0.20

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	Quarter Ended
	March 31, 2017		March 31, 2016
	(unaudited)
Net earnings	$	8.4	$	28.3
Unrealized foreign currency translation adjustment, net of tax		(2.2)		(0.1)
Pension and other benefit adjustments:
Amortization of net gain reclassified into general and administrative: other, net of tax		0.1		—
Marketable securities:
Unrealized net holding gain arising during the period, net of tax		0.2		0.3
Realized net gain reclassified into investment income, net of tax		—		(1.7)
Equity method investees' cash flow hedge:
Unrealized net holding loss arising during the period, net of tax		—		(0.5)
Realized net loss reclassified into equity in earnings of non-consolidated entities, net of tax		—		0.1
Other comprehensive loss		(1.9)		(1.9)
Total comprehensive income	$	6.5	$	26.4

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)


	March 31, 2017		December 31, 2016
	(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	313.1	$	207.1
Receivables, net		144.8		213.6
Assets held for sale		221.4		70.4
Other current assets		211.7		192.5
Total current assets		891.0		683.6
Property, net		3,162.2		3,035.9
Intangible assets, net		362.6		365.1
Goodwill		4,823.7		3,933.0
Deferred tax asset		105.4		90.4
Other long-term assets		595.1		533.8
Total assets	$	9,940.0	$	8,641.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	510.4	$	501.8
Accrued expenses and other liabilities		330.7		329.0
Deferred revenues and income		294.5		277.2
Current maturities of corporate borrowings and capital and financing lease obligations		103.2		81.2
Total current liabilities		1,238.8		1,189.2
Corporate borrowings		4,180.0		3,745.8
Capital and financing lease obligations		613.1		609.3
Exhibitor services agreement		553.3		359.3
Deferred tax liability		26.6		21.0
Other long-term liabilities		726.5		706.5
Total liabilities		7,338.3		6,631.1
Commitments and contingencies
Class A common stock (temporary equity) ($.01 par value, 140,014 shares issued and 103,245 shares outstanding as of March 31, 2017 and December 31, 2016 )		1.1		1.1
Stockholders’ equity:
Class A common stock ($.01 par value, 524,173,073 shares authorized; 54,974,532 shares issued and outstanding as of March 31, 2017; 34,236,561 shares issued and outstanding as of December 31, 2016)		0.6		0.3
Class B common stock ($.01 par value, 75,826,927 shares authorized; 75,826,927 shares issued and outstanding as of March 31, 2017 and December 31, 2016)		0.8		0.8
Additional paid-in capital		2,237.8		1,627.3
Treasury stock (36,769 shares as of March 31, 2017 and December 31, 2016, at cost)		(0.7)		(0.7)
Accumulated other comprehensive income (loss)		(4.4)		(2.5)
Accumulated earnings		366.5		384.4
Total stockholders’ equity		2,600.6		2,009.6
Total liabilities and stockholders’ equity	$	9,940.0	$	8,641.8

