NOTE 2 – ACQUISITIONS

Odeon and UCI Cinemas Holdings Limited.

On November 30, 2016, the Company completed the acquisition of Odeon and UCI Cinemas Holdings Limited. (“Odeon”) for £510,423,000 ($637,073,000) comprised of cash of £384,847,000 ($480,338,000) and 4,536,466 shares of the Company’s Class A common stock with a fair value of £125,576,000 ($156,735,000) 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. Odeon operates 244 theatres and 2,243 screens in four major 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 this Annual Report on Form 10-K, 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 thousands)	Total

Cash	$	41,605
Receivables		26,159
Other current assets		58,120
Property (1)		755,910
Intangible assets (2)		112,111
Goodwill (3)		898,627
Deferred tax asset		18,704
Other long-term assets		29,562
Accounts payable		(78,916)
Accrued expenses and other liabilities		(118,202)
Deferred revenues and income		(20,415)
9% Senior Secured Note GBP due 2018		(382,864)
4.93% Senior Secured Note EUR due 2018		(213,714)
Capital lease and financing lease obligations (5)		(365,264)
Deferred tax liability		(21,298)
Other long-term liabilities (4)		(103,052)
Total estimated purchase price	$	637,073

(1)

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

(2)

Amounts recorded for intangible assets include favorable leases, management agreements and a trade name. See Note 4 - Goodwill and Intangible Assets for additional information.

(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 $48,300,000.

(5)

Including current portion of $26,549,000.

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.

During the year ended December 31, 2016, the Company incurred acquisition-related costs for Odeon of approximately $20,892,000, which were included in general and administrative expense: merger, acquisition and transaction costs in the Consolidated Statements of Operations.

Carmike Cinemas, Inc.

On December 21, 2016, the Company completed the acquisition of Carmike Cinemas, Inc. (“Carmike”) for $858,240,000 comprised of cash of $584,291,000 and 8,189,808 shares of the Company’s Class A common stock with a fair value of $273,949,000 (based on a closing share price of $33.45 per share on December 20, 2016). The Company also assumed debt of $230,000,000 aggregate principal amount of 6.00% Senior Secured Notes due June 15, 2023 (the “Senior Secured Notes due 2023”). Carmike operates 271 theatres and 2,923 screens located in 41 states.


(In thousands)	Total

Cash	$	86,493
Receivables		12,268
Other current assets		14,248
Property (1)		719,642
Intangible assets (2)		25,876
Goodwill (3)		624,803
Other long-term assets		19,423
Accounts payable		(36,946)
Accrued expenses and other liabilities		(53,030)
Deferred revenues and income		(19,944)
Deferred tax liability		(19,535)
6% Senior Secured Notes due 2023		(242,075)
Capital and financing lease obligations (5)		(221,956)
Other long-term liabilities (4)		(51,027)
Total estimated purchase price	$	858,240

(1)

Amounts recorded for property includes land, buildings, capital lease assets, leasehold improvements, furniture, fixtures and equipment. Amounts include $17,238,000 classified as available for sale in other current assets in the Company’s Consolidated Balance Sheets.

(2)

Amounts recorded for intangible assets include favorable lease and trade name. See Note 4 - Goodwill and Intangible Assets for additional information.

(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 $50,379,000.

(5)

Including current portion of $30,365,000.

During the year ended December 31, 2016, the Company incurred acquisition-related costs for Carmike of approximately $25,350,000, which were included in general and administrative expense: merger, acquisition and transaction costs in the Consolidated Statements of Operations.

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; establish firewalls to ensure the Company does not obtain National Cinemedia, LLC’s (“NCM”), 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 extended 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; (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.

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. Pursuant to the agreement, The Company will receive approximately 18,400,000 NCM common units related to annual attendance at the Carmike theatres. 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 Exhibitors Services Agreement (“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 will return approximately 2,850,000 NCM common units to NCM, 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 will return 1,800,000 additional NCM common units (valued at approximately $25,000,000) in exchange for a waiver of exclusivity by NCM as to the required transferred theatres for the term of the final judgment, which is expected to be expensed as General and administrative: Merger, acquisition and transaction costs when the common units are returned to NCM. As a result of the agreement, the Company will receive approximately 13,750,000 net additional NCM common units, valued at approximately $175,038,000 based on the market price of NCM, Inc. stock on March 8, 2017. Due to the structure of the transactions, the Company will no longer anticipate recognizing taxable gain upon the receipt of the new NCM common units. The Company has also agreed to reimburse NCM up to $1,000,000 for expenses related to the negotiation of this agreement.

Pro Forma Results of Operations (Unaudited)

The following selected comparative unaudited pro forma results of operation information for the years ended December 31, 2016 and December 31, 2015 assumes that the Odeon and Carmike acquisitions occurred at the beginning of 2015, and reflects the full results of operations for the years presented. The pro forma results have been prepared for comparative purposes only and do not purport to indicate the results of operations which would actually have occurred had the combination been in effect on the dates indicated, or which may occur in the future. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Carmike and Odeon to reflect the preliminary fair value adjustments to property and equipment and financing obligations. The pro forma financial information presented includes the effects of adjustments related to preliminary values assigned to long-lived assets, including depreciation charges from acquired property and equipment, interest expense and incremental shares issued from financing the acquisitions and the related income tax effects and the elimination of Carmike and AMC historical revenues and expenses for theatres in markets that must be divested as discussed above.


	Pro Forma Year Ended
	December 31,
(In thousands)	2016		2015
Revenues	$	4,914,920	$	4,837,057
Operating income	$	280,913	$	347,474
Net earnings (loss)	$	(14,587)	$	138,705
Income (loss) per share:
Basic	$	(0.13)	$	1.25
Diluted	$	(0.13)	$	1.25

Starplex Cinemas

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 operates 33 theatres with 346 screens in small and mid-size markets in 12 states, which further complements the Company’s U.S. markets segment. 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 was 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 was based on management’s judgment after evaluating several factors, including the valuation assessment. The Company finalized the appraisals for both tangible and intangible assets and liabilities during the fourth quarter of calendar 2016. The following is a summary of the allocation of the purchase price:


(In thousands)	December 31, 2015		Changes		December 31, 2016
Cash	$	2,119	$	400	$	2,519
Receivables		2,001		(140)		1,861
Other current assets		4,806		(177)		4,629
Property (1)		50,810		(8,702)		42,108
Intangible assets (2)		21,080		—		21,080
Goodwill (3)		116,891		13,260		130,151
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)		(714)		(11,324)
Other long-term liabilities (4)		(1,220)		(3,570)		(4,790)
Total purchase price	$	174,972	$	(281)	$	174,691

(1)

Amounts recorded for property includes 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 two unfavorable leases.

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.

During the years ended December 31, 2016 and December 31, 2015, the Company incurred acquisition-related costs for Starplex Cinemas of approximately $1,503,000 and $1,534,000, which were included in general and administrative expense: merger, acquisition and transaction costs in the Consolidated Statements of Operations. The Company’s operating results for the year ended December 31, 2015 were not materially impacted by this acquisition and, therefore, pro forma financial information has not been presented.

In connection with the acquisition of Starplex Cinemas, the Company classified two Starplex Cinemas theatres with 22 screens as held for sale during the year ended 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.