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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

(Mark One)

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended April 3, 2003
OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
 to

Commission file number 1-8747

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AMC ENTERTAINMENT INC.

(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

43-1304369(I.R.S. Employer
Identification No.)920 Main
Kansas City, Missouri(Address of principal executive offices)

64105(Zip Code)


Registrant's telephone number, including area code:(816) 221-4000

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Securities
registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange
on which registeredCommon Stock, 662/3¢ par value

American Stock Exchange, Inc.


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Securities
registered pursuant to Section 12(g) of the Act: None.

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

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ý

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes ý    No o

The
approximate aggregate market value of the registrant's common stock held by non-affiliates as of September 26, 2002 based on the closing sale price on the American
Stock Exchange on September 26, 2002 was approximately $248,563,616.

Title of each class of common stock

Number of shares
Outstanding as of May 9, 2003Common Stock, 662/3¢ par value

33,253,461Class B Stock, 662/3¢ par value

3,051,597


DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Proxy Statement for use in connection with the 2003 Annual Meeting of Stockholders to be filed are incorporated by reference into Part III
of this report, to the extent set forth therein.

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AMC ENTERTAINMENT INC.        FORM 10-K        FOR THE FISCAL YEAR ENDED APRIL 3, 2003        INDEX

|         |  |                                                                                                |  | Page
|-------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|PART I  
|Item 1.  |  | Business                                                                                       |  | 4   
|Item 2.  |  | Properties                                                                                     |  | 13  
|Item 3.  |  | Legal Proceedings                                                                              |  | 13  
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                            |  | 15  
|PART II 
|Item 5.  |  | Market for Registrant's Common Equity and Related Stockholder Matters                          |  | 16  
|Item 6.  |  | Selected Financial Data                                                                        |  | 17  
|Item 7.  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations          |  | 19  
|Item 7A. |  | Quantitative and Qualitative Disclosures about Market Risk                                     |  | 35  
|Item 8.  |  | Financial Statements and Supplementary Data                                                    |  | 37  
|Item 9.  |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure           |  | 78  
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                             |  | 78  
|Item 11. |  | Executive Compensation                                                                         |  | 78  
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 78  
|Item 13. |  | Certain Relationships and Related Transactions                                                 |  | 78  
|Item 14. |  | Controls and Procedures                                                                        |  | 78  
|PART IV 
|Item 15. |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                |  | 79  
|         |  | Signatures                                                                                     |  | 80  
|         |  | Certifications                                                                                 |  | 81  

Forward Looking Statements

This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements, other than statements of historical facts, included in this report and located elsewhere in this Form 10-K regarding the prospects of our
industry and our prospects, plans, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "plan," "foresee," "believe" or "continue" or the negatives of these terms or variations of them or
similar terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been
correct. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-
looking statement. Important factors that could cause actual results to differ materially from our expectations include, among others: (i) our

2

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ability
to enter into various financing programs; (ii) the cost and availability of films and the performance of films licensed by us; (iii) competition; (iv) construction delays;
(v) the ability to open or close theatres and screens as currently planned; (vi) domestic and international political, social and economic conditions; (vii) demographic changes;
(viii) increases in the demand for real estate; (ix) changes in real estate, zoning and tax laws; (x) unforeseen changes in operating requirements; (xi) our ability to
identify suitable acquisition candidates and successfully integrate acquisitions into our operations and (xii) results of significant litigation. Readers are urged to consider these factors
carefully in evaluating the forward-looking statements.

All
subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.
The forward-looking statements included herein are made only as of the date of this Form 10-K, and we do not undertake any obligation to release publicly any revisions to such
forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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PART I

Item 1. Business.

(a)   General Development of Business

We are organized as a holding company. Our principal directly owned subsidiaries are American Multi-Cinema, Inc., AMC Entertainment
International, Inc. ("AMCEI") and National Cinema Network, Inc. ("NCN"). We conduct our North American theatrical exhibition business through AMC and its subsidiaries and AMCEI. We are
developing theatres outside the United States through AMCEI and its subsidiaries. We engage in advertising services through NCN.

Our
predecessor was founded in Kansas City, Missouri in 1920. We were incorporated under the laws of the state of Delaware on June 13, 1983 and maintain our principal executive
offices at 920 Main, Kansas City, Missouri 64105. Our telephone number at such address is (816) 221-4000.

On
March 15, 2002, we acquired the operations and related assets of Gulf States Theatres for a cash purchase price of approximately $46 million. The acquisition included
five theatres with 68 screens in the New Orleans, Louisiana area. Operating results of the acquired theatres are included in our Consolidated Statements of Operations from March 15, 2002.

On
March 29, 2002, we acquired GC Companies, Inc. ("GC Companies"), pursuant to a plan of reorganization of GC Companies which we sponsored, for a purchase price of
approximately $169 million (net of $6.5 million from the sale of GC Companies' portfolio of venture capital investments on the effective date of the plan of reorganization). The
acquisition included 66 theatres with 621 screens throughout the United States and a 50% interest in a joint venture that operates 17 theatres with 160 screens in
Argentina, Chile, Brazil and Uruguay. Operating results of the acquired theatres are included in our consolidated statements of operations from March 29, 2002.

Our
purchase price for GC Companies includes estimated cash payments of $70.7 million, the issuance of $72.9 million of our 91/2% senior subordinated notes
due 2011 with a fair value of $71.8 million and the issuance of $33.2 million of our common stock, or 2.4 million shares based on a fair value of $13.64 per share (the
closing price per share on the effective date of the plan of reorganization). We used (or will use) available cash for the cash payments under the plan of reorganization. See Note 2 to the
Consolidated Financial Statements under Part II Item 8. of this Annual Report on Form 10-K for additional information regarding these acquisitions and "Management's
Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources" for additional information on payments that we might make under the plan of
reorganization.

(b)   Financial Information about Segments

For information about our operating segments, see Note 14 to the Consolidated Financial Statements under Part II Item 8. of this Annual
Report on Form 10-K.

(c)   Narrative Description of Business

We are one of the world's leading theatrical exhibition companies. As of April 3, 2003, we operated 239 theatres with a total of 3,524 screens, with 93%,
or 3,280, of our screens in North America, and 7%, or 244, of our screens in China (Hong Kong), Japan, France, Portugal, Spain, Sweden and the United Kingdom. For the year ended April 3, 2003,
we had revenues of $1.8 billion, a net loss of $20.3 million and net cash provided by operating activities of $128.7 million.

Our
revenues are generated primarily from box office admissions and theatre concession sales, which represented approximately 67% to 68% and 26% to 27%, respectively, of our revenues for
each of the last three fiscal years. The balance of our revenues are generated from ancillary sources, including on-screen

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advertising,
rental of theatre auditoriums, fees and other revenues generated from the sale of gift certificates and theatre tickets and arcade games located in theatre lobbies.

Key
characteristics of our business that we believe differentiate us from and give us a competitive advantage over many other theatrical exhibition companies include our modern theatre
circuit, our highly productive theatres and our broad major market coverage with prime theatre locations.

Modern Theatre Circuit.We are an industry leader in the development and operation of megaplex
theatres, typically defined as having 14 or more screens and offering amenities to enhance the movie-going experience, such as stadium seating providing unobstructed viewing, digital sound and
enhanced seat design. We believe that the megaplex format provides the operator with enhanced revenue opportunities and better asset utilization while creating convenience for patrons by increasing
film choice and the number of film starting times. We believe that the introduction of the megaplex by us in 1995 has led to the current industry replacement cycle, which has accelerated the
obsolescence of older, smaller theatres by setting new standards for moviegoers. We continually upgrade the quality of our theatre circuit by adding new screens through new builds (including
expansions) and acquisitions and by disposing of older screens through closures and sales. From April 1995 through April 3, 2003, we added 104 theatres with 2,229 new screens, acquired
77 theatres with 738 screens and disposed of 174 theatres with 1,073 screens. As of April 3, 2003, approximately 70%, or 2,453, of our screens were located in megaplex theatres. As of
April 3, 2003, our average number of screens per theatre was 14.7, which we believe was the highest among the major North America theatre exhibitors, compared with 5.8 for all North America
theatrical exhibition companies, according to the National Association of Theatre Operators.

Highly Productive Theatres.Our theatres are generally the most productive in the markets where they
operate. As measured by AC Nielsen EDI, Inc. ("EDI"), we operated 26 of the top 50 theatres in the United States in terms of box office revenues for the 53 weeks ended April 3,
2003. Our next closest competitor operated seven. Our theatre circuit in North America also produces the highest box office revenues per screen that are approximately 30% higher than the industry
average, as measured by EDI.

Broad Major Market Coverage with Prime Theatre Locations.In addition to our asset quality and the
high levels of productivity of our theatres, our theatres are generally located in large, urban markets, giving us a breadth of market coverage that places us in most major markets in the United
States. We operate in 88% of the Top 25 and 72% of the Top 50 "Designated Market Areas", or "DMAs" (television market areas as defined by EDI). Our theatres are usually located near or within
developments that include retail stores, restaurants and other activities that complement the movie-going experience.

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The
following table provides detail with respect to the geographic location of our theatre circuit as of April 3, 2003:

Total
Screens

Total
TheatresNorth AmericaCalifornia

486

34Florida

423

30Texas

412

23Illinois

157

8Arizona

148

7Georgia

131

8Pennsylvania

129

12Ohio

107

8Missouri

103

7Virginia

99

7Michigan

80

6New Jersey

78

7Massachusetts

78

7Maryland

75

8New York

72

6Colorado

72

4Louisiana

68

5Washington

56

6Kansas

55

3Minnesota

51

5North Carolina

46

2Indiana

44

5Oklahoma

44

2South Carolina

28

3Nebraska

24

1Kentucky

20

1Wisconsin

18

1District of Columbia

16

2Total United States

3,120

218Canada

160

7Total North America

3,280

225InternationalSpain

86

4Japan

79

5Portugal

20

1Sweden

18

1United Kingdom.

16

1France

14

1China (Hong Kong)

11

1Total International

*244

*14Total Theatre Circuit

*3,524

*239


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The following table sets forth information concerning new builds (including expansions), acquisitions and dispositions and end of period theatres
and screens operated.

Changes in Our Theatres Operated

New Builds

Acquisitions

Dispositions

Total Theatres OperatedFiscal Year

Number of
Theatres

Number of
Screens

Number of
Theatres

Number of
Screens

Number of
Theatres

Number of
Screens

Number of
Theatres

Number of
Screens1996

7

150





13

61

226

1,7191997

17

314





15

76

228

1,9571998

24

608





23

123

229

2,4421999

17

351

3

29

16

87

233

2,7352000

20

450





42

279

211

2,9062001

6

115





37

250

180

2,7712002

8

146

5

68

12

86

181

2,8992003

5

95

*69

*641

16

111

*239

*3,524104

2,229

77

738

174

1,073


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Our Strategy

Our strategic plan has three principal elements.



Maximizing Operating Efficiencies.We believe the fundamentals of our business include maximizing
revenues and managing our costs. For example since fiscal 1999, among other things, we have implemented key initiatives in each of these areas, which have resulted in the following.



We
continue to evaluate opportunities for further revenue and cost savings in these and other areas.

Optimizing Our Theatre Portfolio.Asset quality is a function of our selective new build, acquisition
and theatre disposition strategies.

As
a recognized leader in the development and operation of megaplex theatres and based upon our financial resources, we believe that we will continue to have attractive new build
opportunities presented to us by real estate developers and others. We intend to selectively pursue new build opportunities where the characteristics of the location and the overall market meet our
strategic and financial return criteria. As of April 3, 2003, we had six theatres with 96 screens under construction. Since fiscal 1995, we have added 2,229 screens in high performing
state-of-the-art theatres.

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We
believe that a major factor that has further differentiated us from our competitors and has contributed to our overall theatre portfolio quality has been our proactive efforts to
close older, underperforming theatres. Since fiscal 1995, our last fiscal year before the first megaplex theatre opened, we have disposed of 1,073 screens. In order to maintain a modern, high quality
theatre circuit, we will continue to evaluate our theatre portfolio and, where appropriate, dispose of theatres through closures, lease terminations, lease buyouts, sales or subleases.

There
are over 600 theatrical exhibitors in North America and the top five exhibitors account for approximately 50% of the industry's screens. This statistic is up from 31% in 1999 and
evidence that the theatrical exhibition business in North America has been consolidating. We have played a key role in this consolidation process in 2002 by acquiring two domestic theatre operators
with a total of 689 screens.

Enhancing and Extending Our Business and Brands.We believe there are opportunities to increase our
core and ancillary revenues and build brand equity through enhancements of our business, new product offerings and strategic marketing. Examples of this include the following.



Film Licensing

We predominantly license "first-run" motion pictures from distributors owned by major film production companies and from independent distributors. We
license films on a film-by-film and theatre-by-theatre basis. We obtain these licenses based on several factors, including number of seats and screens
available for a particular picture, revenue potential and the location and condition of our theatres. We pay rental fees on a negotiated basis.

North
American film distributors typically establish geographic film licensing zones and generally allocate available film to one theatre within that zone. Film zones generally encompass
a radius of three to five miles in metropolitan and suburban markets, depending primarily upon population density. In film zones where we are the sole exhibitor, we obtain film licenses by selecting a
film from among those offered and negotiating directly with the distributor. In film zones where there is competition, a distributor generally will allocate its films among the exhibitors in the zone.
As of April 3, 2003, approximately 80% of our screens in the United States were located in non-competitive film zones.

Licenses
that we enter into typically state that rental fees are based on either firm terms established prior to the opening of the picture or on a mutually agreed settlement upon the
conclusion of the picture run. Under a firm terms formula, we pay the distributor a specified percentage of box office receipts, with the percentages declining over the term of the run. Firm term film
rental fees are generally the greater of (i) 70% of box office admissions, gradually declining to as low as 30% over a period of four to seven weeks versus (ii) a specified percentage
(i.e.90%) of the excess of box office receipts over a negotiated allowance for theatre expenses (commonly known as a 90-10 clause). The
settlement process allows for negotiation

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based
upon how a film actually performs. A firm term agreement could result in lower than anticipated film rent if the film outperforms expectations, especially in regards to length of run, and,
conversely, there is a downside risk when the film under performs.

There
are several distributors which provide a substantial portion of quality first-run motion pictures to the exhibition industry. These include Buena Vista Pictures
(Disney), Paramount Pictures, Universal Pictures, Warner Bros. Distribution, New Line Cinema, SONY Pictures Releasing, Miramax, MGM, Twentieth Century Fox and DreamWorks. Films licensed from these
distributors accounted for approximately 94% of our North American admissions revenues during fiscal 2003. Our revenues attributable to individual distributors may vary significantly from year to year
depending upon the commercial success of each distributor's motion pictures in any given year. In fiscal 2003, no single distributor accounted for more than 8% of the motion pictures that we licensed
or for more than 16% of our box office admissions.

During
the period from 1990 to 2002, the annual number of first-run motion pictures released by distributors in the United States ranged from a low of 370 in 1995 to a high
of 490 in 1998, according to the Motion Picture Association of America. During 2002, 449 first-run motion pictures were released by distributors in the United States.

Concessions

Concessions sales are our second largest source of revenue after box office admissions. Concessions items include popcorn, soft drinks, candy, hot dogs and other
products. Different varieties of candy and
soft drinks are offered at our theatres based on preferences in that particular geographic region. We have also implemented "combo-meals" for patrons which offer a pre-selected assortment
of concessions products and offer co-branded and private label products that are unique to us.

Our
strategy emphasizes prominent and appealing concessions counters designed for rapid service and efficiency. We design megaplex theatres to have more concessions capacity to make it
easier to serve larger numbers of customers. In addition, our megaplexes generally feature the "pass-through" concept, which enables the concessionist serving patrons to simply sell
concessions items instead of also preparing them. Strategic placement of large concessions stands within theatres heightens their visibility, aids in reducing the length of lines, allows flexibility
to introduce new concepts and improves traffic flow around the concessions stands.

We
negotiate prices for our concessions products and supplies directly with concessions vendors on a national or regional basis to obtain high volume discounts or bulk rates and
marketing incentives.

Theatre Management and Support

We use a centralized structure for policy development, strategic planning, asset management, marketing, human resources, finance, accounting and information
systems. These systems are managed at our corporate office located in Kansas City, Missouri. All United States film licensing activity occurs in Woodland Hills, California.

We
staff our theatres with personnel capable of making day-to-day operating decisions. A portion of management's compensation at each theatre is linked to the
operating results of each theatre. All theatre level personnel complete formal training programs to maximize both customer service and the efficiency of our operations. Theatre managers receive
market-based training within their first 18 months with us which focuses on operations administration, marketing and information systems interpretation.

Theatre
staffing varies depending on the size and configuration of the theatre and levels of attendance. For example, a typical ten-screen movie theatre may have four
managers with 50 associates while a megaplex theatre may have eight managers and 125 associates. We are committed to developing the strongest possible management teams and seek college graduates for
career management positions.

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Employees

As of April 3, 2003, we had approximately 1,300 full-time and 17,000 part-time employees. Approximately 2% of our
part-time employees were minors that were paid the minimum wage.

Fewer
than 1% of our employees, consisting primarily of motion picture projectionists, are represented by a union, the International Alliance of Theatrical Stagehand Employees and Motion
Picture Machine Operators (and affiliated local unions). We believe that our relationship with this union is satisfactory.

Theatrical Exhibition Industry and Competition

Motion picture theatres are the primary initial distribution channel for new motion picture releases and we believe that the theatrical success of a motion
picture is often the most important factor in establishing its value in the DVD/videocassette, cable television and other ancillary markets. We believe that the emergence of alternative motion picture
distribution channels has not adversely affected attendance at theatres and that these distribution channels do not provide an experience comparable to the out-of-home
entertainment experience offered by moviegoing. We believe that the public will continue to recognize the value of viewing a movie on a large screen with superior audio and visual quality, while
enjoying a variety of concessions and sharing the experience with a larger audience.

Moviegoing
has demonstrated steady growth, with North American box office revenues increasing by a 6% compound annual growth rate ("CAGR") over the last 30 years. Since the
introduction of the megaplex in 1995, these positive growth trends have become more pronounced, with box office revenues growing by an 8% CAGR from 1995 to 2002. In 2002, industry box office revenues
were $9.5 billion, an increase of 13% over the prior year, and attendance was 1.6 billion, an increase of 10% over the prior year and the highest attendance level in 43 years.

As
a result of the economic appeal of megaplex theatres and exhibitors' development of new megaplexes without a corresponding closure of older multiplexes, from 1995 to 1999 the
industry's indoor screen count grew by a CAGR of 8%, from 27,000 to 36,500 screens. However, attendance per
screen declined during this period by a CAGR of 4%. We believe that this decline reflects the industry's excess screen capacity, in which older multiplexes or less competitively positioned theatres
were effectively rendered obsolete by newer megaplexes, resulting in declining profitability.

In
2002, there were approximately 1,300 fewer screens than in 1999, as many of our competitors closed older multiplexes. As a result, from 1999 to 2002 the industry's screen count
decreased by a CAGR of 1% and attendance per screen increased during this period by a CAGR of 5%.

The
following table represents information about the exhibition industry obtained from the National Association of Theatre Owners.

Year

Box Office
Revenues
(In millions)

Attendance
(In millions)

Average
Ticket Price

Indoor
Screens2002

$
9,520

1,639

$
5.80

35,1702001


8,413

1,487


5.65

34,4902000


7,661

1,421


5.39

35,5971999


7,448

1,465


5.06

36,4481998


6,949

1,481


4.69

33,4181997


6,365

1,388


4.59

31,0501996


5,911

1,339


4.42

28,9051995


5,493

1,263


4.35

26,995


There
are over 600 companies competing in the North American theatrical exhibition industry, approximately 300 of which operate four or more screens. Industry
participants vary substantially in size,

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from
small independent operators to large international chains. Based on information obtained from the National Association of Theatre Owners 2002-03 Encyclopedia of Exhibition, we believe
that the ten largest exhibitors (in terms of number of screens) operated approximately 63% of the indoor screens in 2002.

Our
theatres are subject to varying degrees of competition in the geographic areas in which they operate. Competition is often intense with respect to attracting patrons, licensing
motion pictures and finding new theatre sites. Where real estate is readily available, there are few barriers preventing another company from opening a theatre near one of our theatres, which may
adversely effect operations at our theatre.

The
theatrical exhibition industry faces competition from other forms of out-of-home entertainment, such as concerts, amusement parks and sporting events, and
from other distribution channels for filmed entertainment, such as cable television, pay per view and home video systems, as well as from all other forms of entertainment.

Regulatory Environment

The distribution of motion pictures is in large part regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases. The
consent decrees resulting from one of those cases, to which we were not a party, have a material impact on the industry and us. Those consent decrees bind certain major motion picture distributors and
require the motion pictures of such distributors to be offered and licensed to exhibitors, including us, on a film-by-film and theatre-by-theatre basis.
Consequently, we cannot assure ourselves of a supply of motion pictures by entering into long-term arrangements with major distributors, but must compete for our licenses on a
film-by-film and theatre-by-theatre basis.

Our
theatres must comply with Title III of the Americans with Disabilities Act of 1990 (the "ADA"). Compliance with the ADA requires that public accommodations "reasonably
accommodate" individuals with disabilities and that new construction or alterations made to "commercial facilities" conform to accessibility guidelines unless "structurally impracticable" for new
construction or technically infeasible for alterations. Non-compliance with the ADA could result in the imposition of injunctive relief, fines, awards of damages to private litigants or
additional capital expenditures to remedy such noncompliance. Although we believe that our theatres are in substantial compliance with the ADA, in January 1999, the Civil Rights Division of the
Department of Justice filed suit against us alleging that certain of our theatres with stadium-style seating violate the ADA. See Item 3. Legal Proceedings.

As
an employer covered by the ADA, we must make reasonable accommodations to the limitations of employees and qualified applicants with disabilities, provided that such reasonable
accommodations do not pose an undue hardship on the operation of our business. In addition, many of our employees are covered by various government employment regulations, including minimum wage,
overtime and working conditions regulations.

Our
operations also are subject to federal, state and local laws regulating such matters as construction, renovation and operation of theatres as well as wages and working conditions,
citizenship, health and sanitation requirements and licensing. We believe our theatres are in material compliance with such requirements.

We
also own and operate theatres and other properties which may be subject to federal, state and local laws and regulations relating to environmental protection. Certain of these laws
and regulations may impose joint and several liability on certain statutory classes of persons for the costs of investigation or remediation of contamination, regardless of fault or the legality of
original disposal. We believe our theatres are in material compliance with such requirements.

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Seasonality

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

(d)   Financial Information About Geographic Areas.

For information about the geographic areas in which we operate, see Note 14 to the Consolidated Financial Statements under Part II Item 8. of
this Annual Report on Form 10-K. During fiscal 2003, revenues from our theatre operations outside the United States accounted for 8% of our total revenues. We also have a 50% equity
interest in a joint venture which operates theatres in Argentina, Brazil, Chile and Uruguay. There are significant differences between the theatrical exhibition industry in the United States and in
these international markets, including:



(e)   Available Information.

We make available on our web site (www.amctheatres.com) under "Investor RelationsSEC Filings", free of charge, our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after
we electronically file or furnish such material with the Securities and Exchange Commission.

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Item 2. Properties.

The following table sets forth the general character and holding classification of our theatre circuit as of April 3, 2003:

Property Holding Classification

Total
Theatres

Total
ScreensOwned

9

132Leased pursuant to ground leases

12

137Leased pursuant to building leases

215

3,232Managed

3

23Total

239

3,524


Our
theatre leases generally have initial terms ranging from 10 to 25 years, with options to extend the lease for up to 20 additional years. The leases typically require
escalating minimum annual rent payments and additional rent payments based on a percentage of the leased theatre's revenue above a base amount and require us to pay for property taxes, maintenance,
insurance and certain other property-related expenses. In some cases, our rights as tenant are subject and subordinate to the mortgage loans of lenders to our lessors, so that if a mortgage were to be
foreclosed, we could lose our lease. Historically, this has never occurred.

We
lease our corporate headquarters in Kansas City, Missouri, our film licensing office in Woodland Hills, California (Los Angeles) and our administrative offices in Paris, France and
Tokyo, Japan.

The
majority of the concessions, projection, seating and other equipment required for each of our theatres is owned.

Item 3. Legal Proceedings.

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

On
November 20, 2002 the trial court entered summary judgment in favor of the Department on the line of sight aspects of the case. The trial court ruled that wheelchair spaces
located solely on the sloped floor portion of the stadium-style auditoriums fail to provide lines of sight comparable to the general public. The trial court did not address specific changes which
might be required of our existing stadium-style auditoriums, holding thatper serules are simply not possible because the requirements of comparable
lines of sight will vary based on theatre layout. We filed a request for interlocutory appeal on January 23, 2003. The trial court denied our request but postponed any further line of sight
proceedings pending the Ninth Circuit Court of Appeals' ruling in a case with similar facts and issues,Oregon Paralyzed Veterans of America v. Regal
Cinemas, Inc.InRegal, the Oregon District Court held that the exhibitor had provided comparable lines of sight to its
wheelchair-bound patrons. A decision from the Ninth Circuit is expected in the next few months.

On
January 21, 2003, the trial court entered summary judgment in favor of the Department on non-line of sight aspects of the case, which involve such matters as
parking areas, signage, ramps, location of toilets, counter heights, ramp slopes, companion seating and the location and size of handrails. In its non-line of sight decision, the trial
court concluded that we have violated numerous sections of the ADA

13

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and
engaged in a pattern and practice of violating the ADA. As was the case with its line of sight decision, the trial court's non-line of sight decision did not address specific changes
that we might be required to make, reserving this for the remedies stage of the litigation. We are engaged in settlement discussions with the Department for the non-line of sight issues in
this case.

