NOTE 3—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 of interest on the equity value and repayment of shareholder loans. As a result of the acquisition, the Company assumed the 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, which was refinanced subsequent to the acquisition. The Company also assumed approximately SEK 13.5 million ($1.6 million) and approximately €1.0 million ($1.1 million) of interest rate swaps related to the indebtedness which were repaid following the acquisition. 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.

The acquisition is being treated as a purchase in accordance with Accounting Standards Codification Topic 805, Business Combinations (“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 valuation assessment. The Company finalized the appraisals for both tangible and intangible assets and liabilities during the three months ended March 31, 2018. The following is a summary of the final allocation of the purchase price:


(In millions)	March 28, 2017		Changes		March 31, 2018
Cash	$	70.5	$	0.9	$	71.4
Restricted cash		—		5.9		5.9
Receivables		25.0		(11.6)		13.4
Other current assets		14.0		9.6		23.6
Property (1)		89.8		43.4		133.2
Intangible assets (1) (2)		—		22.1		22.1
Goodwill (3)		872.1		(79.2)		792.9
Deferred tax asset		5.5		(4.6)		0.9
Other long-term assets (6)		41.0		34.2		75.2
Accounts payable		(30.3)		0.1		(30.2)
Accrued expenses and other liabilities		(26.5)		(9.6)		(36.1)
Deferred revenues and income		(43.5)		2.3		(41.2)
Term Loan Facility (SEK)		(144.4)		—		(144.4)
Term Loan Facility (EUR)		(169.5)		—		(169.5)
Capital lease and financing lease obligations (1)(4)		(29.2)		19.2		(10.0)
Deferred tax liability		(5.2)		(13.5)		(18.7)
Other long-term liabilities (5)		(14.4)		(19.2)		(33.6)
Total estimated purchase price	$	654.9	$	—	$	654.9

(1)

Amounts recorded for property include land, buildings, capital lease assets, leasehold improvements, furniture, fixtures and equipment. During the year ended March 31, 2018, the Company recorded measurement period adjustments primarily related to the valuation of property, intangible assets, equity method investments, financing lease obligations and related tax adjustments.

(2)

Additional information for intangible assets acquired on March 28, 2017 is presented below:


	Weighted Average		Gross
(In millions)	Amortization Period		Carrying Amount
Acquired intangible assets:
Amortizable intangible assets:
Favorable leases		7.0 years	$	3.5
Favorable subleases		4.0 years		1.1
Screen advertising agreement		5.0 years		6.6
Trade name agreement		4.0 years		0.4
Total, amortizable		5.5 years	$	11.6
Unamortized intangible assets:
Trade names			$	10.5

(3)

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

(4)

Including current portion of approximately $1.1 million.

(5)

Amounts recorded for other long-term liabilities include unfavorable leases of approximately $20.0 million with an amortization period of 9.3 years.

(6)

Includes equity method investments of $64.7 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.

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 Nordic enhances its position as the largest movie exhibition company in Europe and broadens and diversifies its European platform. The Company also expects to realize synergy and cost savings related to the acquisition because of purchasing and procurement economies of scale.

During the three and nine months ended September 30, 2018, the Company incurred acquisition-related and transition costs for Nordic of approximately $1.4 million and $4.1 million, respectively, which were included in general and administrative expense: merger, acquisition and transaction costs in the Consolidated Statements of Operations. The revenues for Nordic during the three and nine months ended September 30, 2018 were $85.1 million and $264.9 million, respectively. Nordic net earnings during the three and nine months ended September 30, 2018 were $7.7 million and $22.2 million, respectively.

Pro Forma Results of Operations (Unaudited)

The following selected comparative unaudited pro forma results of operations information for the nine months ended September 30, 2017 assumes that the Nordic acquisition occurred at the beginning of 2017 and reflects the full results of operations for the periods 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 Nordic to reflect the fair value adjustments to property and equipment and financing obligations. The pro forma financial information presented includes the effects of adjustments related to fair 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 Cinemas, Inc. (“Carmike”) and AMC historical revenues and expenses for theatres in markets that were divested as required by the final judgement with the Department of Justice (“DOJ”) in connection with the acquisition of Carmike. Merger, acquisition and transaction costs directly related to the acquisitions have not been removed.


	Actual Nine Months Ended		Pro Forma Nine Months Ended
(In millions)	September 30, 2018		September 30, 2017
Revenues	$	4,047.5	$	3,739.2
Operating income (loss)	$	177.7	$	38.4
Net earnings (loss)	$	(60.5)	$	(209.0)
Earnings (loss) per share:
Basic	$	(0.48)	$	(1.63)
Diluted	$	(0.48)	$	(1.63)