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	Quarter Ended
	March 31, 2017		March 31, 2016
	(unaudited)
Cash flows from operating activities:
Net earnings	$	8.4	$	28.3
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		125.3		60.4
Loss on NCM charged to merger, acquisition and transaction costs		22.6		—
Loss on extinguishment of debt		0.5		—
Deferred income taxes		(8.8)		16.2
Amortization of net premium on corporate borrowings		(0.3)		0.1
Amortization of deferred charges to interest expense		2.4		—
Theatre and other closure expense		0.9		1.5
Non-cash portion of stock-based compensation		0.1		1.1
Gain on dispositions		(0.2)		(3.0)
Repayment of Nordic interest rate swaps		(2.7)		—
Equity in earnings and losses from non-consolidated entities, net of distributions		21.2		6.2
Landlord contributions		25.0		20.3
Deferred rent		(10.2)		(7.1)
Net periodic benefit cost (credit)		0.1		0.2
Change in assets and liabilities, excluding acquisitions:
Receivables		97.8		44.0
Other assets		(10.7)		(1.7)
Accounts payable		(69.9)		(81.5)
Accrued expenses and other liabilities		(35.9)		(63.2)
Other, net		0.4		1.1
Net cash provided by operating activities		166.0		22.9
Cash flows from investing activities:
Capital expenditures		(161.3)		(57.7)
Acquisition of Nordic Cinemas Group, net of cash acquired		(584.4)		—
Acquisition of Carmike Cinemas, Inc., net of cash acquired		0.1		—
Acquisition of Starplex Cinemas, net of cash acquired		—		0.4
Proceeds from disposition of long-term assets		4.0		5.4
Investments in non-consolidated entities, net		(0.3)		—
Other, net		(1.6)		0.3
Net cash used in investing activities		(743.5)		(51.6)
Cash flows from financing activities:
Proceeds from issuance of Senior Subordinated Sterling Notes due 2024		327.8		—
Proceeds from issuance of Senior Subordinated Notes due 2027		475.0		—
Payment of Nordic SEK Term Loan		(144.4)		—
Payment of Nordic EUR Term Loan		(169.5)		—
Net proceeds from equity offering		617.5		—
Borrowings under (repayments) Revolving Credit Facility		—		(50.0)
Principal payment of Bridge Loan due 2017		(350.0)		—
Principal payments under Term Loan		(2.2)		(2.2)
Principal payments under capital and financing lease obligations		(19.7)		(2.1)
Cash used to pay for deferred financing costs		(27.5)		(0.5)
Cash used to pay dividends		(26.2)		(19.8)
Net cash provided by (used in) financing activities		680.8		(74.6)
Effect of exchange rate changes on cash and equivalents		2.7		—
Net increase (decrease) in cash and equivalents		106.0		(103.3)
Cash and equivalents at beginning of period		207.1		211.2
Cash and equivalents at end of period	$	313.1	$	107.9
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (including amounts capitalized of $0.1 million and $0.0 million)	$	39.0	$	22.5
Income taxes paid (refunded), net	$	1.0	$	0.8
Schedule of non-cash operating and investing activities:
Receivable from sale of RealD Inc. shares (See Note 3 - Investments)	$	—	$	13.5
Investment in NCM (See Note 3-Investments)	$	235.2	$	—
See Note 2-Acquisitions for non-cash activities related to acquisitions

See Notes to Consolidated Financial Statements.

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AMC ENTERTAINMENT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

(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 located in the United States and Europe. Holdings is an indirect subsidiary of Dalian Wanda Group Co., Ltd. (“Wanda”), a Chinese private conglomerate.

As of March 31, 2017, Wanda owned approximately 57.93% of Holdings’ outstanding common stock and 80.51% 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) Fair value of acquired assets and liabilities, 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 year ended December 31, 2016. The accompanying consolidated balance sheet as of December 31, 2016, 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 quarter ended March 31, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017. The Company manages its business under two reportable segments for its theatrical exhibition operations, U.S. markets and International markets.

Presentation: In the Consolidated Balance Sheets, assets held for sale within current assets have been presented separately from other current assets in the current year presentation with conforming reclassifications made for the prior period presentation.

NOTE 2—ACQUISITIONS

Nordic Cinema Group Holding AB

On March 28, 2017, the Company completed the acquisition of Nordic Cinema Group Holding AB (“Nordic”) for cash. The purchase price for Nordic was approximately SEK 5,756 million ($654.9 million), which includes payment

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of interest on the equity value and repayment of shareholder loans. In addition, the Company repaid indebtedness of Nordic of approximately SEK 1,269 million ($144.4 million) and indebtedness of approximately €156 million ($169.5 million) as of March 28, 2017. The Company also repaid approximately SEK 13.5 million ($1.6 million) and approximately €1.0 million ($1.1 million) of interest rate swaps related to the indebtedness. All amounts have been converted into US Dollar amounts assuming an SEK/USD exchange rate of 0.11378 and an EUR/USD exchange rate of 1.0865, which were the exchange rates on March 27, 2017. As of March 31, 2017, Nordic operates 71 theatres, 467 screens, and approximately 67,000 seats in nearly 50 large and medium-sized cities in the Nordic and Baltic nations, and holds a substantial minority investment in another 51 associated theatres with 216 screens, to which Nordic provides a variety of shared services. Nordic is the largest theatre operator in Scandinavia, and the Nordic and Baltic Regions of Europe. Nordic operates in seven countries in the northern region of Europe: Sweden, Finland, Estonia, Latvia, Lithuania, Norway, and Denmark.