Shareholder derivative litigation.We are parties to three shareholder derivative lawsuits filed on our behalf against all of
the members of our board of directors. Two of the lawsuits, captionedKrajewski et al. v. Laurence M. Berg, et al.(Case
No.02-CV-221038) (the "Krajewski Action") andLamb v. Laurence M. Berg, et al.(Case
No. 02-CV-222236) (the "Lamb Action"), were filed on July 31 and August 14, 2002, respectively, in the Circuit Court of Jackson County, Kansas City,
Missouri (collectively, the "Missouri Actions"). On December 30, 2002, another shareholder derivative lawsuit, captionedMalone v. Brown et al,(Case No. 20103-NC), was filed in the Delaware Chancery Court (the "Malone Action").

The
complaints generally allege that our board violated its fiduciary duties of loyalty and good faith and wasted corporate assets by causing us to improperly forgive loans to our Chief
Executive Officer, Peter C. Brown, and Executive Vice President, Philip M. Singleton, without adequate consideration. The complaint in the Malone Action also generally alleges that the
individual defendants violated provisions of our 1999 Stock Option and Incentive Plan and our executive compensation policy as adopted by our compensation committee. The plaintiffs seek unspecified
damages on our behalf together with their costs, fees and expenses. The defendants believe there is no merit to the allegations of wrongdoing.

On
May 6, 2003, counsel for the parties jointly filed a Stipulation of Settlement in the Circuit Court of Jackson County, Kansas City, Missouri. Among other things, the settlement
provides that 1) the board will adopt a compensation committee charter with specified terms, 2) the compensation committee will retain a compensation consultant for fiscal year 2005,
3) we will pay plaintiffs' counsel fees and expenses of $450,000 and 4) Peter C. Brown and Philip M. Singleton will extend existing lock-up agreements by three
(3) months to March 6, 2004. A notice of settlement describing the terms was mailed to shareholders of record as of May 6, 2003. A hearing to determine the fairness of the
settlement was held June 24, 2003. Shareholders that objected to the terms of the settlement were given the opportunity to state their objections. The circuit court held that the settlement was
reasonable and fair and accordingly approved the settlement. As a result, the actions will be dismissed as soon as practical.

Weaver v. AMC Entertainment Inc.(No. 310364, filed March 2000 in Superior Court of California, San
Francisco County) andGeller v. AMC Entertainment Inc.(No. RCV047566, filed May 2000 in Superior Court of California, San Bernardino
County). We are the defendant in these two coordinated class-action cases now pending in California before the San Francisco County Superior Court. Plaintiffs allege that AMC sold discount tickets and
Gifts of Entertainment in violation of California law making it "unlawful for any person or entity to sell a gift certificate to a purchaser containing an expiration date." In both cases, plaintiffs
allege unfair competition and seek injunctive relief. Geller seeks restitution of all expired "gift certificates" purchased in California since January 1, 1997 and not redeemed. Weaver seeks
disgorgement of all revenues and profits obtained since January 1997 from sales of "gift certificates" containing an expiration date, as well as actual and punitive damages.

In
May 2001, following a special trial on the issue, the court ruled that our Gifts of Entertainment and discount tickets are "gift certificates." Subsequently, the court
certified a plaintiff class consisting of holders of Gifts of Entertainment or discount tickets which did not contain expiration dates or disclaimers. On April 28, 2003, the parties entered a
settlement agreement providing for our payment of approximately $600,000 in cash and $900,000 in Gifts of Entertainment. The settlement agreement received preliminary court approval in accordance with
California procedures on June 19, 2003. At the preliminary hearing the court held that the settlement was within the range of possible approval. The court will finally determine the fairness
and adequacy of the settlement at a hearing on December 3, 2003. The class members will be notified of the hearing and have an opportunity to attend and state their objections.

14

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Rob Todd v. AMC Entertainment International, Inc. et. al.(Case No. H-02-1944, United
States District Court for the Southern District of Texas). On May 23, 2002, plaintiff filed a purported class action on behalf of his son and all deaf and severely hearing-impaired individuals
against AMC, four other exhibitors and nine movie production companies. The complaint alleges that the production company defendants have violated the ADA by failing to produce enough closed-captioned
films (an emerging film technology sometimes referred to as rear window captioning where a film's dialogue is displayed on a device affixed to the armrest). The complaint further alleges that the
exhibition defendants have violated the ADA by failing to show a sufficient number of closed-captioned movies. The production company defendants have been dismissed from the case. Plaintiff now seeks
declaratory and injunctive relief that would require exhibitors to
show more films with open captioning, which displays the dialogue on the screen, or a substitute system to permit deaf and severely hearing-impaired individuals to attend movies. Plaintiff has not
identified a specific substitute system.

A
similar class action suit,Kevin Ball, et al. v. AMC Entertainment Inc. and Loews Cineplex Entertainment Corp. (Case
No.1:00CV00867, United States District Court for the District of Columbia), involves only theatres in the District of Columbia area. The Ball suit seeks to have AMC install closed-captioning in
several screens at several theatres in the D.C. area which we estimate would cost approximately $16,000 per screen. We are engaged in settlement discussions to resolve this case. Any settlement
would be subject to court approval and class notice and objection provisions.

American Multi-Cinema, Inc. v. Midwest Drywall Company, Inc., Haskell Constructors, Ltd. et al.(Case
No. 00CV84908, Circuit Court of Platte County, Missouri) andAmerican Multi-Cinema, Inc. v. Bovis Construction Corp. et al.(Civil Action
No. 0207139, Court of Common Pleas of Bucks County, Pennsylvania). We are plaintiffs in these and related suits in which we seek to recover damages from the construction manager, the architect,
certain fireproofing applicators and other parties to correct the defective application of certain fireproofing materials at 23 theatres. We currently estimate our claim for repair costs at these
theatres will aggregate approximately $37.1 million, of which we have expended approximately $20.4 million through the end of fiscal 2003. The remainder is for projected costs of repairs
yet to be performed. We also are seeking additional damages for lost profits, interest and legal and other expenses incurred. Certain parties to the Missouri litigation have filed counterclaims
against us, including Ammon Painting Company, Inc. which asserts claims to recover monies for services provided in an amount not specified in the pleadings but which it has expressed in
discovery to aggregate approximately $950,000. We currently estimate our claim against Ammon is for approximately $6 million. Based on presently available information, we do not believe such
matters will have a material adverse effect on our results of operations, financial condition or liquidity.

LaSpesa v. AMC Entertainment Inc., (No. 03CH03572, filed in the Chancery Division of the Circuit Court of Cook County,
Illinois).    On February 25, 2003, Barbara LaSpesa filed a putative class action case against us alleging violations of the Illinois Consumer Protection Act for unfair and deceptive
trade practice. Ms. LaSpesa, on behalf of a purported class consisting of all of our United States patrons, alleges that our policies and practices result in the showing of
non-movie preview advertising after the advertised movie start time and claims damages in the amount of $75.00 per putative class member. A motion to certify the class has yet to be
formally presented to the Chancery Court. We have denied the allegations and filed a motion for summary judgment to dismiss all claims.

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

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

There has been no submission of matters to a vote of security holders during the fourteen weeks ended April 3, 2003.

15

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

Our Common equity consists of Common Stock and Class B Stock. Our Common Stock is traded on the American Stock Exchange under the symbol AEN. There is no
established public trading market for Class B Stock.

The
table below sets forth, for the periods indicated, the high and low closing prices of our Common Stock as reported on the American Stock Exchange composite tape.

Fiscal 2003

Fiscal 2002High

Low

High

LowFirst Quarter

$
15.80

$
13.07

$
10.85

$
6.17Second Quarter


14.20


7.40


14.04


8.72Third Quarter


9.93


6.11


14.10


9.35Fourth Quarter


9.90


7.91


13.81


10.50


Common Stock

On May 9, 2003, there were 2,033 stockholders of record of Common Stock and one stockholder of record (the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992) of Class B Stock.

Our
Certificate of Incorporation provides that holders of Common Stock and Class B Stock shall receive, pro rata per share, such cash dividends as may be declared from time to
time by the Board of Directors. Under an Investment Agreement dated April 19, 2001 (the "Investment Agreement") with the initial purchasers of our Preferred Stock, we may not pay dividends on
Common Stock except with the consent of the initial purchasers for so long as they continue to beneficially own 50% of the aggregate number of shares of Preferred Stock issued pursuant to the
Investment Agreement, subject to certain limited exceptions.

We
have not declared a dividend on shares of Common Stock or Class B Stock since fiscal 1989. Any payment of cash dividends on Common Stock or Class B Stock in the future
will be at the discretion of the Board and will depend upon such factors as compliance with debt covenants, earnings levels, capital requirements, our financial condition and other factors deemed
relevant by the Board.

16

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Item 6. Selected Financial Data.

|                                                                                                     |                                                                                 | Years Ended(1) |          
|---------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -------------- | ---------
|
|Statement of Operations Data:                                                                        |                                                                                 |                |          
|Revenues                                                                                             |                                                                                 |                |          
|                                                                                                     | Admissions                                                                      |                | $        
|                                                                                                     | Concessions                                                                     |                |          
|                                                                                                     | Other theatre                                                                   |                |          
|                                                                                                     | NCN and other                                                                   |                |          
|                                                                                                     |                                                                                 |                |          
|Total revenues                                                                                       |                                                                                 |                | 1,791,570
|                                                                                                     |                                                                                 |                |          
|Costs and Expenses                                                                                   |                                                                                 |                |          
|                                                                                                     | Film exhibition costs                                                           |                |          
|                                                                                                     | Concession costs                                                                |                |          
|                                                                                                     | Theatre operating expense                                                       |                |          
|                                                                                                     | Rent                                                                            |                |          
|                                                                                                     | NCN and other                                                                   |                |          
|                                                                                                     | General and administrative                                                      |                |          
|                                                                                                     | Preopening expense                                                              |                |          
|                                                                                                     | Theatre and other closure expense                                               |                |          
|                                                                                                     | Restructuring charge                                                            |                |          
|                                                                                                     | Depreciation and amortization                                                   |                |          
|                                                                                                     | Impairment of long-lived assets                                                 |                |          
|                                                                                                     | Gain on disposition of assets                                                   |                |          
|                                                                                                     |                                                                                 |                |          
|Total costs and expenses                                                                             |                                                                                 |                | 1,737,081
|Other expense (income)                                                                               |                                                                                 |                |         
|Interest expense                                                                                     |                                                                                 |                | 77,800   
|Investment income                                                                                    |                                                                                 |                | 3,509    
|                                                                                                     |                                                                                 |                |          
|Loss before income taxes and cumulative effect of accounting changes                                 |                                                                                 |                | (19,802  
|Income tax provision                                                                                 |                                                                                 |                | 500      
|                                                                                                     |                                                                                 |                |          
|Loss before cumulative effect of accounting changes                                                  |                                                                                 |                | (20,302  
|Cumulative effect of accounting changes                                                              |                                                                                 |                |         
|                                                                                                     |                                                                                 |                |          
|Net loss                                                                                             |                                                                                 | $              | (20,302  
|                                                                                                     |                                                                                 |                |          
|Preferred dividends                                                                                  |                                                                                 |                | 27,165   
|                                                                                                     |                                                                                 |                |          
|Net loss for shares of common stock                                                                  |                                                                                 | $              | (47,467  
|                                                                                                     |                                                                                 |                |          
|Loss per share before cumulative effect of accounting changes:                                       |                                                                                 |                |          
|                                                                                                     | Basic and diluted                                                               |                | $        
|Net loss per share:                                                                                  |                                                                                 |                |          
|                                                                                                     | Basic and diluted                                                               |                | $        
|Pro forma amounts assuming SAB No. 101 accounting change had been in effect in fiscal 2000 and 1999: |                                                                                 |                |          
|                                                                                                     | Loss for shares of common stock before cumulative effect of accounting changes  |                |          
|                                                                                                     | Basic and diluted loss per share before cumulative effect of accounting changes |                |          
|Net loss for shares of common stock:                                                                 |                                                                                 |                |          
|                                                                                                     | Basic and diluted net loss per share                                            |                |          
|Average shares outstanding:                                                                          |                                                                                 |                |          
|                                                                                                     | Basic and diluted                                                               |                |          

17

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|                                                    |  | Years Ended(1) |          
|--------------------------------------------------- |  | -------------- | ---------
|
|Balance Sheet Data (at period end):                 |  |                |          
|Cash and equivalents                                |  | $              | 244,412  
|Total assets                                        |  |                | 1,491,698
|Corporate borrowings                                |  |                | 668,661  
|Capital and financing lease obligations             |  |                | 59,101   
|Stockholders' equity (deficit)                      |  |                | 291,904  
|Cash Flow Data:                                     |  |                |          
|Net cash provided by operating activities           |  | $              | 128,747  
|Net cash used in investing activities               |  |                | (137,201 
|Net cash provided by (used in) financing activities |  |                | 33,437   
|Other Data:                                         |  |                |          
|Capital expenditures                                |  | $              | (100,932 
|Proceeds from sale/leasebacks                       |  |                | 43,665   
|Operating Data (at period end):                     |  |                |          
|Screen additions                                    |  |                | 95       
|Screen acquisitions                                 |  |                | 641      
|Screen dispositions                                 |  |                | 111      
|Average screens                                     |  |                | 3,516    
|Attendance (in thousands)                           |  |                | 198,117  
|Number of screens operated                          |  |                | 3,524    
|Number of theatres operated                         |  |                | 239      
|Screens per theatre                                 |  |                | 14.7     

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18

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

General

AMC Entertainment Inc. is a leader in the theatrical exhibition industry. Through its circuit of AMC Theatres, the Company operates 239 theatres with 3,524
screens in the United States, Canada, France, China (Hong Kong), Japan, Portugal, Spain, Sweden and the United Kingdom.

We
acquired Gulf States Theatres on March 15, 2002 and GC Companies, Inc. on March 29, 2002 (collectively, the "Acquisitions"), which significantly increased our
size. In the Gulf States Theatres acquisition, we acquired 5 theatres with 68 screens in the New Orleans area. In the GC Companies acquisition, we acquired 66 theatres with 621 screens throughout the
United States. Accordingly, results of operations for the fifty-three weeks ended April 3, 2003, which include a full fifty-three weeks of operations of the businesses we acquired, are not
comparable to our results for the fifty-two weeks ended March 28, 2002. For information about our Acquisitions, see Note 2 to the Consolidated Financial Statements under
Part II Item 8. of this Annual Report on Form 10-K.

We
intend for this discussion to provide you with information that will assist you in understanding our financial statements, the changes in certain key items in those financial
statements from year to year and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in
conjunction with our Consolidated Financial Statements as of April 3, 2003 and the year then ended and the Notes to Consolidated Financial Statements included under Part II
Item 8. of this Annual Report on Form 10-K.

Fiscal
year 2003 includes 53 weeks. Fiscal years 2002 and 2001 include 52 weeks.

CRITICAL ACCOUNTING POLICIES

The accounting policies identified below are critical to our business operations and the understanding of our results of operations. The impact of, and any
associated risks related to, these policies on our business operations are discussed throughout Management's Discussion and Analysis of Financial Condition and Results of Operations where such
policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Notes to the Consolidated Financial Statements
under Part II Item 8. of this Annual Report on Form 10-K. The methods, estimates and judgments we use in applying our accounting policies have a significant impact on
the results we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. Our most critical accounting estimates include the assessment of recoverability of long-lived assets, including intangibles, which impacts impairment of
long-lived assets when we impair assets or accelerate their depreciation; recoverability of goodwill, which creates the potential for write-offs of goodwill; recognition and
measurement of current and deferred income tax assets and liabilities, which impact our tax provision; recognition and measurement of our remaining lease obligations to landlords on our closed
theatres and other vacant space, which impacts theatre and other closure expense; estimation of self-insurance reserves which impacts theatre operating and general and administrative
expenses; and recognition and measurement of net periodic benefit costs for our pension and other defined benefit programs, which impacts general and administrative expense. Below, we discuss these
policies further, as well as the estimates and judgments involved.

Impairments.We review long-lived assets, including intangibles, for impairment as part of our annual budgeting
process and whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We review internal management reports on a quarterly basis as well
as monitor current and potential future competition in film markets for indicators of triggering events or circumstances that indicate impairment of individual theatre assets. We evaluate theatres
using historical and projected data of theatre level cash flow as our primary indicator of potential impairment and consider

19

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the
seasonality of our business when evaluating theatres for impairment. Because Christmas and New Years holiday results comprise a significant portion of our operating cash flow, the actual results
from this period, which are available during the fourth quarter of each fiscal year, are an integral part of our impairment analysis. As a result of these analyses, if the sum of the estimated future
cash flows, undiscounted and without interest charges, are less than the carrying amount of the asset, an impairment loss is recognized in the amount by which the carrying value of the asset exceeds
its estimated fair value. Assets are evaluated for impairment on an individual theatre basis, which we believe is the lowest level for which there are identifiable cash flows. The impairment
evaluation is based on the estimated cash flows from continuing use until the expected disposal date plus the expected fair value of furniture, fixtures and equipment. The expected disposal date does
not exceed the remaining lease period and is often less than the remaining lease period when we do not expect to operate the theatre to the end of its lease term. The fair value of assets is
determined as either the expected selling price less selling costs (where appropriate) or the present value of the estimated future cash flows plus the fair value of furniture, fixtures and equipment.
The fair value of furniture, fixtures and equipment has been determined using similar asset sales and in some instances independent third party valuation studies. The discount rate used in determining
the present value of the estimated future cash flows is based on management's expected return on assets and ranged from 14% to 20% during fiscal 2003, 2002 and 2001. There is considerable management
judgment necessary to determine the future cash flows, fair value and the expected operating period of a theatre, and accordingly, actual results could vary significantly from such estimates. We have
recorded impairments of long-lived assets of $19.6 million, $4.7 million and $68.8 million during fiscal 2003, 2002 and 2001, respectively and in each of the previous
five fiscal years.

Goodwill.Our recorded goodwill was $61 million as of April 3, 2003. We evaluate goodwill for impairment
annually during the fourth fiscal quarter and any time an event occurs or circumstances change that would more likely than not reduce the fair value for a reporting unit below its carrying amount. We
consider our North American theatrical exhibition operating segment to be the reporting unit for purposes of evaluating our recorded goodwill for impairment. If the carrying value of the reporting
unit exceeds its fair value we are required to reallocate the fair value of the reporting unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting
unit was the price paid to acquire the reporting unit. We determine fair value by considering the market price of our common stock as well as multiples applied to cash flow estimates less net
indebtedness which we believe is an appropriate method to determine fair value. There is considerable management judgment with respect to cash flow estimates and appropriate multiples to be used in
determining fair value and the market value of our common stock could be volatile.

Income taxes.In determining income for financial statement purposes, we must make certain estimates and judgments. These
estimates and judgments occur in the calculation of certain tax liabilities and in
the determination of the recoverability of certain of the deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expense as well
as operating loss carryforwards. We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not likely, we must increase our income tax provision by
recording a reserve, in the form of a valuation allowance, for the deferred tax assets that we estimate will not ultimately be recoverable. As of April 3, 2003, we had recorded approximately
$187 million of deferred tax assets (net of valuation allowances of $9 million) related to the estimated future tax benefits of temporary differences between the tax bases of assets and
liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss carryforwards. The recoverability of this asset is dependent upon our ability to generate
future taxable income. Projections of future taxable income require considerable management judgment about future attendance levels, revenues and expenses. See "Liquidity and Capital Resources-
Deferred Tax Assets" for additional information about our income taxes.

Theatre and Other Closure Expense.Theatre and other closure expense is primarily related to payments made or expected to be
made to landlords to terminate leases on certain of our closed theatres,

20

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other
vacant space and theatres where development has been discontinued. Theatre and other closure expense is recognized at the time the theatre closes, space becomes vacant or development is
discontinued. Expected payments to landlords are based on actual or discounted contractual amounts. We estimate theatre closure expense based on contractual lease terms and our estimates of taxes and
utilities. The discount rate we use to estimate theatre and other closure expense is based on estimates of our borrowing costs at the time of closing. Our discount rates range from 11.0% to 21.0%. We
have recorded theatre and other closure expense of $5.4 million, $2.1 million and $24.2 million in fiscal 2003, 2002 and 2001, respectively. Accretion expense for exit activities
initiated after December 31, 2002 is included as a component of theatre and other closure expense.

Casualty Insurance.We are self-insured for general liability up to $400,000 per occurrence and carry a
$250,000 deductible limit per occurrence for workers compensation claims. We utilize actuarial projections of our ultimate losses that we will be responsible for paying and as a result there is
considerable judgment necessary to determine our casualty insurance reserves. The actuarial method that we use includes an allowance for adverse developments on known claims and an allowance for
claims which have been incurred but which have not been reported. As of April 3, 2003 and March 28, 2002, we had recorded casualty insurance reserves of $19.8 million and
$23.3 million, respectively. We have recorded expense related to general liability and workers compensation claims of $6.8 million, $10.3 million and $6.7 million in fiscal
2003, 2002 and 2001, respectively.

Pension and Postretirement Assumptions.Pension and postretirement benefit obligations and the related effects on operations
are calculated using actuarial models. Two critical assumptions, discount rate and expected return on assets, are important elements of plan expense and/or liability measurement. We evaluate these
critical assumptions at least annually. Other assumptions involve demographic factors such as retirement, expected increases in compensation, mortality and turnover. These assumptions are evaluated
periodically and are updated to reflect our experience. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors.

The
discount rate enables us to state expected future cash flows at a present value on the measurement date. We have little latitude in selecting this rate, as it is required to
represent the market rate for high-quality fixed income investments. A lower discount rate increases the present value of benefit obligations and increases pension and postretirement
expense. For our principal pension plans, a 50 basis point decrease in the discount rate would increase pension expense by approximately $1 million. For our postretirement plan, a 50 basis
point decrease in the discount rate would increase postretirement expense by approximately $230,000. We reduced our discount rate from 71/4% to 63/4% for fiscal 2004 to
reflect market interest rate conditions. We have recorded expenses for our pension and postretirement plans of $3.5 million, $3.0 million and $2.2 million in fiscal 2003, 2003 and
2001, respectively. We expect that our total pension and postretirement expense will increase by approximately $2.6 million from fiscal 2003 to fiscal 2004. Our unrecognized net actuarial loss
for pension and postretirement plans was $17.8 million as of April 3, 2003.

To
determine the expected long-term rate of return on pension plan assets, we consider the current and expected asset allocations, as well as historical and expected returns
on various categories of plan assets obtained from our investment portfolio manager. A 50 basis point decrease in the expected return on assets of our principal plans would increase pension expense on
our principal plans by approximately $175,000 per year. Note 10 to the Consolidated Financial Statements under Part II Item 8. of this Annual Report on
Form 10-K includes disclosure of our pension plan and postretirement plan assumptions and information about our pension plan assets.

21

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OPERATING RESULTS

|(Dollars in thousands)                            |                                   | 53 Weeks Ended
April 3, 2003 |           | 52 Weeks Ended
March 28, 2002 |           | 52 Weeks Ended
March 29, 2001 |        
|------------------------------------------------- | --------------------------------- | ---------------------------- | --------- | ----------------------------- | --------- | ----------------------------- | -------
|Revenues                                          |                                   |                              |           |                               |           |                               |        
|North American theatrical exhibition              |                                   |                              |           |                               |           |                               |        
|                                                  | Admissions                        |                              | $         | 1,133,477                     |           | $                             | 823,248
|                                                  | Concessions                       |                              |           | 448,896                       |           |                               | 341,227
|                                                  | Other theatre                     |                              |           | 45,767                        |           |                               | 37,966 
|                                                  |                                   |                              |           |                               |           |                               |        
|                                                  |                                   |                              | 1,628,140 |                               |           | 1,202,441                     |        
|International theatrical exhibition               |                                   |                              |           |                               |           |                               |        
|                                                  | Admissions                        |                              |           | 83,606                        |           |                               | 78,318 
|                                                  | Concessions                       |                              |           | 21,070                        |           |                               | 17,815 
|                                                  | Other theatre                     |                              |           | 3,061                         |           |                               | 2,190  
|                                                  |                                   |                              |           |                               |           |                               |        
|                                                  |                                   |                              | 107,737   |                               |           | 98,323                        |        
|NCN and other                                     |                                   |                              | 55,693    |                               |           | 41,768                        |        
|                                                  |                                   |                              |           |                               |           |                               |        
|                                                  |                                   | Total revenues               |           | $                             | 1,791,570 |                               | $      
|                                                  |                                   |                              |           |                               |           |                               |        
|Costs and Expenses                                |                                   |                              |           |                               |           |                               |        
|North American theatrical exhibition              |                                   |                              |           |                               |           |                               |        
|                                                  | Film exhibition costs             |                              | $         | 619,949                       |           | $                             | 445,956
|                                                  | Concession costs                  |                              |           | 52,647                        |           |                               | 40,386 
|                                                  | Theatre operating expense         |                              |           | 408,689                       |           |                               | 304,754
|                                                  | Rent                              |                              |           | 268,251                       |           |                               | 208,541
|                                                  | Preopening expense                |                              |           | 2,430                         |           |                               | 2,961  
|                                                  | Theatre and other closure expense |                              |           | 1,968                         |           |                               | 2,124  
|                                                  |                                   |                              |           |                               |           |                               |        
|                                                  |                                   |                              | 1,353,934 |                               |           | 1,004,722                     |        
|International theatrical exhibition               |                                   |                              |           |                               |           |                               |        
|                                                  | Film exhibition costs             |                              |           | 43,467                        |           |                               | 41,621 
|                                                  | Concession costs                  |                              |           | 5,873                         |           |                               | 5,370  
|                                                  | Theatre operating                 |                              |           | 29,472                        |           |                               | 23,937 
|                                                  | Rent                              |                              |           | 34,194                        |           |                               | 28,288 
|                                                  | Preopening expense                |                              |           | 797                           |           |                               | 1,384  
|                                                  | Theatre and other closure expense |                              |           | 3,405                         |           |                               |       
|                                                  |                                   |                              |           |                               |           |                               |        
|                                                  |                                   |                              | 117,208   |                               |           | 100,600                       |        
|NCN and other                                     |                                   |                              | 52,444    |                               |           | 45,264                        |        
|Theatre and other closure expense (NCN and other) |                                   |                              | 43        |                               |           |                              |        
|General and administrative                        |                                   |                              | 68,254    |                               |           | 37,798                        |        
|Depreciation and amortization                     |                                   |                              | 127,020   |                               |           | 99,742                        |        
|Impairment of long-lived assets                   |                                   |                              | 19,563    |                               |           | 4,668                         |        
|Gain on disposition of assets                     |                                   |                              | (1,385    | )                             |           | (1,821                        | )      
|                                                  |                                   |                              |           |                               |           |                               |        
|                                                  |                                   | Total costs and expenses     |           | $                             | 1,737,081 |                               | $      
|                                                  |                                   |                              |           |                               |           |                               |        

Years Ended April 3, 2003 and March 28, 2002

Revenues.Total revenues increased 33.4%, or $449,038,000, during the year ended April 3, 2003 compared to the year
ended March 28, 2002. Of this increase approximately $338,000,000 resulted from the Acquisitions and the opening of five new theatres and 95 screens since March 28, 2002.