The acquisition is being treated as a purchase in accordance with 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 a preliminary valuation assessment. Because the values assigned to assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Quarterly Report on Form 10-Q, amounts may be adjusted during the measurement period of up to twelve months from the date of acquisition as further information becomes available. Any changes in the fair values of assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. The allocation of purchase price is preliminary and subject to changes as an appraisal of tangible and intangible assets and liabilities including working capital are finalized, purchase price adjustments are completed and additional information regarding the tax bases of assets and liabilities at the acquisition date becomes available. The following is a summary of a preliminary allocation of the purchase price:


(In millions)	Total
Cash	$	70.5
Receivables		25.0
Other current assets		14.0
Property (1)		89.8
Intangible assets (1)		—
Goodwill (2)		872.1
Deferred tax asset		5.5
Other long-term assets		41.0
Accounts payable		(30.3)
Accrued expenses and other liabilities		(26.5)
Deferred revenues and income		(43.5)
Term Loan Facility (SEK)		(144.4)
Term Loan Facility (EUR)		(169.5)
Capital lease and financing lease obligations (1)(3)		(29.2)
Deferred tax liability		(5.2)
Other long-term liabilities		(14.4)
Total estimated purchase price	$	654.9

(1)

The Company has not yet determined fair values of property, intangibles or capital and financing lease obligations acquired, therefore the carrying value is the preliminary purchase price allocation.

(2)

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

(3)

Including current portion of approximately $4.2 million.

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.

Pro forma financial information is not presented because it would be impracticable due to the short period of time between acquisition date and issuance of this Quarterly Report on Form 10-Q. In addition, as Nordic was acquired

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on March 28, 2017, the revenues and operating results for the 4 day period included in the quarter ended March 31, 2017 were not material.

During the quarter ended March 31, 2017, the Company incurred acquisition-related costs for Nordic of approximately $7.6 million, which were included in general and administrative expense: merger, acquisition and transaction costs in the Consolidated Statements of Operations.

Odeon and UCI Cinemas Holdings Limited.

On November 30, 2016, the Company completed the acquisition of Odeon and UCI Cinemas Holdings Limited. (“Odeon”) for approximately £510.4 million ($637.1 million) comprised of cash of approximately £384.8 million ($480.3 million) and 4,536,466 shares of the Company’s Class A common stock with a fair value of approximately £125.6 million ($156.7 million) based on a closing share price of $34.55 per share on November 29, 2016. The amounts set forth above are based on a GBP/USD exchange rate of approximately 1.25 on November 30, 2016. As of November 30, 2016, Odeon operated 244 theatres and 2,243 screens in four major European markets: United Kingdom, Spain, Italy, and Germany; and three smaller markets: Austria, Portugal and Ireland.

The acquisition is being treated as a purchase in accordance with 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 a preliminary valuation assessment. Because the values assigned to assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of the Annual Report on Form 10-K filed March 10, 2017, amounts may be adjusted during the measurement period of up to twelve months from the date of acquisition as further information becomes available. Any changes in the fair values of assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. The allocation of purchase price is preliminary and subject to changes as an appraisal of tangible and intangible assets and liabilities including working capital are finalized, purchase price adjustments are completed and additional information regarding the tax bases of assets and liabilities at the acquisition date becomes available. The following is a summary of a preliminary allocation of the purchase price:


(In millions)	November 30, 2016		Changes		March 31, 2017
Cash	$	41.6	$	—	$	41.6
Receivables		26.2		—		26.2
Other current assets		58.1		—		58.1
Property (1)		755.9		(17.8)		738.1
Intangible assets (2)		112.1		—		112.1
Goodwill (3)		898.6		18.2		916.8
Deferred tax asset		18.7		—		18.7
Other long-term assets		29.6		—		29.6
Accounts payable		(78.9)		—		(78.9)
Accrued expenses and other liabilities		(118.2)		—		(118.2)
Deferred revenues and income		(20.4)		—		(20.4)
9% Senior Secured Note GBP due 2018		(382.9)		—		(382.9)
4.93% Senior Secured Note EUR due 2018		(213.7)		—		(213.7)
Capital lease and financing lease obligations (5)		(365.3)		(0.4)		(365.7)
Deferred tax liability		(21.3)		—		(21.3)
Other long-term liabilities (4)		(103.0)		—		(103.0)
Total estimated purchase price	$	637.1	$	—	$	637.1

(1)

Amounts recorded for property include land, buildings, capital lease assets, leasehold improvements, furniture, fixtures and equipment. Amounts include approximately $7.6 million classified as held for sale in the

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Company’s Consolidated Balance Sheets. During the quarter ended March 31, 2017, the Company recorded measurement period adjustments primarily related to the preliminary valuation of property and financing lease obligations.

(2)

Amounts recorded for intangible assets include favorable leases, management agreements and a trade name.

(3)

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

(4)

Amounts recorded for other long-term liabilities include unfavorable leases of approximately $48.3 million.

(5)

Including current portion of approximately $26.3 million.

The preliminary 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 that the Company is still reviewing.

The purchase price paid by the Company in the acquisition resulted in recognition of goodwill because it exceeded the estimated fair value of the assets acquired and liabilities assumed. The Company paid a price in excess of estimated fair value of the assets acquired and liabilities assumed because the acquisition of Odeon allows considerable opportunity in the European markets where it operates to leverage theatre renovations, including power recliners enhanced food and beverage offerings and premium large format experiences, among others, to drive future growth and value. Odeon also provides the Company with a strong and scalable platform to pursue future international growth opportunities. The Company also expects to realize synergy and cost savings related to the acquisition because of purchasing and procurement economies of scale.

During the quarter ended March 31, 2017, the Company incurred acquisition-related costs for Odeon of approximately $3.7 million, which were included in general and administrative expense: merger, acquisition and transaction costs in the Consolidated Statements of Operations. The revenues and net earnings for the International markets segment for the year-ended December 31, 2016 were $118.8 million and $15.6 million, respectively, which primarily consisted of the Odeon operations.

Carmike Cinemas, Inc.

On December 21, 2016, the Company completed the acquisition of Carmike Cinemas, Inc. (“Carmike”) for approximately $858.2 million comprised of cash of approximately $584.3 million and 8,189,808 shares of the Company’s Class A common stock with a fair value of approximately $273.9 million (based on a closing share price of $33.45 per share on December 20, 2016). The Company also assumed debt of $230.0 million aggregate principal amount of 6.00% Senior Secured Notes due June 15, 2023 (the “Senior Secured Notes due 2023”). As of December 21, 2016, Carmike operated 271 theatres and 2,923 screens located in 41 states.

The acquisition is being treated as a purchase in accordance with 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 a preliminary valuation assessment. Because the values assigned to assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of the Annual Report on Form 10-K filed March 10, 2017, amounts may be adjusted during the measurement period of up to twelve months from the date of acquisition as further information becomes available. Any changes in the fair values of assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. The allocation of purchase price is preliminary and subject to changes as an appraisal of tangible and intangible assets and liabilities including working capital are finalized, purchase price adjustments are completed and additional information regarding the tax bases of assets and liabilities at the acquisition date becomes available. The following is a summary of a preliminary allocation of the purchase price:

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(In millions)	December 21, 2016		Changes		March 31, 2017
Cash	$	86.5	$	0.1	$	86.6
Receivables		12.3		—		12.3
Other current assets		14.2		—		14.2
Property (1)		719.6		(0.4)		719.2
Intangible assets (2)		25.9		—		25.9
Goodwill (3)		624.8		0.3		625.1
Other long-term assets		19.4		—		19.4
Accounts payable		(37.0)		—		(37.0)
Accrued expenses and other liabilities		(53.0)		—		(53.0)
Deferred revenues and income		(19.9)		—		(19.9)
Deferred tax liability		(19.5)		—		(19.5)
6% Senior Secured Notes due 2023		(242.1)		—		(242.1)
Capital and financing lease obligations (5)		(222.0)		—		(222.0)
Other long-term liabilities (4)		(51.0)		—		(51.0)
Total estimated purchase price	$	858.2	$	—	$	858.2

(1)

Amounts recorded for property includes land, buildings, capital lease assets, leasehold improvements, furniture, fixtures and equipment. During the quarter ended March 31, 2017, the Company sold one theatre and reduced the carrying value to fair value. Amounts include approximately $14.1 million classified as held for sale in the Company’s Consolidated Balance Sheets.

(2)

Amounts recorded for intangible assets include favorable lease and trade name.

(3)

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

(4)

Amounts recorded for other long-term liabilities include unfavorable leases of approximately $50.4 million.

(5)

Including current portion of approximately $30.4 million.