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North
American theatrical exhibition revenues increased 35.4% from the prior year. Admissions revenues increased 37.7% due to a 26.4% increase in attendance and a 9.0% increase in
average ticket price. Attendance increased due to the addition of 75 new theatres with 764 screens since March 28, 2002, including the Acquisitions. Attendance at comparable theatres (theatres
opened before fiscal 2002) was essentially unchanged from the prior year. The increase in average ticket prices was due to our practice of periodically reviewing ticket prices and the discounts we
offer and making selective adjustments based upon such factors as general inflationary trends and conditions in local markets. Concessions revenues increased 31.6% due to the increase in attendance
and a 4.1% increase in average concessions per patron.

International
theatrical exhibition revenues increased 9.6% from the prior year. Admissions revenues increased 6.8% due to a 5.2% increase in attendance and a 1.5% increase in average
ticket price. The increase in attendance was due to the addition of a new theatre in Spain with 20 screens since March 28, 2002. Attendance at comparable theatres decreased 6.5%, primarily at
our theatres in China (Hong Kong) and Japan due to a decline in the popularity of local language film product. Concession revenues increased 18.3% due to the increase in total attendance and a 12.5%
increase in concessions per patron. International revenues were positively impacted by a weaker U.S. dollar, although this did not contribute materially to consolidated net loss.

Revenues
from NCN and other increased 33.3% from the prior year due to an increase in advertising revenues at NCN. We believe the increase is related to conditions in the general economy
that have lead to an increase in spending by advertisers.

Costs and expenses.Total costs and expenses increased 34.6%, or $446,108,000, during the year ended April 3, 2003
compared to the year ended March 28, 2002. Of this increase, approximately $306,000,000 resulted from the Acquisitions and the opening of five new theatres and 95 screens since March 28,
2002.

North
American theatrical exhibition costs and expenses increased 34.8% from the prior year. Film exhibition costs increased 39.0% due to the increase in admissions revenues and an
increase in the percentage of admissions paid to film distributors. As a percentage of admissions revenues, film exhibition costs were 54.7% in the current year as compared with 54.2% in the prior
year. The increase in film exhibition costs as a percentage of admissions revenues was impacted primarily byStar Wars Episode II: Attack of the
ClonesandSpider-man,films whose audience appeal led to higher than normal film rental terms. Concession costs
increased 30.4% due to the increase in concession revenues. As a percentage of concessions revenues, concession costs were 11.7% in the current year compared with 11.8% in the prior year. As a
percentage of revenues, theatre operating expense was 25.1% in the current year as compared to 25.3% in the prior year. Rent expense increased 28.6% due to the Acquisitions and the opening of theatres
and screens since March 28, 2002. During fiscal 2003, we recognized $1,968,000 of theatre and other closure expense related primarily to the closure of seven theatres with 50 screens. During
fiscal 2002, we incurred $2,124,000 of theatre and other closure expense related primarily to the closure of ten theatres with 74 screens offset by a favorable lease renegotiation for vacant
restaurant space related to a terminated joint venture and the favorable settlement of lease obligations on two closed theatres. We have currently identified 31 underperforming multiplex theatres with
243 screens that we may close over the next two to five years due to expiration
of leases or early lease terminations. Theatres closed prior to their lease expiration may require payments to the landlords to terminate the leases, which we estimate could approximate
$6 million, in total.

International
theatrical exhibition costs and expenses increased 16.5% from the prior year. Film exhibition costs increased 4.4% due to higher admission revenues. Concession costs
increased 9.4% due to the increase in concessions revenues. Theatre operating expense increased 23.1% and rent expense increased 20.9% due primarily to the addition of one new theatre in the United
Kingdom, which was opened during the fourth quarter of fiscal 2002, and one new theatre in Spain, which was opened during the third quarter of fiscal 2003. During fiscal 2003, we ceased operating six
of the existing 20 screens at our theatre in France and negotiated a lease modification with the landlord at this theatre, which is expected to

23

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reduce
our rent and operating costs. The terms of the modification included a payment to the landlord of approximately $8,000,000 and a reduction in future minimum rentals of approximately $1,200,000
annually over the remaining term of the lease (17 years). We recorded a charge for theatre closure of $3,405,000 during fiscal 2003 related to the lease renegotiation and screen closures. To
date we have incurred costs related to the closure of six screens at one of our international theatres in France. We continually monitor the performance of our international theatres and factors such
as an inability to obtain film product, changing consumer preferences for filmed entertainment in international markets and an inability to sublease vacant retail space could negatively impact
operating results and result in future closures, dispositions and charges prior to expiration of underlying lease agreements. International theatrical exhibition costs and expenses were negatively
impacted by a weaker U.S. dollar, although this did not contribute materially to consolidated net loss.

Costs
and expenses from NCN and other increased 16.0% due to an increase in advertising revenues at NCN.

General and Administrative.General and administrative expenses increased $30,456,000 due primarily to $19,250,000 of special
compensation expense related to forgiveness of loans to executive officers, increases in stock-based compensation expense and costs associated with the integration of the Acquisitions.

Depreciation and Amortization.Depreciation and amortization increased 27.3%, or $27,278,000. The increase was primarily
caused by an increase in depreciation of $18,874,000 related to the Acquisitions and new theatres that we have opened and increased amortization of intangible assets of $4,719,000 related primarily to
the Acquisitions.

Impairment of Long-Lived Assets.During fiscal 2003, we recognized a non-cash impairment loss of
$19,563,000 on five theatres with 77 screens including vacant retail space adjacent to one of the theatres. We recognized an impairment loss of $5,522,000 on
one theatre in China (Hong Kong) with 11 screens, $4,998,000 on one theatre in Japan with 16 screens, $4,960,000 on one theatre in the United Kingdom with 16 screens including vacant retail space
adjacent to the theatre, $3,195,000 on one Canadian theatre with 22 screens and $888,000 on one U.S. theatre with 12 screens. Our impairment loss included $19,402,000 of property and $161,000 of
intangible assets. The estimated future cash flows of these theatres, undiscounted and without interest charges, were less than the carrying value of the theatre assets. We are evaluating the future
plans for certain of our theatres, which may include selling theatres or closing theatres and terminating the leases. We have identified 31 underperforming multiplex theatres with 243 screens that we
may close over the next two to five years due to expiration of leases or early lease terminations. Prior to and including fiscal 2003, $13,314,000 of impairment charges have been taken on these
theatre assets and the economic life of these theatre assets have been revised to reflect management's best estimate of the economic life of the theatre assets for purposes of recording depreciation.
During fiscal 2002, we recognized a non-cash impairment loss of $4,668,000 on property, on our theatre in Sweden with 18 screens. The estimated future cash flows of this theatre,
undiscounted and without interest charges, was less than the carrying value of the theatre assets.

Gain on Disposition of Assets.Gain on disposition of assets decreased from a gain of $1,821,000 during the prior year to a
gain of $1,385,000 during the current year. The current and prior year results include gains of $1,420,000 and $1,682,000, respectively, on the favorable settlements of capital lease obligations and
gains related to the sales of real estate held for investment.

Interest Expense.Interest expense increased 28.0% during the year ended April 3, 2003 compared to the prior year due
to an increase in average outstanding borrowings and interest rates. We issued $175,000,000 of 97/8% of Senior Subordinated Notes due 2012 on January 16, 2002 and $72,880,000 of
91/2% Senior Subordinated Notes due 2011 on March 29, 2002.

24

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Income Tax Provision.The provision for income taxes was $500,000 in fiscal 2003 and $600,000 in
fiscal 2002. The effective
tax rate was (2.5)% for fiscal 2003 compared to (5.5)% for fiscal 2002. The increase in effective rate from the statutory rate of 35% during fiscal 2003 was primarily due to $19,250,000 of
non-deductible special compensation expense and $3,977,000 of foreign net operating loss carryforwards for which we have provided a valuation allowance, partially offset by $6,660,000 of
deductible costs related to the Acquisitions. The increase in effective rate from the statutory rate of 35% during fiscal 2002 was primarily due to foreign net operating loss carryforwards for which
we provided a valuation allowance and non-deductible preferred stock issuance costs.

Net Loss for Shares of Common Stock.Net loss for shares of common stock increased during the year ended April 3, 2003
to a loss of $47,467,000 from a loss of $40,889,000 in the prior year. Basic and diluted loss per share of common stock was $1.31 compared to a loss of $1.73 per share of common stock in the
prior year. Preferred Stock dividends of 18,422 shares of Preferred Stock valued at $27,165,000 were recorded in fiscal 2003 compared to Preferred Stock dividends of 16,406 shares of Preferred Stock
valued at $29,421,000 in fiscal 2002.

Years Ended March 28, 2002 and March 29, 2001

Revenues.Total revenues increased 10.4% during the year ended March 28, 2002 compared to the year ended
March 29, 2001.

North
American theatrical exhibition revenues increased 10.0% from the prior year. Admissions revenues increased 10.1% due to a 6.2% increase in average ticket price and a 3.7% increase
in attendance. The increase in average ticket prices was due to our practice of periodically reviewing ticket prices and making selective adjustments based upon such factors as general inflationary
trends and conditions in local markets. Attendance increased due to the addition of 11 new theatres with 180 screens since March 29, 2001. Attendance at comparable theatres (theatres opened
before fiscal 2001) increased 1.6% from the prior year. Concessions revenues increased 6.3% due to a 2.6% increase in average concessions per patron and the increase in attendance.

International
theatrical exhibition revenues increased 24.7% from the prior year. Admissions revenues increased 24.1% due to a 25.1% increase in attendance. The increase in attendance
was due to an increase in the performance of film product at our theatres and the addition of 2 new theatres with 34
screens since March 29, 2001. Attendance at comparable theatres increased 12.4%, primarily at our theatres in Japan. Concession revenues increased 33.4% due to the increase in total attendance
and a 6.6% increase in concessions per patron. International revenues were negatively impacted by a stronger U.S. dollar, although this did not contribute materially to consolidated net loss.

Revenues
from NCN and other decreased 3.9% from the prior year due to a decrease in advertising revenues at NCN. We believe the decrease is related to conditions in the general economy
that have lead to a reduction in spending by advertisers.

Costs and expenses.Total costs and expenses increased 0.4% during the year ended March 28, 2002 compared to the year
ended March 29, 2001.

North
American theatrical exhibition costs and expenses increased 5.6% from the prior year. Film exhibition costs increased 11.6% due to the increase in admissions revenues and an
increase in the percentage of admissions paid to film distributors. As a percentage of admissions revenues, film exhibition costs were 54.2% as compared with 53.4% in the prior year. This increase
occurred because more popular films were licensed from distributors that generally have higher film rental terms and because of the concentration of attendance in the early weeks of several films
released during the thirteen weeks ended September 27, 2001, which typically results in higher film exhibition costs. Concession costs decreased 4.5% due to additional marketing incentives from
vendors under renegotiated contract terms and our initiative to consolidate purchasing to obtain more favorable pricing, offset by the increase in concessions

25

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revenues.
As a percentage of concessions revenues, concession costs were 11.8% compared with 13.2% in the prior year. As a percentage of revenues, theatre operating expense was 25.3% as compared to
25.4% in the prior year. Rent expense increased 2.1% due to the growing number of megaplexes (theatres with predominately stadium seating) in our theatre circuit, which generally have higher rent per
screen than multiplexes (theatres generally without stadium seating). During fiscal 2002, we incurred $2,124,000 of theatre and other closure expense related primarily to the closure of ten theatres
with 74 screens offset by a favorable lease renegotiation for vacant restaurant space related to a terminated joint venture and the favorable settlement of lease obligations on two closed theatres.
During fiscal 2001, we incurred $24,169,000 of theatre and other closure expense related primarily to the closure of 31 multiplexes with 211 screens and vacant restaurant space related to a terminated
joint venture.

International
theatrical exhibition costs and expenses increased 16.1% from the prior year. Film exhibition costs increased 26.6% due to higher admission revenues. Rent expense increased
13.1% and theatre operating expense increased 2.1% from the prior year due to the addition of 2 new theatres with 34 screens since March 29, 2001. International theatrical exhibition costs and
expenses were positively impacted by a stronger U.S. dollar, although this did not contribute materially to consolidated net loss.

Costs
and expenses from NCN and other increased 6.2% due to an increase in direct selling expense at NCN.

General and Administrative.General and administrative expenses increased 16.3% during the year ended March 28, 2002
due to an increase in incentive compensation expense and overall cost increases.

Depreciation and Amortization.Depreciation and amortization decreased 5.2%, or $5,518,000, during fiscal 2002 compared to
fiscal 2001. This decrease was caused by a decrease in depreciation of $7,023,000 related to impairment losses recorded in previous periods which reduced the carrying value of the theatre assets.

Impairment of Long-Lived Assets.During fiscal 2002, we recognized a non-cash impairment loss on
property of $4,668,000 on our theatre in Sweden with 18 screens. The estimated future cash flows of this theatre, undiscounted and without interest charges, was less than the carrying value of the
theatre assets. During fiscal 2001, we recognized a non-cash impairment loss of $68,776,000 on 76 theatres with 719 screens. We recognized an impairment loss of $35,263,000 on five
Canadian theatres with 122 screens, $19,762,000 on 17 U.S. theatres with 202 screens, including two theatres with 44 screens opened since 1995, $4,891,000 on one French theatre with 20 screens,
$3,592,000 on 34 U.S. theatres with 222 screens that were closed during fiscal 2001, $3,476,000 on 19 U.S. theatres with 153 screens that are expected to be closed in the near future, $1,042,000 on
the discontinued development of a theatre in Taiwan and $750,000 related to real estate held for sale. The estimated future cash flows of these theatres, undiscounted and without interest charges,
were less than the carrying value of the theatres assets. Our impairment loss during fiscal 2001 included $63,547,000 of property, $4,397,000 of intangible assets and $832,000 of other
long-term assets.

Gain on Disposition of Assets.Gain on disposition of assets increased from a gain of $664,000 in the prior year to a gain of
$1,821,000 during the current year. The current and prior year results also include gains of $1,682,000 and $72,000, respectively, on the favorable settlements of capital lease obligations and gains
related to the sales of real estate held for investment. The prior year results include a $1,109,000 loss on the sale of furniture, fixtures and equipment.

Other Expense (Income).During fiscal 2002, we recognized $3,754,000 of transaction expenses incurred in connection with the
issuance of Preferred Stock. During fiscal 2001, we recognized non-cash income of $9,996,000 related to the extinguishment of gift certificate liabilities for multiple years of sales. The
extinguishment of gift certificate liabilities related to calendar year 1994 sales resulted in other income of $2,617,000 and the extinguishment of gift certificate liabilities for sales in calendar
year 1993 and prior years resulted in one-time other income of $7,379,000.

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Interest Expense.Interest expense decreased 21.1% during fiscal 2002 compared to the prior year due to a decrease in average
outstanding borrowings and interest rates.

Income Tax Provision.The provision for income taxes was $600,000 in fiscal 2002 and a benefit of $45,700,000 in fiscal 2001.
The effective tax rate was (5.5)% for fiscal 2002 compared to 33.6% for fiscal 2001. The income tax rate for fiscal 2002 was impacted by a $2,200,000 increase in valuation allowance for foreign net
operating loss carryforwards and $3,754,000 of non-deductible Preferred Stock transaction expenses.

Net Loss for Shares of Common Stock.Net loss for shares of common stock decreased during the year ended March 28,
2002 to a loss of $40,889,000 from a loss of $105,886,000 in the prior year. Basic and diluted loss per share of common stock was $1.73 compared to a loss of $4.51 per share of common stock in
the prior year. Prior year results include the cumulative effect of an accounting change of $15,760,000 (net of income tax benefit of $10,950,000) which increased loss per share of common stock by
$.67. Preferred Stock dividends of 16,406 shares of Preferred Stock valued at $29,421,000 were recorded during fiscal 2002.

LIQUIDITY AND CAPITAL RESOURCES

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

Cash
flows from operating activities, as reflected in the Consolidated Statements of Cash Flows, were $128,747,000, $101,091,000 and $43,458,000 in fiscal years 2003, 2002 and 2001,
respectively. The
increase in operating cash flows from fiscal year 2002 to fiscal year 2003 is primarily due to increased attendance and higher ticket prices. We had a net working capital surplus as of April 3,
2003 and March 28, 2002 of $24,462,000 and $42,227,000, respectively. We have the ability to borrow against our credit facility to meet obligations as they come due and had approximately
$363,000,000 and $413,000,000 available on our credit facility to meet these obligations as of April 3, 2003 and March 28, 2002, respectively.

We
continue to expand our North American and international theatre circuits. During fiscal 2003, we opened 5 theatres with 93 screens, opened 2 screens at an existing theatre, acquired
69 theatres with 641 screens (including three managed theatres with 20 screens) and closed 16 theatres with 111 screens resulting in a circuit total of 239 theatres with 3,524 screens as of
April 3, 2003.

We
fund the costs of constructing new theatres through existing cash balances, cash generated from operations or borrowed funds, as necessary. We generally lease our theatres pursuant to
long-term non-cancelable operating leases which may require the developer, who owns the property, to reimburse us for a portion of the construction costs. We may decide to own
the real estate assets of new theatres and, following construction, sell and leaseback the real estate assets pursuant to long-term non-cancelable operating leases. During
fiscal 2003, we leased 5 new theatres with 93 screens from developers.

Historically,
we have either paid for or leased the equipment used in a theatre. We may purchase leased equipment from lessors if prevailing market conditions are favorable. During
fiscal 2003, we purchased certain leased furniture, fixtures and equipment for a total of $7,052,000.

We
lease certain of our theatre properties from Entertainment Properties Trust. Mr. Peter C. Brown, Chairman of the Board, Chief Executive Officer and President of AMCE, served as
Chairman of the Board of Trustees of Entertainment Properties Trust until May 2003, at which time his term expired and he did not stand for reelection to the Board of Trustees of Entertainment
Properties Trust. Because of the

27

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various
agreements between Entertainment Properties Trust and us, situations may have arisen where we had differing interests from Entertainment Properties Trust. For information about related party
transactions see Note 15 to the Consolidated Financial Statements under Part II Item 8. of this Annual Report on Form 10-K.

As
of April 3, 2003, we had construction in progress of $69,968,000 and reimbursable construction advances (amounts due from developers on leased theatres) of $2,628,000. We had 5
theatres in the U.S. with a total of 84 screens and one theatre in the United Kingdom with 12 screens under construction as of April 3, 2003. During fiscal 2003, 2002 and 2001, we incurred cash
outflows for investing
activities of $137,201,000, $144,510,000 and $91,933,000, respectively. Cash outflows for investing activities include capital expenditures of $100,932,000, $82,762,000 and $101,932,000 during fiscal
2003, 2002 and 2001, respectively and proceeds from sale/leasebacks of $43,665,000, $7,486,000 and $682,000 during fiscal 2003, 2002 and 2001, respectively. We expect that our capital expenditures in
fiscal 2004 will be approximately $124,000,000 to $134,000,000 and our proceeds from sale/leasebacks will be approximately $59,000,000 from two anticipated sale and leaseback transactions. During
fiscal 2003, we sold and leased back the real estate assets associated with 2 theatres for an aggregate purchase price of $43,665,000 and then leased the real estate assets associated with these
theatres pursuant to non-cancelable operating leases with terms of 20 years at an initial lease rate of 11% with options to extend for up to an additional 15 years.

Our
credit facility permits borrowings at interest rates based on either the bank's base rate or LIBOR, plus applicable margins ranging from 0.0% to 1.5% on base rate loans and from
0.75% to 2.50% on LIBOR loans, and requires an annual commitment fee based on margin ratios that could result in a rate of 0.375% or 0.500% on the unused portion of the commitment. The credit facility
matures on April 10, 2004. The lender's commitments under the credit facility will be reduced by $25 million on each of June 30, 2003 and September 30, 2003 and by
$50 million on December 31, 2003. The total commitment under the credit facility is $375 million, but the credit facility contains covenants that limit our ability to incur debt
(whether under the credit facility or from other sources). As of April 3, 2003 and March 28, 2002, we had no outstanding borrowings under the credit facility and borrowing capacity under
the credit facility of approximately $363 million and $413 million, respectively.

The
credit facility includes several financial covenants. We are required to maintain (i) a maximum net indebtedness to annualized EBITDA ratio, as defined in the credit facility
(generally, the ratio of the principal amount of outstanding indebtedness (less cash and equivalents) as of the last day of the most recent quarter to earnings for the most recent four quarters before
interest, taxes, depreciation, amortization and other noncash charges, theatre closing or disposition costs, theatre opening costs, and gains or losses from asset sales, and including an annualized
EBITDA calculation for any permanently closed, disposed of or acquired theatre on a pro forma basis as if such closure, disposition or acquisition occurred on the first day of the calculation period),
of 5.0 to 1 as of April 3, 2003, (ii) a minimum cash flow coverage ratio, as defined in the credit facility (generally, the ratio of annualized EBITDA for the most recent four quarters
to the sum of (A) consolidated interest expense for such period, (B) amounts paid as cash dividends, for the optional repurchase or redemption of subordinated debt or capital stock, or
with respect to the principal amount of capitalized lease obligations during such period, plus (C) the current portion of debt with an original maturity exceeding one year as of the last day of
the most recent quarter), of 1.40 to 1, and (iii) a maximum net senior indebtedness to annualized EBITDA ratio, as defined in the credit facility, of 3.50 to 1 as of April 3, 2003. The
credit facility also generally imposes limitations on investments, the incurrence of additional indebtedness, creation of liens, changes of control, transactions with affiliates, dividends, mergers,
investments, guarantees, asset sales, business activities and pledges.

Covenants
under the credit facility limit our ability to incur additional debt. The credit facility allows us to incur any amount of debt which qualifies as subordinated debt thereunder.
If not qualified as subordinated debt under the credit facility, generally we are limited to no more than $75 million of new debt, subject to meeting our financial covenants.

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Each
of our significant subsidiaries (as defined in the credit facility), has guaranteed the credit facility. If at any time the ratio of our net senior indebtedness to annualized EBITDA
exceeds 3.50 to 1, we and each of our subsidiaries that is a guarantor is obligated to pledge to the lenders under the credit facility all the capital stock of any subsidiary owned by such person and
all of our and our subsidiaries' indebtedness owed to such person.

On
March 19, 1997, we sold $200 million aggregate principal amount of 91/2% senior subordinated notes due 2009. We used the net proceeds from the issuance of
the notes due 2009 (approximately $194 million) to reduce borrowings under our credit facility. Interest on the notes due 2009 is payable on March 15 and September 15 of each
year. The notes due 2009 are redeemable at our option, in whole or in part, at any time on or after March 15, 2002 at 104.75% of the principal amount thereof, declining ratably to 100% of the
principal amount thereof on or after March 15, 2006, plus in each case interest accrued to the redemption date. The notes due 2009 are unsecured and are subordinated to all our existing and
future senior indebtedness (as defined in the note indenture for the notes due 2009).

On
January 27, 1999, we sold $225 million aggregate principal amount of 91/2% senior subordinated notes due 2011. Net proceeds from the issuance of the notes
due 2011 (approximately $219 million) were used to reduce borrowings under our credit facility. On March 29, 2002, we issued an additional $72.9 million aggregate principal amount
of 91/2% senior subordinated notes due 2011 (with a fair value of $71.8 million) as part of our acquisition of GC Companies, Inc. The notes due 2011 bear interest at the
rate of 91/2% per annum, payable February and August of each year. The notes due 2011 are redeemable at our option, in whole or in part, at any time on or after February 1, 2004
at 104.75% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after February 1, 2007, plus in each case interest accrued to the redemption date.
The notes due 2011 are unsecured and are subordinated to all our existing and future senior indebtedness (as defined in the note indenture for the notes due 2011). The notes due 2011 rank equally with
our 91/2% senior subordinated notes due 2009.

On
January 16, 2002, we sold $175 million aggregate principal amount of 97/8% senior subordinated notes due 2012. Net proceeds from the issuance of the notes
due 2012 (approximately $168 million) were used to reduce borrowings under our credit facility, to pursue our current business strategy, including the acquisition of GC Companies, and for
general corporate purposes. The notes due 2012 bear interest at the rate of 97/8% per annum, payable in February and August of each year. The notes due 2012 are redeemable at our
option, in whole or in part, at any time on or after February 1, 2007 at 104.938% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after
February 1, 2010, plus in each case interest accrued to the redemption date. The notes due 2012 are unsecured and are subordinated to all our existing and future senior indebtedness (as defined
in the
note indenture for the notes due 2012). The notes due 2012 rank equally with our 91/2% senior subordinated notes due 2009 and our 91/2% senior subordinated notes due
2011.