The purchase price paid by the Company in the acquisition resulted in recognition of goodwill because it exceeded the estimated fair value of the assets acquired and liabilities assumed. The Company paid a price in excess of estimated fair value of the assets acquired and liabilities assumed because the acquisition of Carmike increased and diversified its domestic footprint and made the Company the largest theatre operator in the United States in terms of revenues and offers a unique opportunity to introduce guest-focused strategic initiatives to millions of Carmike’s movie-goers. The Company also expects to realize significant synergy and cost savings related to the acquisition because 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.

During the quarter ended March 31, 2017, the Company incurred acquisition-related costs for Carmike of approximately $5.9 million, which were included in general and administrative expense: merger, acquisition and transaction costs in the Consolidated Statements of Operations. Carmike was acquired on December 21, 2016 and the Company immediately began integrating the operations. The revenues for the 11 day period included in the year-end December 31, 2016 were not material.

Department of Justice Final Judgment - In connection with the acquisition of Carmike the Company entered into a Final Judgment with the United States Department of Justice (“DOJ”) on March 7, 2017, pursuant to which the Company agreed to take certain actions to enable it to complete its acquisition of Carmike, including divest 17 movie theatres (and certain related assets) in the 15 local markets where the Company and Carmike are direct competitors to one or more acquirers acceptable to the DOJ (as of March 31, 2017, theatre assets held for sale related to divestitures

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were $33.4 million); establish firewalls to ensure the Company does not obtain National CineMedia, LLC’s (“NCM” or “NCM LLC”), Screenvision’s or other exhibitors competitively sensitive information; relinquish seats on NCM’s board of directors and all other NCM governance rights; and transfer 24 theatres comprising 384 screens (which represent less than 2% of NCM’s total network) to the Screenvision network. This includes five Carmike theatres that implemented the Screenvision network prior to completion of the Carmike acquisition, an AMC theatre required to extend its existing term with the Screenvision network, and an AMC theatre that was also included in the divestitures. The settlement agreement also requires the Company to divest the majority of its equity interests in National CineMedia, Inc. (“NCMI”) and NCM LLC so that by June 20, 2019, it owns no more than 4.99% of NCM’s outstanding equity interests per the following schedule: (i) on or before December 20, 2017, AMC must own no more than 15% of NCM’s outstanding equity interests (as of March 31, 2017, the Company classified a portion of its investment in NCM as assets held for sale of $188.0 million); (ii) on or before December 20, 2018, AMC must own no more than 7.5% of NCM’s outstanding equity interests; and (iii) on or before June 20, 2019, AMC must own no more than 4.99% of NCM’s outstanding equity interests. In addition, in accordance with the terms of the settlement, effective December 20, 2016, Craig R. Ramsey, executive vice president and Chief Financial Officer of the Company, resigned his position as a member of the Board of Directors of National CineMedia, Inc.

Goodwill activity is presented below:


(In millions)	Total
Balance as of December 31, 2016	$	3,933.0
Acquisition of Nordic		872.1
Adjustments to acquisition of Odeon Cinemas (see table above)		18.2
Adjustments to acquisition of Carmike Cinemas (see table above)		0.3
Effect of foreign currency exchange		0.1
Balance as of March 31, 2017	$	4,823.7

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 March 31, 2017, include a 24.7% interest in NCM, a 29% interest in Digital Cinema Implementation Partners, LLC (“DCIP”), a 14.6% 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, a 16.8% interest in SV Holdco, owner of Screenvision, a 50% interest in Digital Cinema Media (“DCM”), 50% interest in five U.S. motion picture theatres and one IMAX® screen and approximately 50% interest in 51 theatres in Europe acquired in the Nordic acquisition. Indebtedness held by equity method investees is non-recourse to the Company.

RealD Inc. Common Stock. During the quarter ended March, 31, 2016, the Company sold all of its 1,222,780 shares in RealD Inc. and recognized a gain on sale of $3.0 million.