The
indentures relating to the notes allow us to incur all permitted indebtedness (as defined therein) without restriction, which includes all amounts borrowed under our credit facility.
The indentures also allow us to incur any amount of additional debt as long as we can satisfy the coverage ratio of each indenture, both at the time of the event (under the indentures for the notes
due 2009 and 2011) and after giving effect thereto on a pro forma basis (under each of the indentures). Under the indenture relating to the notes due 2009, the most restrictive of the indentures, we
could borrow approximately $337 million as of April 3, 2003 in addition to permitted indebtedness (assuming an interest rate of 10% per annum on the additional borrowings). If we cannot
satisfy the coverage ratios of the indentures, generally we can incur, in addition to amounts borrowed under the credit facility, no more than $75 million of new "permitted indebtedness" under
the terms of the indenture relating to the notes due 2009, the most restrictive of the indentures.

The
indentures relating to the notes also contain covenants limiting dividends, purchases or redemptions of stock, transactions with affiliates, and mergers and sales of assets, and
require us to make an offer

29

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to
purchase the notes upon the occurrence of a change in control, as defined in the indentures. Upon a change of control, we would be required to make an offer to repurchase each holder's notes due
2009, notes due 2011 and notes due 2012 at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. For additional information relating to
covenants contained in the indentures governing the notes, see Note 5 in the Notes to Consolidated Financial Statements included in Part II Item 8. of this
Form 10-K.

As
of April 3, 2003, we were in compliance with all financial covenants relating to the credit facility, the notes due 2009, 2011 and 2012.

On
April 19, 2001, we issued shares of Series A Convertible Preferred Stock and Series B Exchangeable Preferred Stock for an aggregate purchase price of
$250 million. Net proceeds from the sale (including transaction expenses) of approximately $225 million were used to reduce outstanding indebtedness under our credit facility. On
September 13, 2001, pursuant to the certificate of designations relating to the Preferred Stock, all shares of Series B Exchangeable Preferred Stock were exchanged for an equal number of
shares of Series A Convertible Preferred Stock. Dividends on the Series A Convertible Preferred Stock accumulate at an annual rate of 6.75% and are payable in additional shares of
Series A Convertible Preferred Stock until April 2004. At our option, dividends on Series A Convertible Preferred Stock may be paid in cash or additional shares of Series A
Convertible Preferred Stock from April 2004 until April 2008. Thereafter, dividends must be paid in cash unless prohibited by the Indentures for the Notes due 2009 and the Notes due
2011, in which case such dividends are payable in additional Series A Preferred Shares. Reference is made to Note 6 to the Consolidated Financial Statements included under
Part II Item 8. of this Annual Report on Form 10-K for information describing circumstances in which holders of Series A Convertible Preferred Stock may be
entitled to special in-kind dividends and other circumstances under which holders of Series A Convertible Preferred Stock may be required to receive
payments-in-kind in lieu of cash and Series B Exchangeable Preferred Stock instead of Series A Convertible Preferred Stock. Our investment agreement with the
Apollo Purchasers generally requires that we obtain their consent before we issue stock, pay cash dividends or incur indebtedness (other than ordinary course borrowings under our credit facility and
certain other permitted debt) as long as they continue to hold a majority of the shares of Preferred Stock that they purchased. In addition, the certificate of designations for our Preferred Stock
prohibits us from incurring any debt that would restrict our ability to pay dividends on the Preferred Stock in the manner required under the certificate of designations without the consent of the
holder or holders of a majority of the shares of outstanding Preferred Stock (currently the Apollo Purchasers).

On
March 19, 2002, we completed a public offering of 9,000,000 shares of Common Stock at a public offering price of $10.50 per share and granted the underwriters a
30 day option to purchase an additional 1,350,000 shares of Common Stock at $10.50 per share to cover over-allotments. On March 28, 2002, the underwriters exercised
their option to purchase these shares. Net proceeds from the offering of the shares of Common Stock of $100.8 million were used to fund the acquisition of GC Companies and will be used to
pursue our current business strategy, including acquisitions of other theatres and theatre circuits.

On
March 29, 2002, we acquired GC Companies pursuant to a stock purchase agreement and a plan of reorganization that was confirmed by the bankruptcy court on March 18,
2002. Our purchase price of $169.2 million (net of $6.5 million from the sale of GC Companies' portfolio of venture capital investments on the effective date) includes anticipated cash
payments of $70.7 million, the issuance of $72.9 million aggregate principal amount of 91/2% Senior Subordinated Notes due 2011 with a fair value of $71.8 million
and the issuance of 2.4 million shares of common stock with an aggregate fair value of $33.2 million based on a fair value of $13.64 per share (the closing price per share on the
effective date of the plan). We used (or will use) available cash from our sales of senior subordinated notes and common stock in fiscal 2002 for the cash payments under the plan of reorganization.

The
purchase price for GC Companies is based on current estimates of the amount of "deduction claims" under the plan. The exact purchase price will not be determinable until all creditor
claims disputed

30

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by
the GC Companies post-confirmation unsecured creditors committee are consensually resolved or are determined by the bankruptcy court, and that process is ongoing. Through
April 3, 2003, we have issued $72.9 million aggregate principal amount of our senior subordinated notes due 2011 and 2.4 million shares of our common stock and paid approximately
$64 million in cash to creditors of GC Companies. Under the plan, an increase in the amount of deduction claims, which are paid in cash, will reduce the amount of common stock we issue to
unsecured creditors, and vice versa. Although the purchase price should not change materially as a result of the resolution of disputed claims, the ultimate amount of cash and common stock components
may vary from our current estimates. Under the plan of reorganization, reorganized GC Companies and its reorganized subsidiaries retained liability for certain trade payables and other current
liabilities not discharged in the bankruptcy. Reorganized GC Companies continues to have certain obligations to retirees and certain of GC Companies' executory contracts and unexpired leases were
assumed by reorganized GC Companies or one of its reorganized subsidiaries.

Minimum
annual cash payments required under existing capital and financing lease obligations, maturities of corporate borrowings, future minimum rental payments under existing operating
leases, FF&E and leasehold purchase provisions and National Cinema Network ("NCN") exhibitor share commitments that have initial or remaining non-cancelable terms in excess of one year as
of April 3, 2003 are as follows:

|(In thousands) |  | Minimum
Capital and
Financing
Lease
Payments |         | Principal
Amount of
Corporate
Borrowings |   | Minimum
Operating
Lease
Payments |  | FF&E and
Leasehold
Purchase
Provisions |           | NCN
Exhibitor
Share
Commitments |   | Total Commitments
|-------------- |  | -------------------------------------------- | ------- | ---------------------------------------- | - | -------------------------------- |  | -------------------------------------- | --------- | ------------------------------- | - | -----------------
|2004           |  | $                                            | 10,164  |                                          | $ |                                 |  | $                                      | 285,404   |                                 | $ |                 
|2005           |  |                                              | 9,852   |                                          |   |                                 |  |                                        | 281,531   |                                 |   | 25,292           
|2006           |  |                                              | 9,608   |                                          |   |                                 |  |                                        | 279,068   |                                 |   | 5,000            
|2007           |  |                                              | 9,240   |                                          |   |                                 |  |                                        | 276,868   |                                 |   |                 
|2008           |  |                                              | 8,499   |                                          |   |                                 |  |                                        | 273,865   |                                 |   |                 
|Thereafter     |  |                                              | 92,643  |                                          |   | 672,880                          |  |                                        | 2,590,377 |                                 |   |                 
|               |  |                                              |         |                                          |   |                                  |  |                                        |           |                                 |   |                  
|Total          |  | $                                            | 140,006 |                                          | $ | 672,880                          |  | $                                      | 3,987,113 |                                 | $ | 30,292           
|               |  |                                              |         |                                          |   |                                  |  |                                        |           |                                 |   |                  

We
believe that cash generated from operations, existing cash and equivalents, expected reimbursements from developers and the available commitment amount under our credit facility will
be sufficient to fund operations and planned capital expenditures for at least the next twelve months and enable us to maintain compliance with covenants related to the credit facility and the notes.
However, the performance of films licensed by us and unforeseen changes in operating requirements could affect the ability to continue our business strategy as well as comply with certain financial
covenants.

Deferred Tax Assets

We have recorded net current and non-current deferred tax assets in accordance with Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, of approximately $187 million (net of valuation allowance of $9.1 million) as of April 3, 2003, and
estimate that we must generate at least $476 million of future taxable income to realize those deferred tax assets. To achieve this level of future taxable income, we intend to pursue our
current business strategy that includes expansion of our theatre circuit through selective new builds and acquisitions, closure of underperforming theatres and implementation of initiatives to
increase revenues and control costs. The theatrical exhibition industry is cyclical, and we believe that we are capable of generating sufficient future taxable income to utilize our deferred tax
assets.

We
believe it is more likely than not that we will realize future taxable income sufficient to utilize our deferred tax assets except as follows. As of April 3, 2003, we believe
it is more likely than not that deferred

31

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tax
assets related to certain state tax net operating loss carryforwards and certain net operating loss carryforwards of foreign subsidiaries in the amount of approximately $37 million
(expiring 2007 through 2022) and $21 million (expiring in 2004 through 2009), respectively, will not be realized due to uncertainties as to the timing and amounts of related future taxable
income. Accordingly, a valuation allowance of $9.1 million was established as of April 3, 2003. We have made estimates of our future taxable income based on expected increases in
attendance and ticket and concession prices. We currently estimate taxable income of $20.3 million in fiscal 2003 and had reported taxable income of $7.3 million in fiscal 2002. Based on
expected future reversals of our temporary differences and estimates of future taxable income, we believe it is more likely than not that we will have generated sufficient taxable income by the end of
fiscal year 2011 to enable us to realize our deferred tax assets recorded as of April 3, 2003. Our estimates of future taxable income require significant amounts of management judgment and
estimation and actual results could differ from estimated amounts. See "Forward-Looking Statements" for factors which may cause actual results to differ from our expectations. Accordingly, while we
believe it is more likely than not that we will realize future taxable income sufficient to realize our net current and non-current deferred tax asset of $187 million, it is
possible that these deferred taxes may not be realized in the future.

The
table below reconciles loss before income taxes and cumulative effect of an accounting change for financial statement purposes with taxable income (loss) for income tax purposes.

|(Dollars in thousands)                                                            |  | (estimated)
53 Weeks Ended
April 3,
2003 |         | 52 Weeks Ended
March 28,
2002 |   | 52 Weeks Ended
March 29,
2001 |  
|--------------------------------------------------------------------------------- |  | ---------------------------------------- | ------- | ----------------------------- | - | ----------------------------- | -
|Loss before income taxes and cumulative effect of an accounting change            |  | $                                        | (19,802 | )                             | $ | (10,868                       | )
|Cumulative effect of an accounting change                                         |  |                                          |        |                               |   |                              |  
|Reserve for future dispositions                                                   |  |                                          | (421    | )                             |   | (5,803                        | )
|Depreciation and amortization                                                     |  |                                          | 289     |                               |   | 20,802                        |  
|Gain on disposition of assets                                                     |  |                                          |        |                               |   | (5,992                        | )
|Impairment of long-lived assets                                                   |  |                                          | 19,563  |                               |   | 4,668                         |  
|Foreign corporation activity                                                      |  |                                          | 23,200  |                               |   | 11,140                        |  
|Other                                                                             |  |                                          | (2,504  | )                             |   | (6,602                        | )
|                                                                                  |  |                                          |         |                               |   |                               |  
|Taxable income (loss) before special deductions and net operating loss carrybacks |  | $                                        | 20,325  |                               | $ | 7,345                         |  
|                                                                                  |  |                                          |         |                               |   |                               |  

Our
foreign subsidiaries have net operating loss carryforwards in Spain, Japan and the United Kingdom aggregating approximately $40 million, $17 million of which may be
carried forward indefinitely and the balance of which expires from 2008 through 2013. Our federal income tax loss carryforward of $88 million expires in 2020 and 2021 and will be limited to
approximately $20 million annually due to the sale of Preferred Stock and the acquisition of GC Companies, Inc. State net operating loss carryforwards of approximately $62 million
may be used over various periods ranging from five to 20 years.

32

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We anticipate that net temporary differences should reverse and become available as tax deductions as follows:

2004

$
85,000,0002005


53,000,0002006


29,000,0002007


42,000,0002008


16,000,000Thereafter


163,000,000Total

$
388,000,000


Impact of Inflation

Historically, the principal impact of inflation and changing prices upon us has been to increase the costs of the construction of new theatres, the purchase of
theatre equipment, rent and the utility and labor costs incurred in connection with continuing theatre operations. Film exhibition costs, our largest cost of operations, are customarily paid as a
percentage of admissions revenues and hence, while the film exhibition costs may increase on an absolute basis, the percentage of admissions revenues represented by such expense is not directly
affected by inflation. Except as set forth above, inflation and changing prices have not had a significant impact on our total revenues and results of operations.

New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board ("FASB") issued two new standards: Statement of Financial Accounting Standards No. 141 ("SFAS
No. 141")Business Combinationsand SFAS No. 142Goodwill and Other Intangible Assets.
SFAS No. 141 requires that all business combinations be accounted for using one method (the purchase method) and prescribes criteria for the initial recognition and measurement of goodwill and
other intangible assets. SFAS No. 141 is effective for all business combinations completed after June 30, 2001.

SFAS
No. 142 establishes new guidelines for accounting for goodwill and other intangible assets. The provisions of SFAS No. 142 state that goodwill and indefinite-lived
intangible assets will no longer be amortized and that goodwill and indefinite-lived intangible assets will be tested for impairment at least annually. SFAS No. 142 is effective for fiscal
years beginning after December 15, 2001. SFAS No. 142 became effective for us in fiscal 2003. However, goodwill and intangible assets acquired after June 30, 2001, were subject
immediately to the non-amortization and amortization provisions. Adoption of SFAS No. 141 and SFAS No. 142 did not have a material impact on our consolidated financial
position, results of operations or cash flows.

In
August 2001, the FASB issued SFAS No. 143Accounting for Asset Retirement Obligations. SFAS No. 143 addresses the
recognition and remeasurement of obligations associated with the retirement of a tangible long-lived asset. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. SFAS No. 143 will become effective for us in fiscal 2004. Adoption of SFAS No. 143 is not expected to have a material impact on our consolidated financial position,
results of operations or cash flows.

In
October 2001, the FASB issued SFAS No. 144Accounting for the Impairment or Disposal of Long-Lived Assets.
SFAS No. 144 applies to all long-lived assets (excluding goodwill) and discontinued operations and develops one accounting model for long-lived assets that are to be
disposed of by sale. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 became effective for us in fiscal 2003. Adoption of SFAS
No. 144 did not have a material impact on our consolidated financial position, results of operations or cash flows.

33

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In
June 2002, the FASB issued SFAS No. 146Accounting for Costs Associated with Exit or Disposal Activities.SFAS
No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and requires that the liabilities associated with these costs be recorded at their
fair value in the period in which the liability is incurred. SFAS No. 146 was effective for us for disposal activities initiated after December 31, 2002 and did not have a material
impact on our consolidated financial position, results of operations or cash flows.

In
December 2002, the FASB issued SFAS No. 148Accounting for Stock-Based CompensationTransition and
Disclosure.SFAS No. 148 amends SFAS No. 123Accounting for Stock-Based Compensationto provide alternative
methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148 became effective for us in fiscal year 2003 and will be effective for interim periods in fiscal year 2004.

In
April 2003, the FASB issued SFAS No. 149Amendment of Statement No. 133 on Derivative Instruments and Hedging
Activities.SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other
contracts. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except as stated below, and for hedging relationships designated after June 30,
2003. In addition, except as stated below, all provisions of SFAS No. 149 should be applied prospectively. The provisions of SFAS No. 149 relating to SFAS No. 133 Implementation
Issues that have been effective for fiscal quarters beginning prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. Adoption of SFAS
No. 149 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

In
May 2003, the FASB issued SFAS No. 150Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.
It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of these instruments were previously classified as
temporary equity. SFAS No. 150 will be effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first
interim period beginning after June 15, 2003. For financial instruments created before the issuance date of SFAS No. 150 and still existing at the beginning of the interim period of
adoption, transition shall be achieved by reporting the cumulative effect of a change in accounting principle by initially measuring the financial instruments at fair value or other measurement
attribute required by SFAS No. 150. Instruments with characteristics of both liabilities and equity not addressed in SFAS No. 150 will be addressed in the next phase of the project.
Adoption of SFAS No. 150 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

In
November 2002, the FASB issued Interpretation No. 45,Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others.This interpretation elaborates on the disclosures to be made by a guarantor in interim and annual financial statements about the
obligations under certain guarantees. We adopted the disclosure provisions of FASB Interpretation No. 45 on December 15, 2002. FASB Interpretation No. 45 also clarifies that a
guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial
measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. We do not currently provide significant guarantees
on a routine basis. As a result, this interpretation did not have a material impact on our financial statements. To the extent that we enter into any such guarantees after

34

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December 31,
2002, we will record the fair value as a liability and an offsetting amount for an asset or expense depending on the circumstances in which the guarantee was issued.

In
January 2003, the FASB issued Interpretation No. 46,Consolidation of Variable Interest Entities. This interpretation
addresses the consolidation of business enterprises (variable interest entities) to which the usual condition of consolidation does not apply. This interpretation focuses on financial interests that
indicate control. It concludes that in the absence of clear control through voting interests, a company's exposure (variable interest) to the economic risks and potential rewards from the variable
interest entity's assets and activities are the best evidence of control. Variable interests are rights and obligations that convey economic gains or losses from changes in the values of the variable
interest entity's assets and liabilities. Variable interests may arise from financial instruments, service contracts, nonvoting ownership interests and other arrangements. If an enterprise holds a
majority of the variable interests of an entity, it would be considered the primary beneficiary. The primary beneficiary would be required to include assets, liabilities and the results of operations
of the variable interest entity in its financial statements. This interpretation applies immediately to variable interest entities that are created, or for which control is obtained after,
January 31, 2003. For variable interest entities created prior to February 1, 2003, the provisions would be applied effective July 1, 2003.

We
have entered into operating leases with landlords and sale leaseback transactions with landlords that have been accounted for as operating leases and as transactions that qualify for
the use of sale leaseback accounting. Certain of these landlord relationships are considered variable interests, and it is possible that we may be required to consolidate such variable interest
entities when FASB Interpretation No. 46 becomes effective on July 1, 2003. The difference between consolidation and operating lease and or sale leaseback accounting treatment could
increase the amount of assets and indebtedness on our consolidated financial statements related to properties that we currently lease. We are in the process of identifying those landlords that qualify
as variable interest entities and those situations where we are the primary beneficiary, if any.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to various market risks including interest rate risk and foreign currency exchange rate risk. We do not hold any significant derivative financial
instruments.

Market risk on variable-rate financial instruments.We maintain a $375,000,000 credit facility, which permits
borrowings at interest rates based on either the bank's base rate or LIBOR. Increases in market interest rates would cause interest expense to increase and earnings before income taxes to decrease.
The change in interest expense and earnings before income taxes would be dependent upon the weighted average outstanding borrowings during the reporting period following an increase in market interest
rates. Because we had no borrowings on our credit facility as of April 3, 2003, a 100 basis point increase in market interest rates would have no effect on annual interest expense or earnings
before income taxes.

Market risk on fixed-rate financial instruments.Included in long-term debt are $200,000,000 of
91/2% Senior Subordinated Notes due 2009, $297,880,000 of 91/2% Senior Subordinated Notes due 2011 and $175,000,000 of 97/8% Senior Subordinated Notes due
2012. Increases in market interest rates would generally cause a decrease in the fair value of the notes due 2009, 2011 and 2012 and a decrease in market interest rates would generally cause an
increase in fair value of the Notes due 2009, 2011 and 2012.

Foreign currency exchange rates.We currently operate theatres in Canada, Portugal, Spain, France, Japan, Sweden, China (Hong
Kong) and the United Kingdom. As a result of these operations, we have assets, liabilities, revenues and expenses denominated in foreign currencies. The strengthening of the U.S. dollar against the
respective currencies causes a decrease in the carrying values of assets, liabilities, revenues and expenses denominated in such foreign currencies and the weakening of the U.S. dollar against the
respective currencies causes an increase in the carrying values of these items. The increases and

35

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decreases
in assets, liabilities, revenues and expenses are included in accumulated other comprehensive income. Changes in foreign currency exchange rates also impact the comparability of earnings in
these countries on a year-to-year basis. As the U.S. dollar strengthens, comparative translated earnings decrease, and as the U.S. dollar weakens comparative translated
earnings from foreign operations increase. Although we do not currently hedge against foreign currency exchange rate risk, we do not intend to repatriate funds from the operations of our international
theatres but instead intend to use them to fund current and future operations. A 10% fluctuation in the value of the U.S. dollar against all foreign currencies of countries where we currently operate
theatres would either increase or decrease loss before income taxes and accumulated other comprehensive loss by approximately $4.8 million and $12.5 million, respectively.

36

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Item 8.  Financial Statements and Supplementary Data.

RESPONSIBILITY FOR PREPARATION OF FINANCIAL STATEMENTS
AMC Entertainment Inc.

TO THE STOCKHOLDERS OF AMC ENTERTAINMENT INC.

The
accompanying consolidated financial statements and related notes of AMC Entertainment Inc. and subsidiaries were prepared by management in conformity with accounting principles generally
accepted in the United States of America appropriate in the circumstances. In preparing the financial statements, management has made judgments and estimates based on currently available information.
Management is responsible for the information; representations contained elsewhere in this Annual Report are consistent with the financial statements.

The
Company has a formalized system of internal accounting controls designed to provide reasonable assurance that assets are safeguarded and that its financial records are reliable. Management
monitors the system for compliance to measure its effectiveness and recommends possible improvements. The Company has a formalized system of internal accounting controls designed to provide reasonable
assurance that assets are safeguarded and that its financial records are reliable. Management monitors the system for compliance to measure its effectiveness and recommends possible improvements. As
part of their audit of the consolidated financial statements, the Company's independent accountants consider our internal controls over financial reporting solely for the purpose of determining the
nature, extent and timing of audit tests to be applied.

The
Audit Committee of the Board of Directors (consisting solely of Directors from outside the Company) reviews the process involved in the preparation of the Company's annual audited financial
statements, and in this regard meets (jointly and separately) with the independent accountants, management
and internal auditors to review matters relating to financial reporting and accounting procedures and policies, the adequacy of internal controls and the scope and results of the audit performed by
the independent accountants.

/s/
Peter C. Brown

Chairman
of the Board, Chief Executive Officer
and President

/s/
Craig R. Ramsey

Executive
Vice President and
Chief Financial Officer

37

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REPORT OF INDEPENDENT AUDITORS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF AMC ENTERTAINMENT INC.
KANSAS CITY, MISSOURI

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders' equity (deficit) and of cash flows present fairly, in all material
respects, the financial position of AMC Entertainment Inc. and subsidiaries (the "Company") at April 3, 2003 and March 28, 2002, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended April 3, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

As
discussed in Note 1 to the financial statements, the Company adopted Staff Accounting Bulletin No. 101,Revenue Recognition in Financial
Statements, retroactive to the beginning of fiscal year 2001.

/s/
PricewaterhouseCoopers LLP

Kansas
City, Missouri
May 27, 2003

38

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AMC Entertainment Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS

|(In thousands, except per share data)                                         |                                   | 53 Weeks Ended
April 3, 2003            |         | 52 Weeks Ended
March 28, 2002 |           | 52 Weeks Ended
March 29, 2001 |        
|----------------------------------------------------------------------------- | --------------------------------- | --------------------------------------- | ------- | ----------------------------- | --------- | ----------------------------- | -------
|Revenues                                                                      |                                   |                                         |         |                               |           |                               |        
|                                                                              | Admissions                        |                                         | $       | 1,217,083                     |           | $                             | 901,566
|                                                                              | Concessions                       |                                         |         | 469,966                       |           |                               | 359,042
|                                                                              | Other theatre                     |                                         |         | 48,828                        |           |                               | 40,156 
|                                                                              | NCN and other                     |                                         |         | 55,693                        |           |                               | 41,768 
|                                                                              |                                   |                                         |         |                               |           |                               |        
|                                                                              |                                   | Total revenues                          |         |                               | 1,791,570 |                               |        
|Costs and Expenses                                                            |                                   |                                         |         |                               |           |                               |        
|                                                                              | Film exhibition costs             |                                         |         | 663,416                       |           |                               | 487,577
|                                                                              | Concession costs                  |                                         |         | 58,520                        |           |                               | 45,756 
|                                                                              | Theatre operating expense         |                                         |         | 438,161                       |           |                               | 328,691
|                                                                              | Rent                              |                                         |         | 302,445                       |           |                               | 236,829
|                                                                              | NCN and other                     |                                         |         | 52,444                        |           |                               | 45,264 
|                                                                              | General and administrative        |                                         |         | 68,254                        |           |                               | 37,798 
|                                                                              | Preopening expense                |                                         |         | 3,227                         |           |                               | 4,345  
|                                                                              | Theatre and other closure expense |                                         |         | 5,416                         |           |                               | 2,124  
|                                                                              | Depreciation and amortization     |                                         |         | 127,020                       |           |                               | 99,742 
|                                                                              | Impairment of long-lived assets   |                                         |         | 19,563                        |           |                               | 4,668  
|                                                                              | Gain on disposition of assets     |                                         |         | (1,385                        | )         |                               | (1,821 
|                                                                              |                                   |                                         |         |                               |           |                               |        
|                                                                              |                                   | Total costs and expenses                |         |                               | 1,737,081 |                               |        
|                                                                              |                                   |                                         |         |                               |           |                               |        
|Other expense (income)                                                        |                                   |                                         |         |                               |           |                               |        
|                                                                              | Other expense (income)            |                                         |         |                              |           |                               | 3,754  
|                                                                              | Interest expense                  |                                         |         |                               |           |                               |        
|                                                                              |                                   | Corporate borrowings                    |         |                               | 65,585    |                               |        
|                                                                              |                                   | Capital and financing lease obligations |         |                               | 12,215    |                               |        
|                                                                              | Investment income                 |                                         |         | (3,509                        | )         |                               | (2,087 
|                                                                              |                                   |                                         |         |                               |           |                               |        
|Total other expense                                                           |                                   |                                         | 74,291  |                               |           | 62,427                        |        
|                                                                              |                                   |                                         |         |                               |           |                               |        
|Loss before income taxes and cumulative effect of accounting changes          |                                   |                                         | (19,802 | )                             |           | (10,868                       | )      
|Income tax provision                                                          |                                   |                                         | 500     |                               |           | 600                           |        
|                                                                              |                                   |                                         |         |                               |           |                               |        
|Loss before cumulative effect of accounting change                            |                                   |                                         | (20,302 | )                             |           | (11,468                       | )      
|Cumulative effect of accounting change (net of income tax benefit of $10,950) |                                   |                                         |        |                               |           |                              |        
|                                                                              |                                   |                                         |         |                               |           |                               |        
|Net loss                                                                      |                                   | $                                       | (20,302 | )                             | $         | (11,468                       | )      
|                                                                              |                                   |                                         |         |                               |           |                               |        
|Preferred dividends                                                           |                                   |                                         | 27,165  |                               |           | 29,421                        |        
|                                                                              |                                   |                                         |         |                               |           |                               |        
|Net loss for shares of common stock                                           |                                   | $                                       | (47,467 | )                             | $         | (40,889                       | )      
|                                                                              |                                   |                                         |         |                               |           |                               |        
|Loss per share of common stock before cumulative effect of accounting change: |                                   |                                         |         |                               |           |                               |        
|                                                                              |                                   | Basic and diluted                       |         | $                             | (1.31     | )                             | $      
|                                                                              |                                   |                                         |         |                               |           |                               |        
|Net loss per share of common stock                                            |                                   |                                         |         |                               |           |                               |        
|                                                                              |                                   | Basic and diluted                       |         | $                             | (1.31     | )                             | $      
|                                                                              |                                   |                                         |         |                               |           |                               |        

See Notes to Consolidated Financial Statements.

39

---

AMC Entertainment Inc.
CONSOLIDATED BALANCE SHEETS

|(In thousands, except share data)                                                                                             |                                                                                                                                                                                                                                                                                 | April 3,
2003 |                                            | March 28,
2002 |  
|----------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ------------------------------------------ | -------------- | -
|Assets                                                                                                                        |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|Current assets:                                                                                                               |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|Cash and equivalents                                                                                                          |                                                                                                                                                                                                                                                                                 | $             | 244,412                                    |                | $
|Receivables, net of allowance for doubtful accounts of $1,581 and $1,297 as of April 3, 2003 and March 28, 2002, respectively |                                                                                                                                                                                                                                                                                 |               | 27,545                                     |                |  
|Other current assets                                                                                                          |                                                                                                                                                                                                                                                                                 |               | 50,732                                     |                |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               | Total current assets                       |                |  
|Property, net                                                                                                                 |                                                                                                                                                                                                                                                                                 |               | 856,463                                    |                |  
|Intangible assets, net                                                                                                        |                                                                                                                                                                                                                                                                                 |               | 30,050                                     |                |  
|Goodwill                                                                                                                      |                                                                                                                                                                                                                                                                                 |               | 60,698                                     |                |  
|Deferred income taxes                                                                                                         |                                                                                                                                                                                                                                                                                 |               | 171,152                                    |                |  
|Other long-term assets                                                                                                        |                                                                                                                                                                                                                                                                                 |               | 50,646                                     |                |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               | Total assets                               |                | $
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|Liabilities and Stockholders' Equity                                                                                          |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|Current liabilities:                                                                                                          |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|                                                                                                                              | Accounts payable                                                                                                                                                                                                                                                                |               | $                                          | 116,269        |  
|                                                                                                                              | Accrued expenses and other liabilities                                                                                                                                                                                                                                          |               |                                            | 179,393        |  
|                                                                                                                              | Current maturities of corporate borrowings and capital and financing lease obligations                                                                                                                                                                                          |               |                                            | 2,565          |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               | Total current liabilities                  |                |  
|Corporate borrowings                                                                                                          |                                                                                                                                                                                                                                                                                 |               | 668,661                                    |                |  
|Capital and financing lease obligations                                                                                       |                                                                                                                                                                                                                                                                                 |               | 56,536                                     |                |  
|Other long-term liabilities                                                                                                   |                                                                                                                                                                                                                                                                                 |               | 176,370                                    |                |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               | Total liabilities                          |                |  
|Commitments and contingencies                                                                                                 |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|Stockholders' equity:                                                                                                         |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|                                                                                                                              | Series A Convertible Preferred Stock, 662/3¢ par value; 280,107 and 261,989 shares issued and outstanding as of April 3, 2003 and March 28, 2002, respectively (aggregate
liquidation preference of $284,828 and $266,406 as of April 3, 2003 and March 28, 2002, respectively) |               |                                            | 187            |  
|                                                                                                                              | Common Stock, 662/3¢ par value; 33,286,173 and 30,038,046 shares issued as of April 3, 2003 and March 28, 2002, respectively                                                                                                                                                    |               |                                            | 22,191         |  
|                                                                                                                              | Convertible Class B Stock, 662/3¢ par value; 3,051,597 and 3,801,545 shares issued and outstanding as of April 3, 2003 and March 28, 2002, respectively                                                                                                                         |               |                                            | 2,035          |  
|                                                                                                                              | Additional paid-in capital                                                                                                                                                                                                                                                      |               |                                            | 464,663        |  
|                                                                                                                              | Accumulated other comprehensive loss                                                                                                                                                                                                                                            |               |                                            | (8,773         | )
|                                                                                                                              | Accumulated deficit                                                                                                                                                                                                                                                             |               |                                            | (187,817       | )
|                                                                                                                              | Employee notes for Common Stock purchases                                                                                                                                                                                                                                       |               |                                            |               |  
|                                                                                                                              | Common Stock in treasury, at cost, 35,387 and 20,500 shares as of April 3, 2003 and March 28, 2002, respectively                                                                                                                                                                |               |                                            | (582           | )
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               | Total stockholders' equity                 |                |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               |                                            |                |  
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               | Total liabilities and stockholders' equity |                | $
|                                                                                                                              |                                                                                                                                                                                                                                                                                 |               |                                            |                |  

See Notes to Consolidated Financial Statements.

40

---

AMC Entertainment Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

|(In thousands)                                           |                                                                                                                    | 53 Weeks Ended
April 3, 2003 |                                        | 52 Weeks Ended
March 28, 2002 |         | 52 Weeks Ended
March 29, 2001 |         
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ---------------------------- | -------------------------------------- | ----------------------------- | ------- | ----------------------------- | --------
|INCREASE (DECREASE) IN CASH AND EQUIVALENTS              |                                                                                                                    |                              |                                        |                               |         |                               |         
|Cash flows from operating activities:                    |                                                                                                                    |                              |                                        |                               |         |                               |         
|                                                         | Net loss                                                                                                           |                              | $                                      | (20,302                       | )       | $                             | (11,468 
|                                                         | Adjustments to reconcile net loss to net cash provided by operating activities:                                    |                              |                                        |                               |         |                               |         
|                                                         | Depreciation and amortization                                                                                      |                              |                                        | 127,020                       |         |                               | 99,742  
|                                                         | Non-cash portion of special and stock-based compensation                                                           |                              |                                        | 12,670                        |         |                               | 442     
|                                                         | Impairment of long-lived assets                                                                                    |                              |                                        | 19,563                        |         |                               | 4,668   
|                                                         | Deferred income taxes                                                                                              |                              |                                        | (10,086                       | )       |                               | 9,026   
|                                                         | Gain on disposition of assets                                                                                      |                              |                                        | (1,385                        | )       |                               | (1,821  
|                                                         | Cumulative effect of accounting change                                                                             |                              |                                        |                              |         |                               |        
|                                                         | Change in assets and liabilities, net of effects from acquisition of GC Companies Inc.:                            |                              |                                        |                               |         |                               |         
|                                                         |                                                                                                                    |                              | Receivables                            |                               |         | (2,292                        | )       
|                                                         |                                                                                                                    |                              | Other assets                           |                               |         | 10,170                        |         
|                                                         |                                                                                                                    |                              | Accounts payable                       |                               |         | (14,723                       | )       
|                                                         |                                                                                                                    |                              | Accrued expenses and other liabilities |                               |         | 11,445                        |         
|                                                         | Other, net                                                                                                         |                              |                                        | (3,333                        | )       |                               | 1,256   
|                                                         |                                                                                                                    |                              |                                        |                               |         |                               |         
|                                                         | Net cash provided by operating activities                                                                          |                              |                                        | 128,747                       |         |                               | 101,091 
|                                                         |                                                                                                                    |                              |                                        |                               |         |                               |         
|Cash flows from investing activities:                    |                                                                                                                    |                              |                                        |                               |         |                               |         
|                                                         | Capital expenditures                                                                                               |                              |                                        | (100,932                      | )       |                               | (82,762 
|                                                         | Proceeds from sale/leasebacks                                                                                      |                              |                                        | 43,665                        |         |                               | 7,486   
|                                                         | Construction project costs:                                                                                        |                              |                                        |                               |         |                               |         
|                                                         |                                                                                                                    | Reimbursable by landlord     |                                        |                               | (38,586 | )                             |         
|                                                         |                                                                                                                    | Reimbursed by landlord       |                                        |                               | 13,259  |                               |         
|                                                         | Acquisition of GC Companies, Inc., net of cash acquired and proceeds from sale of venture capital investments      |                              |                                        | (47,314                       | )       |                               |        
|                                                         | Acquisition of Gulf States Theatres                                                                                |                              |                                        | (752                          | )       |                               | (45,020 
|                                                         | Purchase of leased furniture, fixtures and equipment                                                               |                              |                                        | (7,052                        | )       |                               | (23,739 
|                                                         | Proceeds from disposition of long-term assets                                                                      |                              |                                        | 5,494                         |         |                               | 6,647   
|                                                         | Other, net                                                                                                         |                              |                                        | (4,983                        | )       |                               | (4,243  
|                                                         |                                                                                                                    |                              |                                        |                               |         |                               |         
|                                                         | Net cash used in investing activities                                                                              |                              |                                        | (137,201                      | )       |                               | (144,510
|                                                         |                                                                                                                    |                              |                                        |                               |         |                               |         
|Cash flows from financing activities:                    |                                                                                                                    |                              |                                        |                               |         |                               |         
|                                                         | Repayments under Credit Facility                                                                                   |                              |                                        |                              |         |                               | (270,000
|                                                         | Proceeds from issuance of 97/8% Senior Subordinated Notes due 2012                                                 |                              |                                        |                              |         |                               | 172,263 
|                                                         | Net proceeds from sale of Common Stock                                                                             |                              |                                        |                              |         |                               | 100,800 
|                                                         | Net proceeds from sale of Preferred Stock                                                                          |                              |                                        |                              |         |                               | 230,022 
|                                                         | Construction project costs reimbursed by landlord                                                                  |                              |                                        | 29,612                        |         |                               | 881     
|                                                         | Principal payments under capital and financing lease obligations                                                   |                              |                                        | (2,580                        | )       |                               | (2,638  
|                                                         | Change in cash overdrafts                                                                                          |                              |                                        | 7,325                         |         |                               | (3,406  
|                                                         | Change in construction payables                                                                                    |                              |                                        | (528                          | )       |                               | 6,264   
|                                                         | Deferred financing costs and other                                                                                 |                              |                                        | (392                          | )       |                               | (5,307  
|                                                         |                                                                                                                    |                              |                                        |                               |         |                               |         
|                                                         | Net cash provided by (used in) financing activities                                                                |                              |                                        | 33,437                        |         |                               | 228,879 
|                                                         | Effect of exchange rate changes on cash and equivalents                                                            |                              |                                        | (3                            | )       |                               | (103    
|                                                         |                                                                                                                    |                              |                                        |                               |         |                               |         
|Net increase (decrease) in cash and equivalents          |                                                                                                                    |                              | 24,980                                 |                               |         | 185,357                       |         
|Cash and equivalents at beginning of year                |                                                                                                                    |                              | 219,432                                |                               |         | 34,075                        |         
|                                                         |                                                                                                                    |                              |                                        |                               |         |                               |         
|Cash and equivalents at end of year                      |                                                                                                                    | $                            | 244,412                                |                               | $       | 219,432                       |         
|                                                         |                                                                                                                    |                              |                                        |                               |         |                               |         
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:       |                                                                                                                    |                              |                                        |                               |         |                               |         
|Cash paid (refunded) during the period for:              |                                                                                                                    |                              |                                        |                               |         |                               |         
|                                                         | Interest (net of amounts capitalized of $4,095, $2,677 and $4,186 during fiscal 2003, 2002 and 2001, respectively) |                              | $                                      | 78,677                        |         | $                             | 59,824  
|                                                         | Income taxes, net                                                                                                  |                              |                                        | (9,757                        | )       |                               | (3,579  
|Schedule of non-cash investing and financing activities: |                                                                                                                    |                              |                                        |                               |         |                               |         
|                                                         | Preferred dividends                                                                                                |                              | $                                      | 27,165                        |         | $                             | 29,421  
|                                                         | See Note 2Acquisitions for information about the non-cash components of the acquisition of GC Companies, Inc.     |                              |                                        |                               |         |                               |         

See Notes to Consolidated Financial Statements.

41

---

AMC Entertainment Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

|                                                                                
|--------------------------------------------------------------------------------
|
|
|
|
|
|Balance, March 31, 2000                                                         
|Comprehensive Loss:                                                             
|Net loss                                                                        
|Foreign currency translation adjustment                                         
|Unrealized loss on marketable securities (net of income
    tax benefit of $145)
|Additional minimum pension liability                                            
|                                                                                
|Comprehensive Loss                                                              
|Accrued interest on employee notes
for Common Stock purchases                   
|                                                                                
|Balance, March 29, 2001                                                         
|Comprehensive Loss:                                                             
|Net loss                                                                        
|Foreign currency translation adjustment                                         
|Additional minimum pension liability                                            
|                                                                                
|Comprehensive Loss                                                              
|Sale of Common Stock                                                            
|Sale of Preferred Stock                                                         
|Conversion of Class B Stock                                                     
|Preferred Stock for dividends                                                   
|Preferred Stock dividends                                                       
|Preferred Stock accretion                                                       
|Deferred compensationrestricted stock awards                                   
|Unissued restricted stock awards                                                
|Accrued interest on employee notes for Common Stock
    purchases               
|                                                                                
|Balance, March 28, 2002                                                         
|Comprehensive Loss:                                                             
|Net loss                                                                        
|Foreign currency translation adjustment                                         
|Additional minimum pension liability                                            
|Unrealized loss on marketable securities                                        
|                                                                                
|Comprehensive Loss                                                              
|Stock issued in connection with acquisition of GC                               
|Conversion of Class B Stock                                                     
|Preferred Stock for dividends                                                   
|Preferred Stock dividends                                                       
|Preferred Stock accretion                                                       
|Stock awards, options exercised and other                                       
|Deferred compensationrestricted stock awards                                   
|Unissued restricted stock awards                                                
|Accrued interest on employee notes for Common Stock purchases                   
|Forgiveness of employee notes                                                   
|Treasury stock purchase                                                         
|                                                                                
|Balance, April 3, 2003                                                          
|                                                                                

See Notes to Consolidated Financial Statements

42

---

|                                                                                 | 
|-------------------------------------------------------------------------------- | 
|
|
|
|
|Balance, March 31, 2000                                                          | 
|Comprehensive Loss:                                                              | 
|Net loss                                                                         | 
|Foreign currency translation adjustment                                          | 
|Unrealized loss on marketable securities (net of income
    tax benefit of $145) | 
|Additional minimum pension liability                                             | 
|                                                                                 | 
|Comprehensive Loss                                                               | 
|Accrued interest on employee notes
for Common Stock purchases                    | 
|                                                                                 | 
|Balance, March 29, 2001                                                          | 
|Comprehensive Loss:                                                              | 
|Net loss                                                                         | 
|Foreign currency translation adjustment                                          | 
|Additional minimum pension liability                                             | 
|                                                                                 | 
|Comprehensive Loss                                                               | 
|Sale of Common Stock                                                             | 
|Sale of Preferred Stock                                                          | 
|Conversion of Class B Stock                                                      | 
|Preferred Stock for dividends                                                    | 
|Preferred Stock dividends                                                        | 
|Preferred Stock accretion                                                        | 
|Deferred compensationrestricted stock awards                                    | 
|Unissued restricted stock awards                                                 | 
|Accrued interest on employee notes for Common Stock
    purchases                | 
|                                                                                 | 
|Balance, March 28, 2002                                                          | 
|Comprehensive Loss:                                                              | 
|Net loss                                                                         | 
|Foreign currency translation adjustment                                          | 
|Additional minimum pension liability                                             | 
|Unrealized loss on marketable securities                                         | 
|                                                                                 | 
|Comprehensive Loss                                                               | 
|Stock issued in connection with acquisition of GC                                | 
|Conversion of Class B Stock                                                      | 
|Preferred Stock for dividends                                                    | 
|Preferred Stock dividends                                                        | 
|Preferred Stock accretion                                                        | 
|Stock awards, options exercised and other                                        | 
|Deferred compensationrestricted stock awards                                    | 
|Unissued restricted stock awards                                                 | 
|Accrued interest on employee notes for Common Stock purchases                    | 
|Forgiveness of employee notes                                                    | 
|Treasury stock purchase                                                          | 
|                                                                                 | 
|Balance, April 3, 2003                                                           | 
|                                                                                 | 

43

---

AMC Entertainment Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended April 3, 2003, March 28, 2002 and March 29, 2001

NOTE 1THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

AMC Entertainment Inc. ("AMCE") is a holding company which, through its direct and indirect subsidiaries, including American Multi-Cinema, Inc.
("AMC") and its subsidiaries, AMC Entertainment International, Inc. ("AMCEI") and National Cinema Network, Inc. ("NCN") (collectively with AMCE, unless the context otherwise requires,
the "Company"), is principally involved in the theatrical exhibition business throughout North America and in Portugal, Spain, France, Japan, Sweden, China (Hong Kong) and the United Kingdom. The
Company's North American theatrical exhibition business is conducted through AMC and AMCEI. The Company's International theatrical exhibition business is conducted through AMCEI. The Company is also
involved in the business of providing on-screen advertising and other services to AMC and other theatre circuits through a wholly-owned subsidiary, NCN.

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. Actual results could differ from those estimates.

Principles of Consolidation:The consolidated financial statements include the accounts of AMCE and
all subsidiaries. All significant intercompany balances and transactions have been eliminated.

Fiscal Year:The Company has a 52/53 week fiscal year ending on the Thursday closest to the
last day of March. Fiscal year 2003 reflects a 53 week period. The 2002 and 2001 fiscal years reflect a 52 week period.

Revenues and Film Exhibition Costs:Revenues are recognized when admissions and concessions sales are
received at the theatres. Film exhibition costs are accrued based on the applicable box office receipts and estimates of the final settlement pursuant to the film licenses. In connection with the
adoption of Staff Accounting Bulletin No. 101 ("SAB 101")Revenue Recognition in Financial Statementsin fiscal 2001, the Company changed
its revenue recognition policy related to the sales of gift certificates and discounted theatre tickets. The Company defers 100% of the revenue associated with the sales of discounted theatre tickets
and gift certificates (no revenue or income recognition for non-presentment) until such time as the items are redeemed or the gift certificate liabilities are extinguished and the
discounted theatre tickets expire. The Company adopted SAB No. 101 in the fourth fiscal quarter of 2001 retroactive to the beginning of the fiscal year.

Concession Costs:The Company accounts for vendor rebates as a reduction of concession costs when
earned in accordance with Emerging Issues Task Force Issue No. 02-16Accounting by a Customer (Including a Reseller) for Certain Consideration Received From
a Vendor.

Cash and Equivalents:Cash and equivalents consist of cash on hand and temporary cash investments
with original maturities of three months or less. The Company invests excess cash in deposits with major banks and in temporary cash investments. Such investments are made only in instruments issued
or enhanced by high quality financial institutions (investment grade or better). Amounts invested in a single institution are limited to minimize risk. As of April 3, 2003, approximately
$1,700,000 of our cash and equivalents collateralized certain stand-by letters of credit.

Under
the Company's cash management system, checks issued but not presented to banks frequently result in overdraft balances for accounting purposes and are classified within accounts
payable in the balance sheet. The amount of these checks included in accounts payable as of April 3, 2003 and March 28, 2002 was $39,076,000 and $31,751,000, respectively.

44

---

Property:Property is recorded at cost. The Company uses the straight-line method in
computing depreciation and amortization for financial reporting purposes and accelerated methods, with respect to certain assets, for income tax purposes. The estimated useful lives are as follows:

Buildings and improvements

3 to 40 yearsLeasehold improvements

1 to 20 yearsFurniture, fixtures and equipment

3 to 10 years


Expenditures
for additions (including interest during construction), major renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense
as incurred. The cost of assets retired or otherwise disposed of and the related accumulated depreciation and amortization are eliminated from the accounts in the year of disposal. Gains or losses
resulting from property disposals are credited or charged to operations.

Intangible Assets:Intangible assets are recorded at cost and are comprised of lease rights, amounts
assigned to theatre leases acquired under favorable terms, customer lists, non-competition and consulting agreements and trademarks, each of which are being amortized on a
straight-line basis over the estimated remaining useful lives of the assets. The gross carrying amount of intangible assets was $64,230,000 and $39,282,000 as of April 3, 2003 and
March 28, 2002, respectively. Accumulated amortization on intangible assets was $34,180,000 and $33,913,000 as of April 3, 2003 and March 28, 2002, respectively. Amortization
expense was $7,138,000, $2,420,000 and $3,415,000 in fiscal 2003, 2002 and 2001, respectively. The original useful lives of these assets ranged from 1 to 36 years and the remaining useful lives
range from 1 to 10 years.

Goodwill:Goodwill represents the excess of cost over fair value of net tangible and identifiable
intangible assets related to acquisitions of theatre circuits. The Company is not required to amortize goodwill as a charge to earnings; however, the Company is required to conduct an annual review of
goodwill for impairment.

The
Company's recorded goodwill was $60,698,000 as of April 3, 2003. We evaluate goodwill for impairment annually during the fourth fiscal quarter and any time an event occurs or
circumstances change that would more likely than not reduce the fair value for a reporting unit below its carrying amount. We consider our North American theatrical exhibition operating segment to be
the reporting unit for purposes of evaluating recorded goodwill for impairment. If the carrying value of the reporting unit exceeds its fair value we are required to reallocate the fair value of the
reporting unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. We determine fair value
by considering the market price of our common stock as well as multiples applied to cash flow estimates less net indebtedness which we believe is an appropriate method to determine fair value. There
is considerable management judgment with respect to cash flow estimates and appropriate multiples to be used in determining fair value and the market value of our common stock could be volatile.

Other Long-term Assets:Other long-term assets are comprised principally of
costs incurred in connection with the issuance of debt securities which are being amortized over the respective lives of the issuances and investments in real estate.

Preopening Expense:Preopening expense consists primarily of advertising and other
start-up costs incurred prior to the operation of new theatres and are expensed as incurred.

Theatre and Other Closure Expense:Theatre and other closure expense is primarily related to payments
made or expected to be made to landlords to terminate leases on certain of the Company's closed theatres, other vacant space or theatres where development has been discontinued. Theatre and other
closure expense is recognized at the time the theatre closes, space becomes vacant or development is discontinued. Expected payments to landlords are based on actual or discounted contractual amounts.
Accretion expense

45

---

for
exit activities initiated after December 31, 2002 is included as a component of theatre and other closure expense. The Company recorded theatre and other closure expense of $5,416,000,
$2,124,000 and $24,169,000 in fiscal 2003, 2002 and 2001, respectively. Accrued theatre and other closure expense is classified as current based upon management's intention to negotiate termination of
the related lease obligations within one year.

Impairment of Long-lived Assets:Management reviews long-lived assets,
including intangibles, for impairment as part of the Company's annual budgeting process and whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully
recoverable. Management reviews internal management reports on a quarterly basis as well as monitors current and potential future competition in film markets for indicators of triggering events or
circumstances that indicate potential impairment of individual theatre assets. Management evaluates its theatres using historical and projected data of theatre level cash flow as its primary indicator
of potential impairment and considers the seasonality of its business when evaluating theatres for impairment. Because the Christmas and New Years holiday results comprise a significant portion of the
Company's operating cash flow, the actual results from this period, which are available during the fourth quarter of each fiscal year, are an integral part of the Company's impairment analysis. As a
result of these analyses, if the sum of the estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount of the asset, an impairment loss is recognized in
the amount by which the carrying value of the asset exceeds its estimated fair value. Assets are evaluated for impairment on an individual theatre basis, which management believes is the lowest level
for which there are identifiable cash flows. The impairment evaluation is based on the estimated cash flows from continuing use until the expected disposal date plus the fair value of furniture,
fixtures and equipment. The expected disposal date does not exceed the remaining lease period and is often less than the remaining lease period when management does not expect to operate the theatre
to the end of its lease term. The fair value of assets is determined as either the expected selling price less selling costs (where appropriate) or the present value of the estimated future cash flows
plus the fair value of furniture, fixtures and
equipment. Fair value for furniture, fixtures and equipment has been determined using similar asset sales and in some instances independent third party valuation studies. There is considerable
management judgment necessary to determine the future cash flows, fair value and the expected operating period of a theatre, and accordingly, actual results could vary significantly from such
estimates.

If
theatres currently have sufficient estimated future cash flows to realize the related carrying amount of theatre assets, but management believes that it is not likely the theatre will
be operated to the end of its lease term, the estimated economic life of the theatre assets are revised to reflect management's best estimate of the economic life of the theatre assets for purposes of
recording depreciation.