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:


	Quarter Ended
(In millions)	March 31, 2017		March 31, 2016
Revenues	$	117.4	$	116.8
Operating costs and expenses		101.1		105.8
Net earnings	$	16.3	$	11.0

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


	Quarter Ended
(In millions)	March 31, 2017		March 31, 2016
National CineMedia, LLC	$	(6.0)	$	(2.1)
Digital Cinema Implementation Partners, LLC		7.4		5.8
Other		(3.7)		0.5
The Company’s recorded equity in earnings (loss)	$	(2.3)	$	4.2

NCM Transactions. As of March 31, 2017, the Company owns 37,992,630 common membership units, or a 24.7% interest, in NCM LLC and 200,000 common shares of NCM, Inc. The estimated fair market value of the common units in NCM LLC and the common stock investment in NCM, Inc. was approximately $482.4, million based on the publically quoted price per share of NCM, Inc. on March 31, 2017 of $12.63 per share.

The Company recorded the following related party transactions with NCM:


	As of		As of
(In millions)	March 31, 2017		December 31, 2016
Due from NCM for on-screen advertising revenue	$	2.7	$	2.6
Due to NCM for Exhibitor Services Agreement		1.3		1.4
Promissory note payable to NCM		4.2		4.2


	Quarter Ended
(In millions)	March 31, 2017		March 31, 2016
Net NCM screen advertising revenues	$	11.6	$	10.5
NCM beverage advertising expense		1.9		1.5

The Company recorded the following changes in the carrying amount of its investment in NCM and equity in losses of NCM during the quarter ended March 31, 2017:


					Accumulated						G&A: Mergers
			Exhibitor		Other						and
	Investment		Services		Comprehensive		Cash		Equity in		Acquisitions		Advertising
(In millions)	in NCM(1)		Agreement(2)		(Income)		Received		(Earnings)/Loss		Expense		(Revenue)
Ending balance at December 31, 2016	$	323.9	$	(359.2)	$	(4.0)
Receipt of common units (5)		235.2		(235.2)		—
Receipt of excess cash distributions		(12.3)		—		—	$	12.3	$	—	$	—	$	—
Surrender of common units for transferred theatres		(36.4)		35.7		—		—		0.7		—		—
Surrender of common units for make whole agreement		(23.1)		—		—		—		0.5		22.6		—
Impairment - held for sale		(1.9)		—		—		—		1.9		—		—
Amortization of ESA		—		5.1		—		—		—		—		(5.1)
Equity in earnings and loss from amortization of basis difference (3)(4)		(2.9)		—		—		—		2.9		—		—
For the period ended or balance as of March 31, 2017	$	482.5	$	(553.6)	$	(4.0)	$	12.3	$	6.0	$	22.6	$	(5.1)

(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:

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	Common
	Membership Units
	Tranche 1	Tranche 2 (a)
Beginning balance at December 31, 2012	17,323,782	—
Additional units received in the quarter ended June 30, 2013	—	1,728,988
Additional units received in the quarter ended June 30, 2014	—	141,731
Additional units received in the quarter ended June 30, 2015	—	469,163
Additional units received in the quarter ended December 31, 2015	—	4,399,324
Units exchanged for NCM, Inc. shares in December 2015	—	(200,000)
Additional units received in the quarter ended March 31, 2017	—	18,787,315
Surrender of units for transferred theatres in March 2017	—	(2,850,453)
Surrender of units for exclusivity waiver in March 2017	—	(1,807,220)
Ending balance at March 31, 2017	17,323,782	20,668,848

(a)

The additional units received in June 2013, June 2014, June 2015, December 2015, and March 2017 were measured at fair value (Level 1) using NCM, Inc.’s stock price of $15.22, $15.08, $14.52, $15.75 and $12.52, 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.

(5)

The Company recorded an impairment charge of $1.9 million to reduce the carrying value of these units to Level 1 fair value as of March 31, 2017.

The Company recorded $5.5 million and $7.2 million in investment income, net of related amortization for the NCM tax receivable agreement intangible asset during the quarters ended March 31, 2017, and March 31, 2016, respectively.