Impairment
losses by operating segment follows:

|Impairment of long-lived assets (In thousands) |  | 2003 |        | 2002 |   | 2001 
|---------------------------------------------- |  | ---- | ------ | ---- | - | -----
|North American theatrical exhibition           |  | $    | 4,083  |      | $ |     
|International theatrical exhibition            |  |      | 15,480 |      |   | 4,668
|                                               |  |      |        |      |   |      
|Total impairments of long-lived assets         |  | $    | 19,563 |      | $ | 4,668
|                                               |  |      |        |      |   |      

Foreign Currency Translation:Operations outside the United States are generally measured using the
local currency as the functional currency. Assets and liabilities are translated at the rates of exchange at the balance sheet date. Income and expense items are translated at average rates of
exchange. The resultant translation adjustments are included in foreign currency translation adjustment, a separate component of accumulated other comprehensive income. Gains and losses from foreign
currency transactions, except those intercompany transactions of a long-term investment nature, are included in net earnings and have not been material.

46

---

Loss per Share:Basic loss per share is computed by dividing net loss by the weighted-average number
of common shares outstanding. The Company accounts for loss per share in accordance with EITF Topic No. D-95Effect of Participating Convertible Securities
on the Computation of Basic Earnings Per Share. Topic No. D-95 requires the inclusion of participating convertible securities in the computation of basic
earnings per common share. Topic No. D-95 permits the use of either the "if-converted" or the "two-class" method: the Company has selected the
"if-converted" method. The dilutive effect of the Company's Series A Convertible Preferred Stock is considered in the computation of basic earnings per common share in accordance
with Topic No. D-95. Under Topic No. D-95, the dilutive effect of the Series A Preferred on basic earnings per common share cannot be less than the amount
that would result from the application of the "two-class" method of computing basic earnings per common share. The "two-class" method is an earnings allocation formula that
determines earnings per share for the common stock and the participating Series A Preferred according to dividends declared and participating rights in the undistributed earnings as if all such
earnings were distributed. If dividends are paid on the common stock in any fiscal period, the holders of Series A Preferred shares are entitled to receive dividends on an "as converted" basis,
to the extent such dividends are greater than the face amount of Series A Preferred dividends otherwise payable in such fiscal period. Diluted loss per share includes the effects of outstanding
stock options, stock awards and Series A Convertible Preferred Stock, if dilutive.

Stock-based Compensation:The Company currently sponsors stock option plans and restricted stock
award plans as described in Note 6. The Company accounts for those plans under the recognition and measurement provisions of APB Opinion No. 25,Accounting for
Stock issued to Employees(APB No. 25) and related interpretations. Stock-based employee compensation expense related to restricted stock awards of $2,105,000 and
$442,000 was reflected in net loss for fiscal 2003 and 2002, respectively. No stock-based employee compensation expense for stock options was reflected in net loss for fiscal 2003, 2002 and 2001, as
all stock options granted under those plans had an exercise price equal to the fair market value of the underlying common stock on the date of grant.

The
following table reflects the weighted average fair value per option granted during each year, as well as the significant weighted average assumptions used in determining fair value
using the Black-Scholes option-pricing model:

|                                          |  | 2003  |  | 2002  |  | 2001 
|----------------------------------------- |  | ----- |  | ----- |  | -----
|Weighted average fair value on grant date |  | $8.82 |  | $4.16 |  | $1.36
|Risk-free interest rate                   |  | 2.6%  |  | 4.7%  |  | 5.5% 
|Expected life (years)                     |  | 5     |  | 5     |  | 5    
|Expected volatility                       |  | 67.7% |  | 66.8% |  | 61.1%
|Expected dividend yield                   |  |      |  |      |  |     

The
following table illustrates the effect on net loss and loss per share as if the fair value method had been applied to all stock awards and outstanding and unvested options in each
period:

|(In thousands, except per share data)          |             | 2003                                                                                             |   | 2002    |        | 2001 |        
|---------------------------------------------- | ----------- | ------------------------------------------------------------------------------------------------ | - | ------- | ------ | ---- | -------
|Net loss:                                      |             |                                                                                                  |   |         |        |      |        
|                                               | As reported |                                                                                                  | $ | (20,302 | )      | $    | (11,468
|                                               |             | Add: Stock based compensation expense included in reported net loss, net of related tax effects  |   |         | 1,263  |      |        
|                                               |             | Deduct: Total stock-based compensation expense determined under fair value method for all awards |   |         | (3,052 | )    |        
|                                               |             |                                                                                                  |   |         |        |      |        
|                                               | Pro forma   |                                                                                                  | $ | (22,091 | )      | $    | (12,185
|                                               |             |                                                                                                  |   |         |        |      |        
|Net loss per common share (basic and diluted): |             |                                                                                                  |   |         |        |      |        
|                                               | As reported |                                                                                                  | $ | (1.31   | )      | $    | (1.73  
|                                               | Pro forma   |                                                                                                  | $ | (1.36   | )      | $    | (1.76  

47

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Income Taxes:The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109")Accounting for Income Taxes. Under SFAS 109, deferred income tax effects of transactions
reported in different periods for financial reporting and income tax return purposes are recorded by the liability method. This method gives consideration to the future tax consequences of deferred
income or expense items and immediately recognizes changes in income tax laws upon enactment. The income statement effect is generally derived from changes in deferred income taxes on the balance
sheet.

Casualty Insurance:The Company is self-insured for general liability up to $400,000 per
occurrence and carries a $250,000 deductible limit per occurrence for workers compensation claims. The Company utilizes actuarial projections of its ultimate losses that it will be responsible for
paying. The actuarial method includes an allowance for adverse developments on known claims and an allowance for claims which have been incurred but which have not been reported. As of April 3,
2003 and March 28, 2002, the Company had recorded casualty insurance reserves of $19,765,000 and $23,275,000, respectively. The Company recorded expenses related to general liability and
workers compensation claims of $6,752,000, $10,304,000 and $6,667,000 in fiscal 2003, 2002 and 2001, respectively.

New Accounting Pronouncements:In July 2001, the Financial Accounting Standards Board ("FASB")
issued two new standards: Statement of Financial Accounting Standards No. 141 ("SFAS No. 141")Business Combinationsand SFAS
No. 142Goodwill and Other Intangible Assets. SFAS No. 141 requires that all business combinations be accounted for using one method (the
purchase method) and prescribes criteria for the initial recognition and measurement of goodwill and other intangible assets. SFAS No. 141 is effective for all business combinations completed
after June 30, 2001.

SFAS
No. 142 establishes new guidelines for accounting for goodwill and other intangible assets. The provisions of SFAS No. 142 state that goodwill and indefinite-lived
intangible assets will no longer be amortized and that goodwill and indefinite-lived intangible assets will be tested for impairment at least annually. SFAS No. 142 is effective for fiscal
years beginning after December 15, 2001. SFAS No. 142 became effective for the Company in fiscal 2003. However, goodwill and intangible assets acquired after June 30, 2001, were
subject immediately to the non-amortization and amortization provisions. Adoption of SFAS No. 141 and SFAS No. 142 did not have a material impact on the Company's
consolidated financial position, results of operations or cash flows.

In
August 2001, the FASB issued SFAS No. 143Accounting for Asset Retirement Obligations. SFAS No. 143 addresses the
recognition and remeasurement of obligations associated with the retirement of a tangible long-lived asset. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. SFAS No. 143 will become effective for the Company in fiscal 2004. Adoption of SFAS No. 143 is not expected to have a material impact on the Company's consolidated
financial position, results of operations or cash flows.

In
October 2001, the FASB issued SFAS No. 144Accounting for the Impairment or Disposal of Long-Lived Assets.
SFAS No. 144 applies to all long-lived assets (excluding goodwill) and discontinued operations and develops one accounting model for long-lived assets that are to be
disposed of by sale. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 became effective for the Company in fiscal 2003. Adoption of SFAS
No. 144 did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In
June 2002, the FASB issued SFAS No. 146Accounting for Costs Associated with Exit or Disposal Activities.SFAS
No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and requires that the liabilities associated with these costs be recorded at their
fair value in the period in which the liability is incurred. SFAS No. 146 was effective for the Company for disposal activities initiated after December 31, 2002 and did not have a
material impact on the Company's consolidated financial position, results of operations or cash flows.

48

---

In
December 2002, the FASB issued SFAS No. 148Accounting for Stock-Based CompensationTransition and
Disclosure.SFAS No. 148 amends SFAS No. 123Accounting for Stock-Based Compensationto provide alternative
methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148 became effective for the Company in fiscal year 2003 and will be effective for interim periods in fiscal year 2004.

In
April 2003, the FASB issued SFAS No. 149Amendment of Statement No. 133 on Derivative Instruments and Hedging
Activities.SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other
contracts. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except as stated below, and for hedging relationships designated after June 30,
2003. In addition, except as stated below, all provisions of SFAS No. 149 should be applied prospectively. The provisions of SFAS No. 149 relating to SFAS No. 133 Implementation
Issues that have been effective for fiscal quarters beginning prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. Adoption of SFAS
No. 149 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

In
May 2003, the FASB issued SFAS No. 150Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.
It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of these instruments were previously classified as equity.
SFAS No. 150 will be effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first interim period
beginning after June 15, 2003. For financial instruments created before the issuance date of SFAS No. 150 and still existing at the beginning of the interim period of adoption,
transition shall be achieved by reporting the cumulative effect of a change in accounting principle by initially measuring the financial instruments at fair value or other measurement attribute
required by SFAS No. 150. Instruments with characteristics of both liabilities and equity not addressed in SFAS No. 150 will be addressed in the next phase of the project. Adoption of
SFAS No. 150 is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In
November 2002, the FASB issued Interpretation No. 45,Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others.This interpretation elaborates on the disclosures to be made by a guarantor in interim and annual financial statements about the
obligations under certain guarantees. The Company adopted the disclosure provisions of FASB Interpretation No. 45 as of April 3, 2003. FASB Interpretation No. 45 also clarifies
that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial
measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The Company does not currently provide significant
guarantees on a routine basis. As a result, this interpretation did not have a material impact on the Company's financial statements. To the extent that the Company enters into any such guarantees
after December 31, 2002, it will record the fair value as a liability and an offsetting amount for an asset or expense depending on the circumstances in which the guarantee was issued.

In
January 2003, the FASB issued Interpretation No. 46,Consolidation of Variable Interest Entities. This interpretation
addresses the consolidation of business enterprises (variable interest entities) to which the usual condition of consolidation does not apply. This interpretation focuses on financial interests that
indicate control. It concludes that in the absence of clear control through voting interests, a company's

49

---

exposure
(variable interest) to the economic risks and potential rewards from the variable interest entity's assets and activities are the best evidence of control. Variable interests are rights and
obligations that convey economic gains or losses from changes in the values of the variable interest entity's assets and liabilities. Variable interests may arise from financial instruments, service
contracts, nonvoting ownership interests and other arrangements. If an enterprise holds a majority of the variable interests of an entity, it would be considered the primary beneficiary. The primary
beneficiary would be required to include assets, liabilities and the results of operations of the variable interest entity in its financial statements. This interpretation applies immediately to
variable interest entities that are created, or for which control is obtained after, January 31, 2003. For variable interest entities created prior to February 1, 2003, the provisions
would be applied effective July 1, 2003.

The
Company has entered into operating leases with landlords and sale leaseback transactions with landlords that have been accounted for as operating leases and as transactions that
qualify for the use of sale leaseback accounting. Certain of these landlord relationships are considered variable interests, and it is possible that the Company could be required to consolidate such
variable interest entities when FASB Interpretation No. 46 becomes effective on July 1, 2003. The difference between consolidation and operating lease and or sale leaseback accounting
treatment could increase the amount of assets and indebtedness on our consolidated financial statements related to properties that the Company currently leases. The Company is in the process of
identifying those landlords that qualify as variable interest entities and those situations where it is the primary beneficiary, if any.

Presentation:Certain amounts have been reclassified from prior period consolidated financial
statements to conform with the current year presentation.

NOTE 2ACQUISITIONS

On March 15, 2002, the Company acquired the operations and related assets of Gulf States Theatres ("GST") for a cash purchase price of $45,772,000 (see
Note 15Related Party Transactions). In connection with the acquisition, the Company leased five theatres with 68 screens in the New Orleans, Louisiana area. All five of the
theatres feature stadium seating and have been built since 1997 and strengthen the Company's position in the New Orleans market. The following is a summary of the allocation of the purchase price to
the assets acquired from GST, based on an independent third party valuation study:

(In thousands)Property

$
11,396Intangible assets


8,540Goodwill


25,836Total purchase price

$
45,772


Amounts
recorded for goodwill are not subject to amortization, are recorded at the Company's North American theatrical exhibition operating segment (the reporting unit) and are expected
to be deductible for tax purposes.

The
Company will pay $300,000 annually for five years in connection with consulting and non-competition agreements related to the acquisition.

50

---

Amounts allocated to intangible assets relate to $8,200,000 for a non-competition and consulting agreement and $340,000 for an acquired trademark. The amortization periods
for the non-competition and consulting agreement and trademark are seven years and 20 years, respectively. Amortization expense and accumulated amortization are as follows:

(In thousands)

2003

2002Amortization expense of non-competition and consulting agreement

$
1,171

$
Amortization expense of trademark


17


Total

$
1,188

$



(In thousands)

2003

2002Accumulated amortization of non-competition and consulting agreement

$
1,171

$
Accumulated amortization of trademark


17


Total

$
1,188

$



Estimated
amortization expense for each of the next five fiscal years is $1,171,000 under the non-competition and consulting agreement and $17,000 for the trademark.

On
March 29, 2002, the Company acquired GC Companies, Inc. ("GC") pursuant to a plan of reorganization sponsored by the Company for an estimated purchase price of
$169,169,000 (net of $6,500,000 from the sale of GC's portfolio of venture capital investments on the effective date), which includes cash payments of $70,732,000, the issuance of $72,880,000
aggregate principal amount of 91/2% Senior Subordinated Notes due 2011 with a fair value of $71,787,000 and the issuance of 2,430,429 shares of common stock, with an aggregate fair
value of $33,151,000 based on a fair value of $13.64 per share (the closing price per share on the effective date of the plan). The acquisition includes 66 theatres with 621 screens in the
United States, 3 managed theatres with 20 screens in the United States and a 50% interest in a joint venture that operates 17 theatres with 160 screens in Argentina, Chile, Brazil and Uruguay.

As
of April 3, 2003, $6,450,000 of the cash portion of the estimated purchase price was unpaid. The purchase price is based on current estimates of the amount of "deduction
claims" under the plan of reorganization. The exact purchase price will not be determinable until all creditor claims disputed by GC's post-confirmation unsecured creditors committee are
consensually resolved or are determined by the bankruptcy court, and that process is ongoing. Under the plan, an increase in the amount of deduction claims, which are paid in cash, will reduce the
amount of common stock we issue to unsecured creditors, and vice versa. Although the purchase price should not change materially as a result of the resolution of disputed claims, the ultimate amount
of cash and common stock components may vary from current estimates. Acquisition of GC's theatre circuit expands the Company's national footprint of industry-leading theatres, especially in key
markets in the Northeast and upper Midwest.

The
GC subsidiary which held its interest in the South American theatre joint venture was not subject to the jurisdiction of the bankruptcy court and the joint venture's lenders retain
liens on the Argentine and Chilean entities. Prior to the Company's acquisition of GC, its joint venture defaulted on its Argentine and Chilean loan agreements as the debts thereunder became due in
December 2001 and payment was not made in accordance with the agreements. However, in connection with the plan of reorganization, one of the Company's wholly-owned subsidiaries acquired, at
par, a 25% undivided, non-voting, economic participation interest in the joint venture's loans for an aggregate purchase price of $10.96 million, whereupon the GC guaranties were
released and the lenders agreed to extend the final maturity date of the loans. The joint venture is currently renegotiating payment terms related to these loans. Non-compliance with
covenants applicable to these loans could result in an acceleration of the loan

51

---

payment
terms or default. Because of such considerations the Company attributes little or no value to its investment in the joint venture and participation interest in the joint venture's loans.

The
following is a summary of the allocation of the purchase price to the assets and liabilities of GC based on estimates of fair value from an independent third party valuation study
and the final settlement of liabilities assumed from GC:

(In thousands)Cash and equivalents

$
10,468Current assets


12,828Property


133,509Intangible assets


23,318Goodwill


34,862Deferred income taxes


35,700Other long-term assets


7,738Current liabilities


(32,113
)Other long-term liabilities


(57,141
)Total purchase price

$
169,169


Amounts
recorded for goodwill are not subject to amortization, are recorded at the Company's North American theatrical exhibition operating segment (the reporting unit) and are not
expected to be deductible for tax purposes.

Amounts
allocated to intangible assets relate to $19,664,000 of favorable leases assumed from GC and gift certificate and discount ticket customer lists of $3,654,000. The weighted
average amortization period for favorable leases and customer lists is approximately 10 years and 2 years, respectively. Amortization expense and accumulated amortization are as follows:

(In thousands)

2003

2002Amortization expense of favorable leases

$
2,241

$
Amortization expense of customer lists


1,725


Total

$
3,966

$



(In thousands)

2003

2002Accumulated amortization of favorable leases

$
2,241

$
Accumulated amortization of customer lists


1,725


Total

$
3,966

$



Estimated
amortization expense for the next five fiscal years is as follows:

(In thousands)

Favorable
Leases

Customer
Lists

Total2004

$
2,040

$
1,929

$
3,9692005


2,033





2,0332006


2,033





2,0332007


1,929





1,9292008


1,892





1,892


The
unaudited pro forma financial information presented below sets forth the Company's historical statements of operations for the periods indicated and give effect to the acquisitions
of GC and GST as adjusted for the related purchase price allocations. Such information is presented for comparative

52

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purposes
only and does not purport to represent what the Company's results of operations would actually have been had these transactions occurred on the date indicated or to project its results of
operations for any future period or date.

(In thousands, except per share data)

2003

Pro Forma
2002(unaudited)RevenuesAdmissions

$
1,217,083

$
1,125,999Concessions


469,966


455,465Other theatre


48,828


52,518NCN and other


55,693


41,768Total Revenues


1,791,570


1,675,750Costs and ExpensesFilm exhibition costs


663,416


608,175Concession costs


58,520


61,823Theatre operating expense


438,161


428,221Rent


302,445


288,123NCN and other


52,444


45,264General and administrative


68,254


39,397Preopening expense


3,227


4,345Theatre and other closure expense


5,416


2,124Reorganization items





6,026Depreciation and amortization


127,020


122,822Impairment of long-lived assets


19,563


4,668Gain on disposition of assets


(1,385
)

(1,821
)Total costs and expenses


1,737,081


1,609,167Other expense





3,754Interest expenseCorporate borrowings


65,585


57,911Capital and financing lease obligations


12,215


9,773Investment income


(3,509
)

(2,087
)Total other expense


74,291


69,351Loss before income taxes


(19,802
)

(2,768
)Income tax provision


500


3,600Net loss

$
(20,302
)
$
(6,368
)Preferred dividends


27,165


29,421Net loss for shares of common stock

$
(47,467
)
$
(35,789
)Net loss per share of common stock:Basic

$
(1.31
)
$
(1.37
)Diluted

$
(1.31
)
$
(1.37
)Average shares outstanding:Basic


36,296


26,107Diluted


36,296


26,107


53

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NOTE 3PROPERTY

A summary of property is as follows:

(In thousands)

2003

2002Property owned:Land

$
34,563

$
41,800Buildings and improvements


255,950


255,555Leasehold improvements


399,891


298,117Furniture, fixtures and equipment


799,082


696,3491,489,486


1,291,821Lessaccumulated depreciation and amortization


640,709


520,590848,777


771,231Property leased under capital leases:Buildings and improvements


29,119


27,015Lessaccumulated amortization


21,433


22,1337,686


4,882$
856,463

$
776,113


Included
in property is $69,968,000 and $36,774,000 of construction in progress as of April 3, 2003 and March 28, 2002, respectively.

54

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NOTE 4SUPPLEMENTAL BALANCE SHEET INFORMATION

Other assets and liabilities consist of the following:

(In thousands)

2003

2002Other current assets:Prepaid rent

$
24,847

$
17,975Deferred income taxes


15,793


14,044Income taxes receivable





8,483Other


10,092


7,914$
50,732

$
48,416Other long-term assets:Investments in real estate

$
11,996

$
11,193Deferred financing costs


13,093


14,624Other


25,557


22,437$
50,646

$
48,254Accrued expenses and other liabilities:Income taxes payable

$
4,080

$
Taxes other than income


29,613


20,286Interest


8,952


7,915Payroll and vacation


10,039


6,655Casualty claims and premiums


7,955


4,187Deferred income


65,248


47,570Accrued bonus


14,126


12,996Theatre and other closure


21,011


23,609Unpaid acquisition costs


6,450


Other


11,919


12,978$
179,393

$
136,196


(In thousands)

2003

2002Other long-term liabilities:Deferred rent and unfavorable leases

$
111,657

$
52,988Casualty claims and premiums


11,810


19,088Pension and other benefits


20,459


18,390Deferred income


7,185


10,748Deferred gain


11,402


10,964Advance sale leaseback proceeds


6,994


2,085Theatre and other closure


1,488


531Other


5,375


5,235$
176,370

$
120,029


55

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NOTE 5CORPORATE BORROWINGS AND CAPITAL AND FINANCING LEASE OBLIGATIONS

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

(In thousands)

2003

2002Credit Facility due 2004

$


$
91/2% Senior Subordinated Notes due 2009


200,000


200,00091/2% Senior Subordinated Notes due 2011


297,880


225,00097/8% Senior Subordinated Notes due 2012


175,000


175,000Discounts on Senior Subordinated Notes


(4,219
)

(3,460
)Capital and financing lease obligations, interest ranging from 71/4% to 20%


59,101


57,056727,762


653,596Less-current maturities


2,565


2,627$
725,197

$
650,969


Minimum
annual payments required under existing capital and financing lease obligations (net present value thereof) and maturities of corporate borrowings as of April 3, 2003 are
as follows:

|           |  | Capital and Financing Lease Obligations |         |  |   |       
|---------- |  | --------------------------------------- | ------- |  | - | ------
|
|2004       |  | $                                       | 10,164  |  | $ | 7,599 
|2005       |  |                                         | 9,852   |  |   | 7,193 
|2006       |  |                                         | 9,608   |  |   | 6,793 
|2007       |  |                                         | 9,240   |  |   | 6,387 
|2008       |  |                                         | 8,499   |  |   | 5,977 
|Thereafter |  |                                         | 92,643  |  |   | 46,956
|           |  |                                         |         |  |   |       
|Total      |  | $                                       | 140,006 |  | $ | 80,905
|           |  |                                         |         |  |   |       

Credit Facility

The Company maintains a $375,000,000 credit facility (the "Credit Facility"), which permits borrowings at interest rates based on either the bank's base rate or
LIBOR and requires an annual commitment fee based on margin ratios that could result in a rate of .375% or .500% on the unused portion of the commitment. The Credit Facility matures on
April 10, 2004. The commitment thereunder will be reduced by $25,000,000 on each of June 30, 2003 and September 30, 2003 and by $50,000,000 on December 31, 2003. The total
commitment under the Credit Facility as of April 3, 2003 is $375,000,000; however, the Credit Facility contains covenants that limit the Company's ability to incur debt. As of April 3,
2003, the Company had no outstanding borrowings under the Credit Facility and approximately $363,000,000 was available for borrowing under the Credit Facility.

Covenants
under the Credit Facility impose limitations on indebtedness, creation of liens, change of control, transactions with affiliates, mergers, investments, guaranties, asset sales,
dividends, business activities and pledges. In addition, the Credit Facility contains certain financial covenants. As of April 3, 2003, the Company was in compliance with all financial
covenants relating to the Credit Facility.

Costs
related to the establishment of the Credit Facility were capitalized and are charged to interest expense over the life of the Credit Facility. Unamortized issuance costs of
$106,000 as of April 3, 2003 are included in other long-term assets.

56

---

Notes Due 2009

On March 19, 1997, the Company sold $200,000,000 aggregate principal amount of 91/2% Senior Subordinated Notes due 2009 (the "Notes due
2009"). The Notes due 2009 bear interest at the rate of 91/2% per annum, payable in March and September. The Notes due 2009 are redeemable at the option of the Company, in whole or in
part, at any time on or after March 15, 2002 at 104.75% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after March 15, 2006, plus in
each case interest accrued to the redemption date. Upon a change of control (as defined in the Indenture), each holder of the Notes due 2009 will have the right to require the Company to repurchase
such holder's Notes due 2009 at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. The Notes due 2009 are subordinated to all existing
and future senior indebtedness, as defined in the Indenture, of the Company. The Notes due 2009 are unsecured senior subordinated indebtedness of the Company ranking equally with the Company's Notes
due 2011 and Notes due 2012.

The
Indenture to the Notes due 2009 contains certain covenants that, among other things, limit the ability of the Company and its subsidiaries to incur additional indebtedness and pay
dividends or make distributions in respect of their capital stock. If the Notes due 2009 attain "investment grade status", the covenants in the Indenture limiting the Company's ability to incur
additional indebtedness and pay dividends will cease to apply. As of April 3, 2003, the Company was in compliance with all financial covenants relating to the Notes due 2009.

The
discount on the Notes due 2009 is being amortized to interest expense following the interest method. Costs related to the issuance of the Notes due 2009 were capitalized and are
charged to interest expense, following the interest method, over the life of the securities. Unamortized issuance costs of $4,025,000 as of April 3, 2003 are included in other
long-term assets.

Notes Due 2011

On January 27, 1999, the Company sold $225,000,000 aggregate principal amount of 91/2% Senior Subordinated Notes due 2011 and on
March 29, 2002, the Company issued an additional $72,880,000 aggregate principal amount of Notes due 2011 in connection with the acquisition of GC (the "Notes due 2011").
The Notes due 2011 bear interest at the rate of 91/2% per annum, payable in February and August. The Notes due 2011 are redeemable at the option of the Company, in whole or in part, at
any time on or after February 1, 2004 at 104.75% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after February 1, 2007, plus in each
case interest accrued to the redemption date. Upon a change of control (as defined in the Indenture), the Company will be required to make an offer to repurchase each holder's notes at a price equal
to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. The Notes due 2011 are subordinated to all existing and future senior indebtedness of the Company.
The Notes due 2011 are unsecured senior subordinated indebtedness of the Company ranking equally with the Company's Notes due 2009 and Notes due 2012.

The
Indenture to the Notes due 2011 contains certain covenants that, among other things, limit the ability of the Company and its subsidiaries to incur additional indebtedness and pay
dividends or make distributions in respect of their capital stock. If the Notes due 2011 attain "investment grade status", the covenants in the Indenture limiting the Company's ability to incur
additional indebtedness and pay dividends will cease to apply. As of April 3, 2003, the Company was in compliance with all financial covenants relating to the Notes due 2011.

The
discount on the Notes due 2011 is being amortized to interest expense following the interest method. Costs related to the issuance of the Notes due 2011 were capitalized and are
charged to interest expense, following the interest method, over the life of the securities. Unamortized issuance costs of $4,036,000 as of April 3, 2003 are included in other
long-term assets.

57

---

Notes Due 2012

On January 16, 2002, the Company sold $175,000,000 aggregate principal amount of 97/8% Senior Subordinated Notes due 2012 (the "Notes due
2012"). The Notes due 2012 bear interest at the rate of 97/8% per annum, payable in February and August. The Notes due 2012 are redeemable at the option of the Company, in whole or in
part, at any time on or after February 1, 2007 at 104.938% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after February 1, 2010, plus
in each case interest accrued to the redemption date. Upon a change of control (as defined in the Indenture), the Company will be required to make an offer to repurchase each holder's notes at a price
equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. The Notes due 2012 are subordinated to all existing and future senior indebtedness of the
Company. The Notes due 2012 are unsecured senior subordinated indebtedness of the Company ranking equally with the Company's Notes due 2009 and Notes due 2011.

The
Indenture to the Notes due 2012 contains certain covenants that, among other things, limit the ability of the Company and its subsidiaries to incur additional indebtedness and pay
dividends or make distributions in respect of their capital stock. If the Notes due 2012 attain "investment grade status", the covenants in the Indenture limiting the Company's ability to incur
additional indebtedness and pay dividends will cease to apply. As of April 3, 2003, the Company was in compliance with all financial covenants relating to the Notes due 2012.

The
discount on the Notes due 2012 is being amortized to interest expense following the interest method. Costs related to the issuance of the Notes due 2012 were capitalized and are
charged to interest expense, following the interest method, over the life of the securities. Unamortized issuance costs of $4,926,000 as of April 3, 2003 are included in other
long-term assets.

Capital and Financing Lease Obligations

Occasionally, the Company is responsible for the construction of leased theatres and for paying project costs that are in excess of an agreed upon amount to be
reimbursed from the developer. Emerging Issues Task Force (EITF) Issue No. 97-10The Effect of Lessee Involvement in Asset
Constructionrequires the Company to be considered the owner (for accounting purposes) of these types of projects during the construction period. As a result, the Company has
recorded $37,632,000 and $37,776,000 as financing lease obligations on its Consolidated Balance Sheets related to these types of projects as of April 3, 2003 and March 28, 2002,
respectively.

The
Company's lenders issue letters of credit on behalf of the Company in the normal course of its business. The outstanding amount on these letters of credit was $14,731,000 as of
April 3, 2003 with maturity dates ranging from June 2003 to December 2004.

NOTE 6STOCKHOLDERS' EQUITY

The Company has two classes of common stock outstanding which do not provide for different dividend rates or other preferences, other than voting rights, between
the two classes of common stock.

Voting Rights

The holders of Common Stock are entitled to one vote per share and, except for the election of directors, vote together as a single class with the holders of the
Company's Class B Stock and holders of our Series A Convertible Preferred Stock who are entitled to vote their shares, on an as-converted basis, subject to the right to vote
as a separate class as required by law and on certain charter amendments affecting the number of authorized shares of common stock or the par value or relative powers, preferences or special rights
thereof.

58

---

The
holders of Class B Stock are entitled to ten votes per share and, except for the election of directors, vote together as a single class with the holders of Common Stock and
holders of the Company's Series A Convertible Preferred Stock who are entitled to vote their shares, on an as-converted basis, subject to the right to vote as a separate class as
required by law and on certain charter amendments affecting the number of authorized shares of Class B Stock or the par value or relative powers, preferences or special rights thereof.

Under
the Company's investment agreement with the initial purchasers of the Company's Preferred Stock, the Company cannot change the size of the Board of Directors, which presently has
eight members, without the approval of the initial purchasers as long as they continue to own at least 117,500 shares of Preferred Stock. Also, so long as the initial purchasers continue to hold this
and other preferred stock approval rights, the initial purchasers will have the right to elect three directors to the Company's Board of Directors. The remaining members of the board are elected by
the holders of Common Stock and Class B stock. Under the Company's restated and amended certificate of incorporation, presently holders of Common Stock, voting separately as a class, have the
right to elect two directors, and the holders of Common Stock and Class B Stock, voting together as a single class, with each share of Common Stock having one vote per share and each share of
Class B Stock having ten votes per share, have the right to elect three directors. In the event that no shares of Class B Stock
remain outstanding, the holders of Common Stock may elect all of the members of the Board of Directors to be elected by holders other than holders of Preferred Stock, with each share having one vote
for such purpose. Holders of Common Stock and Class B Stock do not have cumulative voting rights in elections of directors.

Upon
transfer of shares of Series A Convertible Preferred Stock to a transferee that is not an affiliate of the initial purchasers, the transferee holder of Series A
Convertible Preferred Stock is entitled to vote on an as-converted basis with the holders of the Company's Common Stock and Class B Stock on all matters except the election of
directors and any matter reserved by law or the Company's restated and amended certificate of incorporation for consideration exclusively by the holders of Common Stock or Class B Stock.
Holders of the Series A Convertible Preferred Stock also have the right to vote as a class on the creation, authorization or issuance of any class, series or shares of senior stock, parity
stock or junior stock (if the junior stock may be redeemed at the option of the holders thereof prior to April 19, 2011) and on any adverse change to the preference, rights and powers of the
Series A Convertible Preferred Stock.

If
an event of default with respect to the Company's Preferred Stock (as defined below) occurs and is not cured or waived within 45 days, then the holders of Preferred Stock will
have the right to elect that number of directors that, when added to those directors already elected by the holders of Series A Convertible Preferred Stock, constitute a majority of the Board
of Directors. An "event of default" is defined as (i) an event of default under the Company's credit facility, the note indentures or any other indebtedness in excess of $10 million,
(ii) the Company's failure to pay cash dividends on the Preferred Stock when required under the terms thereof or (iii) the Company's violation of the provisions of the investment
agreement relating to the preferred stock approval rights.

Equity Securities

The authorized common stock of AMCE consists of two classes of stock: Common Stock (662/3¢ par value; 200,000,000 shares authorized)
and Class B Stock (662/3¢ par value; 30,000,000 shares authorized). Holders of Class B Stock may elect to convert at any time on a
share-for-share basis into Common Stock.

The
Company has authorized 10,000,000 shares of Preferred Stock (662/3¢ par value), of which 2,000,000 shares have been designated under the Company's
Certificate of Designations as Series A Convertible Preferred Stock ("Series A Preferred") and 2,000,000 shares have been designated as Series B Exchangeable Preferred Stock
("Series B Preferred", and collectively with the Series A Preferred, the "Preferred Stock"). As of April 3, 2003, 280,107 Series A Preferred shares were issued and
outstanding.

59

---

On
March 29, 2002, the Company acquired GC pursuant to a plan of reorganization sponsored by the Company for an estimated purchase price of $169,169,000 (net of $6,500,000 from
the sale of GC's portfolio of venture capital investments on the effective date), which included the issuance of 2,430,429 shares of common stock, with an aggregate fair value of $33,151,000 based on
a fair value of $13.64 per share (the closing price per share on the effective date of the plan).

On
March 19, 2002, the Company completed a public offering of 9,000,000 shares of Common Stock at a public offering price of $10.50 per share and granted the underwriters a
30 day option to purchase an additional 1,350,000 shares of Common Stock at $10.50 per share to cover over-allotments. On March 28, 2002, the underwriters exercised
their option to purchase these shares. Net proceeds from the offering of the shares of Common Stock of $100,800,000 were used to fund the acquisition of GC and will be used to pursue the Company's
current business strategy including acquisitions of other theatres and theatre circuits.

On
April 19, 2001, the Company issued 92,000 shares of Series A Preferred and 158,000 shares of Series B Preferred at a price of $1,000 per share. Net
proceeds from the issuance of approximately $225,000,000 were used to repay borrowings under the Credit Facility. On September 13, 2001, all shares of Series B Preferred were exchanged
for an equal number of shares of Series A Preferred. The Preferred Stock has preference in liquidation equal to the greater of $1,000 per share plus accrued and unpaid dividends, or the
amount that would have been payable if the Preferred Stock were converted into Common Stock.

The
Series A Preferred is convertible at the option of the holder into shares of Common Stock at a conversion price of $7.15 per Common Stock share (as adjusted, the
"Conversion Price") resulting in a current conversion rate of 139.86 shares of Common Stock for each share of Series A Preferred.

Dividends
on the Series A Preferred accumulate at an annual rate of 6.75% and are payable when, as and if declared by the Company's Board of Directors. Dividends on the
Series A Preferred must be paid with additional Series A Preferred shares for the first three years from April 19, 2001. Between April 20, 2004 and April 19, 2008,
dividends may be paid in either additional Series A Preferred shares or cash, at the Company's option, and must be paid in cash after April 19, 2008, unless prohibited by the Indentures
for the Notes due 2009 and Notes due 2011, in which case such dividends are payable in additional Series A Preferred shares.

Preferred
Stock dividends paid in shares of Preferred Stock are recorded at their estimated fair value on the date of declaration. The carrying value of Series A Preferred is
accreted to its redemption price (including any accrued and unpaid dividends) over ten years (the period from initial issuance until redemption first becomes available to the holder of the security)
using the interest method. During fiscal 2003, the Company recorded dividends of 18,422 shares of Series A Preferred valued at $27,165,000. During fiscal 2002, the Company recorded dividends of
16,406 shares of Series A Preferred valued at $29,421,000.

The
holders of Series A Preferred shares are also entitled to a special dividend of additional Series A Preferred shares if a Change of Control (as defined in the
Certificate of Designations) of the Company occurs prior to April 19, 2006 equal to the dividends that they would have received through April 19, 2006 if the Change of Control had not
occurred. If dividends are paid on the Common Stock in any fiscal period, the holders of Series A Preferred shares are entitled to receive dividends on an "as converted" basis to the extent
such dividends are greater than the Series A Preferred dividends otherwise payable in such fiscal period.

The
Preferred Stock may be redeemed in whole and not in part by the Company at the Company's option at any time after April 19, 2006 for cash equal to the liquidation preference,
provided that the average Common Stock closing price for the 20 trading days preceding the notice of redemption exceeds 150% of the Conversion Price. The Series A Preferred must be redeemed by
the Company at the option of

60

---

a
holder at any time after April 19, 2011 for cash or Common Stock, at the Company's option, at a price equal to the Series A Preferred liquidation preference.

The
initial purchasers of the Preferred Stock have the right to approve the payment of dividends on the Company's other capital stock.

In
addition, during the period that they are entitled to elect three Directors, the initial purchasers of the Company's Preferred Stock must approve certain corporate actions before the
Company may take them. These Preferred Stock Approval Rights include but are not limited to, limitations on the Company's ability to:



In
July 2001, the SEC issued a Staff Announcement which was codified as EITF Topic No. D-98. During fiscal 2002, we adopted Topic No. D-98 Classification and Measurement of Redeemable Securities. Topic No. D-98 provides additional guidance about determining when an equity
security is redeemable at the option of the holder or upon the occurrence of an event that is solely within the control of the issuer. There was no impact to our consolidated financial position,
results of operations or cash flows as a result of adopting Topic No. D-98. We believe that adoption of Topic No. D-98 will not require a restatement of financial
statements until such time, if ever, that (i) the holders of our Preferred Stock either (a) are entitled to elect a majority of the board of directors or (b) could convert a
portion of their Preferred Stock into a sufficient number of shares of common stock to gain control of the board of directors and (ii) our optional right to redeem the Preferred Stock is
unconditional. Such circumstances do not presently exist and we believe should not exist prior to 2006, if ever.

During
fiscal 1999, the Company loaned one of its executive officers $5,625,000 to purchase 375,000 shares of Common Stock of the Company in a secondary offering. During fiscal 1999, the
Company also loaned $3,765,000 to another of its executive officers to purchase 250,000 shares of Common Stock of the Company. The 250,000 shares were purchased in the open market and unused proceeds
of $811,000 were repaid to the Company leaving a remaining unpaid principal balance of $2,954,000. The loans were unsecured and were due in August and September of 2003, respectively, could be prepaid
in part or full without penalty and were represented by promissory notes which bore interest at a rate (6% per annum) at least equal to the applicable federal rate prescribed by Section 1274(d)
of the Internal Revenue Code in effect on the date of such loans, payable at maturity. Based on the recommendation of the Compensation Committee, on May 13, 2002 the Company's Board of
Directors approved the forgiveness of $10,538,000 of principal and accrued interest on the loans to the two executive officers together with the payment of $8,712,000 of federal, state and payroll
related taxes on behalf of the executive officers in connection with the loan forgiveness and recorded these amounts as general and administrative expense. Such loan forgiveness was effective as of
June 6, 2002 pursuant to agreements between the Company and each of the executive officers in which the officers agreed not to sell shares of Common Stock purchased in fiscal 1999 with proceeds
of the loans for 18 months.

Stock-Based Compensation

In November 1994, AMCE adopted a stock option and incentive plan (the "1994 Plan"). This plan expired in fiscal 1999 except as to outstanding
non-qualified stock options. The 1994 Plan provided that the option exercise price for stock options may not have been less than the fair market value of the stock at the date of grant and
unexercised options expire no later than ten years after date of grant. Options issued

61

---

under
the 1994 Plan during fiscal 2000 vested 50% at issuance and 50% one year from issuance; options issued under the 1994 Plan during fiscal 1999 vested immediately; and all other options issued
under the 1994 Plan vested two years from the date of issuance.

In
December 1999, AMCE adopted a stock option and incentive plan for Outside Directors (the "1999 Outside Directors Plan"). This plan expired in fiscal 2003 except as to
outstanding awards, provided for a one-time grant to outside directors of non-qualified stock options and permitted directors to receive up to all of their annual cash retainer
in options in lieu of cash. The 1999 Outside Directors Plan provided that the option exercise price for stock options be equal to the fair market value of the stock at the date of grant and
unexercised options expire no later than ten years after date of grant. Options issued under the 1999 Outside Directors Plan during fiscal 2002 and 2001 vest one year from the date of issuance.

In
December 1999, AMCE adopted a stock option and incentive plan (the "1999 Plan"). This plan expired in fiscal 2003 except as to outstanding non-qualified stock
options and grants of restricted stock awards. The 1999 Plan provided that the option exercise price for stock options may not be less than the fair market value of the stock at the date of grant and
unexercised options expire no later than ten years after date of grant. Options issued under the 1999 Plan during fiscal 2003 and 2002 vest 50% one year from issuance and 50% two years from issuance.

On
May 13, 2002, the Company granted stock awards on 170,710 shares of Common Stock with a fair value of $2,593,000 which vest 50% one year from issuance and 50% two years from
issuance. As of April 3, 2003, 8,570 of these shares were forfeited prior to vesting.

On
April 17, 2001, the Company granted stock awards on 133,200 shares of Common Stock with a fair value of $930,000 which vest 50% one year from issuance and 50% two years from
issuance. As of April 3, 2003, 3,320 of these shares were forfeited prior to vesting. The Company recognized $2,105,000 and $442,000 of compensation expense during fiscal 2003 and 2002,
respectively, related to stock awards.

A
summary of stock option activity under all plans is as follows:

|                                   |  | 2003      |   | 2002 |       | 2001
|---------------------------------- |  | --------- | - | ---- | ----- | ----
|
|Outstanding at beginning of year   |  | 1,553,570 |   | $    | 12.34 |     
|Granted                            |  | 452,980   |   |      | 15.19 |     
|Canceled                           |  | (24,090   | ) |      | 14.28 |     
|Exercised                          |  | (4,295    | ) |      | 6.98  |     
|                                   |  |           |   |      |       |     
|Outstanding at end of year         |  | 1,978,165 |   | $    | 12.98 |     
|                                   |  |           |   |      |       |     
|Exercisable at end of year         |  | 1,370,773 |   | $    | 13.05 |     
|                                   |  |           |   |      |       |     
|Available for grant at end of year |  |          |   |      |       |     
|                                   |  |           |   |      |       |     

62

---

The
following table summarizes information about stock options as of April 3, 2003:

|                 |  | Outstanding Stock Options |  | Exercisable Stock Options
|---------------- |  | ------------------------- |  | -------------------------
|
|$2.38            |  | 61,330                    |  | 7.7 years                
|$6.74 to $6.98   |  | 372,485                   |  | 8.0 years                
|$9.25 to $12.50  |  | 444,790                   |  | 1.7 years                
|$14.50 to $20.75 |  | 1,077,060                 |  | 7.1 years                
|$22.13 to $26.38 |  | 22,500                    |  | 3.1 years                
|                 |  |                           |  |                          
|$2.38 to $26.38  |  | 1,978,165                 |  | 6.0 years                
|                 |  |                           |  |                          

NOTE 7LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per common share:

|(In thousands, except per share data)                                                 |                                                                                                                      | 2003 |        | 2002    |   | 2001   |        
|------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ---- | ------ | ------- | - | ------ | -------
|Numerator:                                                                            |                                                                                                                      |      |        |         |   |        |        
|                                                                                      | Loss before cumulative effect of an accounting change                                                                |      | $      | (20,302 | ) | $      | (11,468
|                                                                                      | Dividends on Series A Preferred                                                                                      |      |        | 27,165  |   |        | 29,421 
|                                                                                      |                                                                                                                      |      |        |         |   |        |        
|                                                                                      | Loss for common shares before cumulative effect of an accounting change and assumed conversion of Series A Preferred |      | $      | (47,467 | ) | $      | (40,889
|                                                                                      |                                                                                                                      |      |        |         |   |        |        
|Denominator:                                                                          |                                                                                                                      |      |        |         |   |        |        
|                                                                                      | Average common shares outstanding                                                                                    |      |        | 36,296  |   |        | 23,692 
|                                                                                      | Series A Preferred                                                                                                   |      |        |        |   |        |       
|                                                                                      |                                                                                                                      |      |        |         |   |        |        
|                                                                                      | Shares for basic earnings per common share                                                                           |      |        | 36,296  |   |        | 23,692 
|                                                                                      | Stock options                                                                                                        |      |        |        |   |        |       
|                                                                                      | Stock awards                                                                                                         |      |        |        |   |        |       
|                                                                                      |                                                                                                                      |      |        |         |   |        |        
|Shares for diluted earnings per common share                                          |                                                                                                                      |      | 36,296 |         |   | 23,692 |        
|                                                                                      |                                                                                                                      |      |        |         |   |        |        
|Loss per common share before cumulative effect of an accounting change                |                                                                                                                      | $    | (1.31  | )       | $ | (1.73  | )      
|Further dilution from applying the "two-class" method                                 |                                                                                                                      |      |       |         |   |       |        
|                                                                                      |                                                                                                                      |      |        |         |   |        |        
|Basic and diluted loss per common share before cumulative effect of accounting change |                                                                                                                      | $    | (1.31  | )       | $ | (1.73  | )      
|                                                                                      |                                                                                                                      |      |        |         |   |        |        

The
following is a reconciliation of the basic and diluted loss per common share computations on loss before the cumulative effect of accounting change to net loss.

2001(per share amounts)Basic

DilutedLoss for common shares before cumulative effect of accounting change

$
(3.84
)
$
(3.84
)Cumulative effect of accounting change, net of income tax benefit


(.67
)

(.67
)Net loss for common shares

$
(4.51
)
$
(4.51
)


During
2003, 38,212,000 shares of Common Stock and $27,165,000 of dividends from the assumed conversion of Series A Preferred were excluded from the computation of diluted loss
per common share

63

---

because
they were anti-dilutive. During 2002, 33,839,611 shares of Common Stock and $29,421,000 of dividends from the assumed conversion of Series A Preferred were excluded from the
computation of diluted loss per common share because they were anti-dilutive.

In
2003, 2002 and 2001, incremental shares from stock options and stock awards of 433,292, 370,490 and 9,999, respectively, were excluded from the computation of diluted earnings per
share because they were anti-dilutive.

NOTE 8INCOME TAXES

Income tax provision reflected in the Consolidated Statements of Operations for the three years ended April 3, 2003 consists of the following components:

(In thousands)

2003

2002

2001Current:Federal

$
6,995

$
(8,615
)
$
(3,685
)Foreign








State


3,591


189


(106
)Total current


10,586


(8,426
)

(3,791
)Deferred:Federal


(1,391
)

12,132


(51,837
)Foreign


(8,178
)

(3,140
)

1,688State


(517
)

34


(2,710
)Total deferred


(10,086
)

9,026


(52,859
)Total provision


500


600


(56,650
)Tax benefit of cumulative effect of accounting change








10,950Total provision before cumulative effect of accounting change

$
500

$
600

$
(45,700
)


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

2003

2002

2001Federal statutory rate

35.0
%
35.0
%
35.0
%State income taxes, net of federal tax benefit

(5.5
)
(1.5
)
3.1Valuation allowance

(7.0
)
(19.8
)
(3.9
)Deductible portion of GC Companies, Inc. purchase price

11.8



Special compensation

(34.0
)


Preferred stock issuance expense



(11.3
)
Other, net

(2.8
)
(7.9
)
(.6
)Effective tax rate

(2.5
)%
(5.5
)%
33.6
%


64

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The significant components of deferred income tax assets and liabilities as of April 3, 2003 and March 28, 2002 are as follows:

2003

2002Deferred Income Tax

Deferred Income Tax(In thousands)Assets

Liabilities

Assets

LiabilitiesProperty

$
46,324

$
9,003

$
42,050

$
Capital lease obligations


5,544





5,905


Accrued reserves and liabilities


51,260





39,774


Deferred rents


40,127





17,579


Alternative minimum tax credit carryover


9,412





8,583


Net operating loss carryforward


33,264





23,875


Other


19,298


189


11,336


189Total


205,229


9,192


149,102


189Less: Valuation allowance


9,092





7,754


Net


196,137


9,192


141,348


189Less: Current deferred income taxes


15,793





14,044


Total noncurrent deferred income taxes

$
180,344

$
9,192

$
127,304

$
189Net noncurrent deferred income taxes

$
171,152




$
127,115


The
Company's foreign subsidiaries have net operating loss carryforwards in Spain, Japan and the United Kingdom aggregating $39,957,000, $17,269,000 of which may be carried forward
indefinitely and the balance of which expires from 2008 through 2013. The Company's federal income tax loss carryforward of $88,603,000 expires in 2020 and 2021 and will be limited to approximately
$20,500,000 annually due to the sale of Preferred Stock and the acquisition of GC. The Company's state income tax loss carryforwards of $61,879,000 may be used over various periods ranging from five
to 20 years.

As
of April 3, 2003, management believed it was more likely than not that certain deferred tax assets related to state and foreign tax net operating loss carryforwards would not
be realized due to uncertainties as to the timing and amounts of future taxable income. Accordingly a valuation allowance of $9,092,000 was established.

Management
believes it is more likely than not that the Company will generate future taxable income to realize its recorded deferred tax assets. However, the amount of the deferred tax
asset considered realizable could be reduced in the future if estimates of future taxable income during the carryforward period are reduced.

NOTE 9LEASES

The majority of the Company's operations are conducted in premises occupied under lease agreements with initial base terms ranging generally from 10 to
25 years, with certain leases containing options to extend the leases for up to an additional 20 years (see Note 15Related Party Transactions). The leases provide for
fixed rentals and/or rentals based on revenues with a guaranteed minimum. The majority of the leases provide that the Company will pay all, or substantially all, taxes, maintenance, insurance and
certain other operating expenses. Assets held under capital lease obligations are included in property.

65

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Following
is a schedule, by year, of future minimum rental payments required under existing operating leases that have initial or remaining non-cancelable terms in excess of
one year and provisions to repurchase certain theatre equipment and leasehold improvements as of April 3, 2003:

(In thousands)

Minimum operating
lease payments

FF&E and
Leasehold
Repurchase
Provisions

Total2004

$
285,404

$


$
285,4042005


281,531


25,292


306,8232006


279,068


5,000


284,0682007


276,868





276,8682008


273,865





273,865Thereafter


2,590,377





2,590,377Total minimum payments required

$
3,987,113

$
30,292

$
4,017,405


The
Company has also entered into agreements to lease space for the operation of theatres not yet fully constructed. The future minimum rental payments required under the terms of these
leases included above total approximately $152,000,000.

The
Company records rent expense on a straight-line basis over the term of the lease. Included in long-term liabilities as of April 3, 2003 and
March 28, 2002 is $111,657,000 and $52,988,000, respectively, of deferred rent representing pro rata future minimum rental payments for leases with scheduled rent increases and unfavorable
lease liabilities acquired from GC.