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NCM Agreement

On March 9, 2017, the Company reached an agreement with NCM to implement the requirements of the final judgment entered in connection with the DOJ approval of the Carmike transaction, as discussed in Note 2 – Acquisitions. Pursuant to the agreement, the Company received 18,425,423 NCM common units in March 2017 related to annual attendance at the Carmike theatres and 361,892 NCM common units related to the 2016 common unit adjustment. Because the Carmike theatres were subject to a pre-existing agreement with a third party and will not receive advertising services from NCM, the Company will be obligated to make quarterly payments to NCM reflecting the estimated value of the advertising services at the Carmike theatres as if NCM had provided such services. The quarterly payments will continue until the earlier of (i) the date the theatres are transferred to the NCM network or (ii) expiration of the ESA with NCM. All calculations will be made pursuant to the terms of the existing ESA and Common Unit Adjustment Agreement with NCM. With regard to the existing AMC theatres on the NCM network that are required under the final judgment to be transferred to another advertising provider, the Company returned 2,850,453 NCM common units to NCM in March 2017, calculated under the Common Unit Adjustment Agreement as if such theatres had been disposed of on March 3, 2017. The Company is not obligated to make quarterly payments with respect to the transferred theatres. In addition, the Company returned 1,807,220 additional NCM common units (valued at $22.6 million) in exchange for a waiver of exclusivity by NCM as to the required transferred theatres for the term of the final judgment, which was classified as General and administrative: Merger, acquisition and transaction costs when the common units were returned to NCM during the quarter ended March 31, 2017. The Company recorded a loss of $1.2 million on the return of NCM common units as per the Common Unit Adjustment Agreement and exclusivity waiver for the difference between the average carrying value of the units and the fair value on the date of return. As a result of the agreement, the Company received 14,129,642 net additional NCM common units, valued at $176.9 million based on the market price of NCM, Inc. stock on March 16, 2017 of $12.52. Due to the structure of the transactions, the Company will no longer anticipate recognizing taxable gain upon receipt of new NCM common units. The Company has also agreed to reimburse NCM up to $1.0 million for expenses related to the negotiation of this agreement. The Company has classified 14,887,453 NCM common units (approximately $188.0 million) as held for sale as of March 31, 2017, which it must sell before December 20, 2017 to reach the 15% ownership level discussed above in the Department of Justice Final Judgment. The Company recorded an impairment charge of $1.9 million to reduce the carrying value of these units to Level 1 fair value as of March 31, 2017.

Digital Cinema Media. The Company acquired its investment in DCM on November 30, 2016 in connection with the acquisition of Odeon. The Company receives advertising services from DCM for its Odeon theatres in International markets through a joint venture in which it has a 50% ownership interest. As of March 31, 2017, the Company recorded revenue of $5.4 million and a receivable as of March 31, 2017 of $1.3 million for cinema advertising.

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 related party transactions with DCIP:


	As of		As of
(In millions)	March 31, 2017		December 31, 2016
Due from DCIP for equipment and warranty purchases	$	2.3	$	2.1
Deferred rent liability for digital projectors		8.3		8.4

Open Road Films Transactions. During the quarter ended March 31, 2017, the Company recorded additional equity losses in Open Road of $4.7 million related to certain advances to and on behalf of Open Road. The losses would be reversed upon reimbursement by Open Road and expiration of guarantees. The Company’s share of cumulative losses from Open Road Films in excess of the Company’s capital commitment was $40.4 million as of March 31, 2017 and $43.7 million as of December 31, 2016. The Company committed to fund additional amounts to Open Road on April 18, 2017 of $5.0 million.

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The Company recorded the following related party transactions with Open Road Films:


	As of		As of
(In millions)	March 31, 2017		December 31, 2016
Due from Open Road Films	$	2.8	$	4.8
Film rent payable to Open Road Films		1.3		0.1

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


	As of		As of
(In millions)	March 31, 2017		December 31, 2016
Due from AC JV	$	—	$	—
Due to AC JV for Fathom Events programming		1.4		0.6

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NOTE 4—CORPORATE BORROWINGS

A summary of the carrying value of corporate borrowings and capital and financing lease obligations is as follows:


(In millions)	March 31, 2017		December 31, 2016
Senior Secured Credit Facility-Term Loan due 2022 (3.66% as of March 31, 2017)	$	869.6	$	871.8
Senior Secured Credit Facility-Term Loan due 2023 (3.73% as of March 31, 2017)		500.0		500.0
Bridge Loan Agreement due 2017 (7.0% as of March 31, 2017)		—		350.0
5% Promissory Note payable to NCM due 2019		4.2		4.2
5.875% Senior Subordinated Notes due 2022		375.0		375.0
6.0% Senior Secured Notes due 2023		230.0		230.0
6.375% Senior Subordinated Notes due 2024 (£500 million par value)		626.8		308.4
5.75% Senior Subordinated Notes due 2025		600.0		600.0
5.875% Senior Subordinated Notes due 2026		595.0		595.0
6.125% Senior Subordinated Notes due 2027		475.0		—
Capital and financing lease obligations, 5.75% - 11.5%		701.1		675.4
Deferred charges		(108.1)		(82.9)
Premiums and (discounts)		27.7		9.4
		4,896.3		4,436.3
Less: current maturities		(103.2)		(81.2)
	$	4,793.1	$	4,355.1

Bridge Loan Agreement

On December 21, 2016, the Company entered into a bridge loan agreement with Citicorp North America, Inc., as administrative agent and the other lenders party thereto (the “Bridge Loan Agreement”). The Company borrowed $350.0 million of interim bridge loans (the “Interim Bridge Loans”) on December 21, 2016 under the Bridge Loan Agreement and recorded approximately $4.4 million in deferred financing costs. The proceeds of the Interim Bridge Loans were used to partially finance the acquisition of Carmike.

On February 13, 2017, the Company repaid the aggregate principal amount of Interim Bridge Loans of $350.0 million with a portion of the proceeds from its public offering of shares of Holdings Class A common stock, as discussed in Note 5 – Stockholders’ Equity, and recorded a loss of $0.4 million in Other income.

Notes Due 2027

On March 17, 2017, the Company issued $475.0 million aggregate principal amount of its 6.125% Senior Subordinated Notes due 2027 (the "Notes due 2027"). The Company recorded deferred financing costs of approximately $18.5 million related to the issuance of the Notes due 2027. The Notes due 2027 mature on May 15, 2027. The Company will pay interest on the Notes due 2027 at 6.125% per annum, semi-annually in arrears on May 15th and November 15th, commencing on November 15, 2017. The Company may redeem some or all of the Notes due 2027 at any time on or after May 15, 2022 at 103.063% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after May 15, 2025, 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 2027 using net proceeds from certain equity offerings completed on or prior to May 15, 2020 at a redemption price as set forth in the indenture governing the Notes due 2027. The Company may redeem some or all of the Notes due 2027 at any time prior to May 15, 2022 at a redemption price equal to 100% of their aggregate principal amount and accrued and unpaid interest to, but not including, the date of redemption, plus an applicable make-whole premium. The Company used the net proceeds from the Notes due 2027 private offering to pay a portion of the consideration for the acquisition of Nordic plus related refinancing of Nordic debt assumed in the acquisition.

The Notes due 2027 are general unsecured senior subordinated obligations of the Company and are fully and unconditionally guaranteed on a joint and several senior subordinated unsecured basis by all of its existing and future domestic restricted subsidiaries that guarantee its other indebtedness. Following the closing of the Nordic acquisition on March 28, 2017, neither Nordic or any of its subsidiaries guaranteed the Notes due 2027.

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The indenture governing the Notes due 2027 contains covenants limiting other indebtedness, dividends, purchases or redemptions of stock, transactions with affiliates, and mergers and sales of assets.

On March 17, 2017, in connection with the issuance of the Notes due 2027, the Company entered into a registration rights agreement. Subject to the terms of the registration rights agreement, the Company is required to (1) file one or more registration statements with the SEC not later than 270 days from the issuance date with respect to the registered offer to exchange the notes for new notes of the Company having terms identical in all material respects to the notes and (2) use its commercially reasonable efforts to cause the exchange offer registration statement to be declared effective under the Securities Act within 365 days of the issuance date. The Company filed its Form S-4 registration statement related to the registration rights agreement with the Securities and Exchange Commission on April 19, 2017.

Sterling Notes Due 2024

On March 17, 2017, the Company issued £250.0 million additional aggregate principal amount of its 6.375% Senior Subordinated Notes due 2024 (the "Sterling Notes due 2024") at 106% plus accrued interest from November 8, 2016 in a private offering. These additional Sterling Notes due 2024 were offered as additional notes under an indenture pursuant to which the Company had previously issued and has outstanding £250.0 million aggregate principal amount of its 6.375% Sterling Notes due 2024. The Company recorded deferred financing costs of approximately $12.4 million related to the issuance of the additional Sterling Notes due 2024. The Sterling Notes due 2024 mature on November 15, 2024. The Company will pay interest on the Sterling Notes due 2024 at 6.375% per annum, semi-annually in arrears