Rent
expense is summarized as follows:

(In thousands)

2003

2002

2001Minimum rentals

$
263,025

$
206,510

$
197,754Common area expenses


29,601


20,760


19,200Percentage rentals based on revenues


5,034


3,166


2,592Furniture, fixtures and equipment rentals


8,758


9,032


12,407$
306,418

$
239,468

$
231,953


NOTE 10EMPLOYEE BENEFIT PLANS

The Company sponsors a non-contributory qualified defined benefit pension plan generally covering all employees age 21 or older who have
completed at least 1,000 hours of service in their first twelve months of employment, or in a calendar year ending thereafter, and who are not covered by a collective bargaining agreement.

Under
the plan, benefits are integrated with Social Security and paid to participants at retirement based primarily upon years of credited service with the Company (not exceeding
thirty-five) and the employee's highest five year average compensation. Contributions to the plan reflect benefits attributed to employees' services to date, as well as services expected
to be earned in the future. Plan assets are invested in pooled separate accounts with an insurance company pursuant to which the plan's benefits are paid to retired and terminated employees and the
beneficiaries of deceased employees. The Company also sponsors two non-contributory nonqualified deferred compensation plans which provide additional pension benefits to certain eligible
employees.

The
Company currently offers eligible retirees the opportunity to participate in a health plan (medical and dental) and a life insurance plan. Employees may become eligible for these
benefits at retirement provided the employee is at least age 55 and has at least 15 years of credited service after age 40. The

66

---

health
plan is contributory, with retiree contributions adjusted annually; the life insurance plan is noncontributory. The accounting for the health plan currently anticipates future modifications to
the cost-sharing provisions to provide for retiree premium contributions of approximately 20% of total premiums, increases in deductibles and co-insurance at the medical
inflation rate and coordination with Medicare. The retiree health plan is not funded. The Company is amortizing the transition obligation on the straight-line method over a period of
20 years.

During
fiscal 2003, the Company acquired GC including its defined benefit pension plan (See Note 2Acquisition). The fair value of plan assets acquired was $21,488,000
and the benefit obligation assumed was $15,550,000.

During
fiscal 2003, the Company recorded postretirement obligations of $6,676,000 related to the GC acquisition.

Net
periodic benefit cost for the three plans consists of the following:

Pension Benefits

Other Benefits(In thousands)2003

2002

2001

2003

2002

2001Components of net periodic benefit cost:Service cost

$
2,027

$
1,557

$
1,346

$
406

$
295

$
315Interest cost


3,124


1,862


1,655


887


370


357Expected return on plan assets


(3,263
)

(1,264
)

(1,351
)







Recognized net actuarial (gain) loss


23


(52
)

(387
)







Amortization of unrecognized transition obligation


182


176


176


50


50


50Amortization of prior service cost


90


55


55








Net periodic benefit cost

$
2,183

$
2,334

$
1,494

$
1,343

$
715

$
722


The
following tables set forth the plans' change in benefit obligations and plan assets and the accrued liability for benefit costs included in the Consolidated Balance Sheets for the
years ended April 3, 2003 and March 28, 2002:

Pension Benefits

Other Benefits(In thousands)2003

2002

2003

2002Change in benefit obligation:Benefit obligation at beginning of year

$
28,689

$
25,758

$
5,076

$
4,527Benefit obligation related to acquisition of GC


15,550





6,676


Service cost


2,027


1,557


406


295Interest cost


3,124


1,862


887


370Plan participants' contributions








106


23Actuarial (gain) loss


8,009


(742
)

6,240


(47
)Benefits paid


(2,246
)

(305
)

(464
)

(92
)Other


(856
)

559


260


Benefit obligation at end of year

$
54,297

$
28,689

$
19,187

$
5,076


67

---

Pension Benefits

Other Benefits(In thousands)2003

2002

2003

2002Change in plan assets:Fair value of plan assets at beginning of year

$
16,195

$
16,157

$


$
Fair value of plan assets related to acquisition of GC Companies, Inc.


21,488








Actual return on plan assets


(3,621
)

343





Employer contribution


2,435





358


69Plan participants' contributions








106


23Benefits paid


(2,246
)

(305
)

(464
)

(92
)Fair value of plan assets at end of year

$
34,251

$
16,195

$


$
Net liability for benefit cost:Funded status

$
(20,046
)
$
(12,494
)
$
(19,187
)
$
(5,076
)Unrecognized net actuarial (gain) loss


11,702


(2,369
)

6,076


(203
)Unrecognized transition obligation


399


529


397


447Unrecognized prior service cost


891


1,088


260


Net liability recognized

$
(7,054
)
$
(13,246
)
$
(12,454
)
$
(4,832
)


Pension Benefits

Other Benefits(In thousands)2003

2002

2003

2002Amounts recognized in the balance sheet:Accrued benefit liability

$
(8,005
)
$
(13,558
)
$
(12,454
)
$
(4,832
)Accumulated other comprehensive income


501








Intangible asset


450


312





Net liability recognized

$
(7,054
)
$
(13,246
)
$
(12,454
)
$
(4,832
)


The
projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the one qualified and two nonqualified pension plans with accumulated benefit
obligations in excess of plan assets were $54,297,000, $38,585,000 and $34,251,000, respectively, as of April 3, 2003; and $28,689,000, $19,290,000 and $16,195,000, respectively, as of
March 28, 2002.

Pension Benefits(In thousands)2003

2002Plan asset information:Government Securities

$
1,558

$
1,043Bond and Mortgage


7,774


3,922Real Estate


2,723


Large Company Equity


13,947


7,272Small Company Equity


3,394


1,827International Equity


3,825


2,131Preferred Securities


1,030


Fair value of plan assets

$
34,251

$
16,195


68

---

The
assumptions used in computing the preceding information are as follows:

Pension Benefits

Other Benefits2003

2002

2001

2003

2002

2001Weighted-average assumptions:Discount rate

6.75
%
7.25
%
7.25
%
6.75
%
7.50
%
7.75
%Expected return on plan assets

8.50
%
8.50
%
8.50
%




Rate of compensation increase

5.97
%
6.00
%
6.00
%
6.50
%
6.50
%
6.50
%


For
measurement purposes, the annual rate of increase in the per capita cost of covered health care benefits assumed for 2003 was 12.0% for medical and 4.0% for dental. The rates were
assumed to decrease gradually to 5.0% for medical in 2009 and 3.0% for dental in 2013 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the
amounts reported. Increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of April 3, 2003
by $1,581,000 and the aggregate of the service and interest cost components of postretirement expense for fiscal 2003 by $288,000. Decreasing the assumed health care cost trend rates by one percentage
point in each year would decrease the accumulated postretirement expense for fiscal 2003 by $1,060,000 and the aggregate service and interest cost components of postretirement expense for fiscal 2003
by $233,000.

The
Company sponsors a voluntary 401(k) savings plan covering eligible employees after one year of service and age 21. From the inception of the savings plan and until
December 31, 2001, the Company matched 50% of each eligible employee's elective contributions up to 6% of the employee's pay (i.e., a maximum match of 3%). Effective January 1, 2002, the
Company began matching 100% of each eligible employee's elective contributions up to 3% of the employee's compensation and 50% of each eligible employee's elective contributions on the next 2% of the
employees pay. The Company's expense under the 401(k) savings plan was $2,007,000, $1,591,000 and $1,362,000 for fiscal 2003, 2002 and 2001, respectively.

NOTE 11COMMITMENTS AND CONTINGENCIES

The Company's on-screen advertising subsidiary (NCN) operates its advertising program through agreements with theatre circuits. These circuit
agreements stipulate the amount of circuit payments a theatre will receive for running on-screen slides, on-film programs and other related in-theatre products and
services. The Company's circuit agreements have terms of 1 to 5 years, with an annual cancellation provision included in select agreements. Certain circuits have agreements requiring an annual
minimum exhibitor share payment. The Company recognizes the minimum exhibitor share payments as an expense on a straight line basis over the terms of the agreements. NCN's total future exhibitor share
commitment as of April 3, 2003, totals $20,538,000, which will be paid over the next 3 years.

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

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

69

---

On
November 20, 2002 the trial court entered summary judgment in favor of the Department on the line of sight aspects of the case. The trial court ruled that wheelchair spaces
located solely on the sloped floor portion of the stadium-style auditoriums fail to provide lines of sight comparable to the
general public. The trial court did not address specific changes which might be required of the Company's existing stadium-style auditoriums, holding thatper
serules are simply not possible because the requirements of comparable lines of sight will vary based on theatre layout. The Company filed a request for interlocutory appeal
on January 23, 2003. The trial court denied the Company's request but postponed any further line of sight proceedings pending the Ninth Circuit Court of Appeals' ruling in a case with similar
facts and issues,Oregon Paralyzed Veterans of America v. Regal Cinemas, Inc.InRegal, the
Oregon District Court held that the exhibitor had provided comparable lines of sight to its wheelchair-bound patrons. A decision from the Ninth Circuit is expected in the next few months.

On
January 21, 2003, the trial court entered summary judgment in favor of the Department on non-line of sight aspects of the case, which involve such matters as
parking areas, signage, ramps, location of toilets, counter heights, ramp slopes, companion seating and the location and size of handrails. In its non-line of sight decision, the trial
court concluded that the Company has violated numerous sections of the ADA and engaged in a pattern and practice of violating the ADA. As was the case with its line of sight decision, the trial
court's non-line of sight decision did not address specific changes that the Company might be required to make, reserving this for the remedies stage of the litigation. The Company is
engaged in settlement discussions with the Department for the non-line of sight issues in this case.

Weaver v. AMC Entertainment Inc.(No. 310364, filed March 2000 in Superior Court of California, San
Francisco County) andGeller v. AMC Entertainment Inc.(No. RCV047566, filed May 2000 in Superior Court of California, San
Bernardino County). The Company is the defendant in these two coordinated class-action cases now pending in California before the San Francisco County Superior Court. Plaintiffs allege that AMC sold
discount tickets and Gifts of Entertainment in violation of California law making it "unlawful for any person or entity to sell a gift certificate to a purchaser containing an expiration date." In
both cases, plaintiffs allege unfair competition and seek injunctive relief. Geller seeks restitution of all expired "gift certificates" purchased in California since January 1, 1997 and not
redeemed. Weaver seeks disgorgement of all revenues and profits obtained since January 1997 from sales of "gift certificates" containing an expiration date, as well as actual and punitive
damages.

In
May 2001, following a special trial on the issue, the court ruled that the Company's Gifts of Entertainment and discount tickets are "gift certificates." Subsequently, the
court certified a plaintiff class consisting of holders of Gifts of Entertainment or discount tickets which did not contain expiration dates or disclaimers. On April 28, 2003, the parties
entered a settlement agreement providing for payment of approximately $600,000 in cash and $900,000 in Gifts of Entertainment. The Company has recorded a liability for the settlement as of
April 3, 2003. The settlement agreement received preliminary court approval in accordance with California procedures on June 19, 2003. At the preliminary hearing the court held that the
settlement was within the range of possible approval. The court will finally determine the fairness and adequacy of the settlement at a hearing on December 3, 2003. The class members will be
notified of the hearing and have an opportunity to attend and state their objections.

NOTE 12THEATRE AND OTHER CLOSURE AND DISPOSITION OF ASSETS

The Company has provided reserves for estimated losses from theatres which have been closed and from discontinuing the operation of fast food and other
restaurants operated adjacent to certain of the Company's theatres. During fiscal 2003, the Company discontinued operation of 16 North American theatres with 105 screens and six of the existing 20
screens at a theatre in France. As of April 3, 2003, the Company has reserved $22,499,000 for lease terminations which have either not been consummated or paid related primarily to 3 of these
North American theatres with 23 screens, 11 North American theatres with 73 screens closed in prior years, the closure of six screens in France and vacant restaurant space. The Company is obligated
under long-term lease commitments with remaining terms of up to 17 years for

70

---

theatres
which have been closed. As of April 3, 2003, base rents aggregated approximately $7,649,000 annually and $31,601,000 over the remaining terms of the leases. A rollforward of reserves
for theatre and other closure and the discontinuing operation of fast food restaurants is as follows:

(In thousands)

2003

2002

2001Beginning Balance

$
24,140

$
32,092

$
18,019Theatre and other closure expense


5,416


2,124


24,169Interest expense


3,656


4,617


4,224General and administrative expense


99


125


400Gain on capital lease termination





(1,682
)

Payments


(11,570
)

(19,373
)

(23,600
)Transfer of deferred rent and capital lease obligations


758


6,237


8,880Ending balance

$
22,499

$
24,140

$
32,092


Theatre
and other closure reserves for leases that have not been terminated are recorded at the present value of the future contractual commitments for the base rents, taxes and
maintenance.

NOTE 13FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it was practicable to estimate that
value.

The
carrying value of cash and equivalents approximates fair value because of the short duration of those instruments. The fair value of publicly held corporate borrowings was based upon
quoted market prices. For other corporate borrowings, the fair value was based upon rates available to the Company from bank loan agreements or rates based upon the estimated premium over U.S.
treasury notes with similar average maturities. The fair values of Employee Notes for Common Stock purchases are based upon rates of publicly traded corporate debt with similar interest rates and
maturities.

The
estimated fair values of the Company's financial instruments are as follows:

2003

2002(In thousands)

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
ValueFinancial assets:Cash and equivalents

$
244,412

$
244,412

$
219,432

$
219,432Employee Notes for Common Stock purchases








10,430


10,430Financial liabilities:Cash overdrafts

$
39,076

$
39,076

$
31,751

$
31,751Corporate borrowings


668,661


676,744


596,540


595,500


NOTE 14OPERATING SEGMENTS

The Company has identified three reportable segments around differences in products and services and geographical areas. North American and International
theatrical exhibition operations are identified as separate segments based on dissimilarities in international markets from North America. NCN and other is identified as a separate segment due to
differences in products and services offered.

The
Company evaluates the performance of its segments and allocates resources based on several factors, of which the primary measure is Adjusted EBITDA. The Company evaluates Adjusted
EBITDA generated by its segments in a number of manners, of which the primary measure is a comparison of segment Adjusted EBITDA to segment property, intangibles and goodwill.

71

---

The Company's segments follow the same accounting policies as discussed in Note 1 to the Consolidated Financial Statements.

Information
about the Company's operations by operating segment is as follows:

|Revenues (In thousands)                                     |  | 2003 |           | 2002 |   | 2001      |  
|----------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | -
|North American theatrical exhibition                        |  | $    | 1,628,140 |      | $ | 1,202,441 |  
|International theatrical exhibition                         |  |      | 107,737   |      |   | 98,323    |  
|NCN and other                                               |  |      | 55,693    |      |   | 41,768    |  
|                                                            |  |      |           |      |   |           |  
|Total revenues                                              |  | $    | 1,791,570 |      | $ | 1,342,532 |  
|                                                            |  |      |           |      |   |           |  
|
|North American theatrical exhibition                        |  | $    | 278,604   |      | $ | 202,804   |  
|International theatrical exhibition                         |  |      | (5,269    | )    |   | (893      | )
|NCN and other                                               |  |      | 3,249     |      |   | (3,496    | )
|                                                            |  |      |           |      |   |           |  
|Total segment Adjusted EBITDA                               |  | $    | 276,584   |      | $ | 198,415   |  
|                                                            |  |      |           |      |   |           |  
|
|North American theatrical exhibition                        |  | $    | 1,372,974 |      | $ | 1,197,379 |  
|International theatrical exhibition                         |  |      | 132,834   |      |   | 95,316    |  
|NCN and other                                               |  |      | 22,148    |      |   | 14,755    |  
|                                                            |  |      |           |      |   |           |  
|Total segment property                                      |  |      | 1,527,956 |      |   | 1,307,450 |  
|Construction in progress                                    |  |      | 69,968    |      |   | 36,774    |  
|Corporate                                                   |  |      | 45,609    |      |   | 44,170    |  
|                                                            |  |      |           |      |   |           |  
|Total long-term assets(2)                                   |  | $    | 1,643,533 |      | $ | 1,388,394 |  
|                                                            |  |      |           |      |   |           |  
|
|North American theatrical exhibition                        |  | $    | 63,473    |      | $ | 65,251    |  
|International theatrical exhibition                         |  |      | 23,029    |      |   | 15,880    |  
|NCN and other                                               |  |      | 8,423     |      |   | 1,765     |  
|                                                            |  |      |           |      |   |           |  
|Total segment capital expenditures                          |  |      | 94,925    |      |   | 82,896    |  
|Construction in progress                                    |  |      | 44,752    |      |   | 36,774    |  
|Corporate                                                   |  |      | 6,893     |      |   | 14,953    |  
|                                                            |  |      |           |      |   |           |  
|Total additions to long-term assets, net of acquisitions(3) |  | $    | 146,570   |      | $ | 134,623   |  
|                                                            |  |      |           |      |   |           |  

72

---

A
reconciliation of loss before income taxes and cumulative effect of an accounting change to segment Adjusted EBITDA is as follows:

|(In thousands)                                                         |                                              | 2003 |         | 2002    |   | 2001    |       
|---------------------------------------------------------------------- | -------------------------------------------- | ---- | ------- | ------- | - | ------- | ------
|Loss before income taxes and cumulative effect of an accounting change |                                              | $    | (19,802 | )       | $ | (10,868 | )     
|Plus:                                                                  |                                              |      |         |         |   |         |       
|                                                                       | Interest expense                             |      |         | 77,800  |   |         | 60,760
|                                                                       | Depreciation and amortization                |      |         | 127,020 |   |         | 99,742
|                                                                       | Impairment of long-lived assets              |      |         | 19,563  |   |         | 4,668 
|                                                                       | Stock-based and special compensation expense |      |         | 21,261  |   |         | 442   
|                                                                       | Preopening expense                           |      |         | 3,227   |   |         | 4,345 
|                                                                       | Theatre and other closure expense            |      |         | 5,416   |   |         | 2,124 
|                                                                       | Gain on disposition of assets                |      |         | (1,385  | ) |         | (1,821
|                                                                       | Investment income                            |      |         | (3,509  | ) |         | (2,087
|                                                                       | Other                                        |      |         |        |   |         | 3,754 
|                                                                       | General and administrative(1)unallocated    |      |         | 46,993  |   |         | 37,356
|                                                                       |                                              |      |         |         |   |         |       
|Total segment Adjusted EBITDA                                          |                                              | $    | 276,584 |         | $ | 198,415 |       
|                                                                       |                                              |      |         |         |   |         |       

Information
about the Company's revenues and assets by geographic area is as follows:

|Revenues (In thousands) |  | 2003 |           | 2002 |   | 2001     
|----------------------- |  | ---- | --------- | ---- | - | ---------
|United States           |  | $    | 1,640,279 |      | $ | 1,207,183
|Canada                  |  |      | 43,555    |      |   | 37,027   
|Japan                   |  |      | 51,476    |      |   | 54,324   
|China (Hong Kong)       |  |      | 8,868     |      |   | 10,559   
|Portugal                |  |      | 9,744     |      |   | 8,152    
|Spain                   |  |      | 25,063    |      |   | 17,082   
|France                  |  |      | 3,681     |      |   | 3,388    
|Sweden                  |  |      | 6,494     |      |   | 4,645    
|United Kingdom          |  |      | 2,410     |      |   | 172      
|                        |  |      |           |      |   |          
|Total revenues          |  | $    | 1,791,570 |      | $ | 1,342,532
|                        |  |      |           |      |   |          

|Long-term assets (In thousands) |  | 2003 |           | 2002 |   | 2001     
|------------------------------- |  | ---- | --------- | ---- | - | ---------
|United States                   |  | $    | 1,427,216 |      | $ | 1,226,182
|Canada                          |  |      | 69,535    |      |   | 64,012   
|Japan                           |  |      | 35,015    |      |   | 30,336   
|China (Hong Kong)               |  |      | 11,269    |      |   | 11,217   
|Portugal                        |  |      | 13,183    |      |   | 10,770   
|Spain                           |  |      | 53,940    |      |   | 27,101   
|France                          |  |      | 7,143     |      |   | 5,793    
|Sweden                          |  |      | 6,596     |      |   | 5,572    
|United Kingdom                  |  |      | 19,636    |      |   | 7,411    
|                                |  |      |           |      |   |          
|Total long-term assets          |  | $    | 1,643,533 |      | $ | 1,388,394
|                                |  |      |           |      |   |          

---

73

---

NOTE 15RELATED PARTY TRANSACTIONS

Prior to his resignation on October 30, 2002 as successor co-trustee with shared voting powers over shares held in the Durwood Voting Trust
(the "Voting Trust"), Mr. Raymond F. Beagle, Jr.
may be deemed to have been a related party to the Company. He became successor co-trustee on July 14, 1999 as a result of the death of Stanley H. Durwood.

Mr. Beagle
provided legal services to the Company for more than 30 years and served as general counsel under a series of retainer agreements dating back to 1986. In these
agreements, the Company agreed to pay Mr. Beagle an annual retainer and to make deferred compensation payments to him over a period of years. In 1997, Mr. Beagle's retainer agreement was
amended to provide for the deferral of any annual bonus paid to him, which amount was added to his deferred compensation account. The Company also agreed to annually credit Mr. Beagle's
deferred compensation account with interest in an amount equal to the prime rate plus 1%. In 1997, the Company also determined to fund its deferred payment obligations to Mr. Beagle through the
creation of a rabbi trust, the assets of which remain subject to the claims of the Company's creditors in the event of its insolvency. When Mr. Beagle became a voting trustee of the Durwood
Voting Trust in 1999, the amount of his deferred compensation account was approximately $2,400,000. Mr. Beagle retired as General Counsel on March 31, 2003, at which time the amount of
his deferred compensation account was approximately $3,800,000.

Amounts
paid by the Company to Mr. Beagle as a retainer for serving as General Counsel were $450,000 in fiscal 2003, $400,000 in fiscal 2002 and $360,000 in fiscal 2001. Deferred
bonuses awarded to Mr. Beagle, which awards were made in the first quarter of each fiscal year, were $350,000 in fiscal 2003, $150,000 in fiscal 2002 and $75,000 in fiscal 2001.

Lathrop &
Gage L.C., a law firm of which Mr. Beagle is a member, renders legal services to the Company and its subsidiaries. The Company paid Lathrop &
Gage L.C. $6,872,000 for its services in fiscal 2003, $4,058,000 in fiscal 2002 and $3,252,000 in fiscal 2001.

During
fiscal 2003, the Company reimbursed the initial purchasers of Preferred Stock approximately $650,000 for expenses related to the acquisitions of GC Companies, Inc. and Gulf
States Theatres, the issuance of the Notes due 2012 and the issuance of Common Stock and other business matters related to the Company. During fiscal 2002, the Company reimbursed the initial
purchasers of Preferred Stock $3,754,000 for their issuance costs related to the Preferred Stock offering. The Company has recorded a liability for payments to the initial purchasers of Preferred
Stock of $0 as of April 3, 2003 and $600,000 as of March 28, 2002.

The
Company leases certain of its theatres from Entertainment Properties Trust ("EPT"). The Chairman of the Board, Chief Executive Officer and President of AMCE was also the Chairman of
the Board of Trustees of EPT until May of 2003 at which time his term expired and he did not stand for reelection to the Board of Trustees of EPT. Payments to EPT for rent were approximately
$61,000,000, $52,000,000 and $49,000,000 in fiscal 2003, 2002 and 2001, respectively.

In
connection with the acquisition of GST, the Company entered into leases with EPT for the real estate assets associated with the five theatres with EPT, for a term of 20 years.
Of the $45,772,000
purchase price, approximately $5,800,000 was paid to EPT for specified non-real estate assets which EPT acquired from GST and resold to the Company at cost.

During
fiscal 2003, the Company sold the real estate assets associated with 2 theatres to EPT for an aggregate purchase price of $43,665,000 (the "Sale and Lease Back Transaction") and
then leased the real estate assets associated with the theatres from EPT pursuant to non-cancelable operating leases with terms of 20 years at an initial lease rate of 11% with
options to extend for up to an additional 15 years. The leases are triple net leases that require the Company to pay substantially all expenses associated with the operation of the theatres,
such as taxes and other governmental charges, insurance, utilities, service, maintenance and any ground lease payments. The Company has accounted for these transactions as sale and leasebacks in
accordance with Statement of Financial Accounting Standards No. 98Accounting for Leases.During fiscal 2002, the Company sold the land at one
theatre to EPT for proceeds of $7,500,000 under terms similar to the above Sale and Leaseback Transaction and at an initial lease rate of 10.75%.

74

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(This
page has been left blank intentionally.)

75

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AMC Entertainment Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS BY QUARTER (UNAUDITED)

|                                                                                                  | 
|------------------------------------------------------------------------------------------------- | 
|
|
|Admissions                                                                                        | 
|Concessions                                                                                       | 
|Other theatre                                                                                     | 
|NCN and other                                                                                     | 
|                                                                                                  | 
|Total revenues                                                                                    | 
|Film exhibition costs                                                                             | 
|Concession costs                                                                                  | 
|Theatre operating expense                                                                         | 
|Rent                                                                                              | 
|Other                                                                                             | 
|General and administrative                                                                        | 
|Preopening expense                                                                                | 
|Theatre and other closure expense                                                                 | 
|Depreciation and amortization                                                                     | 
|Impairment of long-lived assets                                                                   | 
|(Gain) loss on disposition of assets                                                              | 
|                                                                                                  | 
|Total costs and expenses                                                                          | 
|Other expense                                                                                     | 
|Interest expense                                                                                  | 
|Investment income                                                                                 | 
|                                                                                                  | 
|Total other expense                                                                               | 
|                                                                                                  | 
|Earnings (loss) before income taxes                                                               | 
|Income tax provision                                                                              | 
|                                                                                                  | 
|Net earnings (loss)                                                                               | 
|                                                                                                  | 
|Less: Preferred dividends                                                                         | 
|                                                                                                  | 
|Net earnings (loss) for shares of common stock                                                    | 
|                                                                                                  | 
|Net earnings (loss) per share of common stock:                                                    | 
|Basic and diluted                                                                                 | 
|                                                                                                  | 
|                                                                                                  | 
|(1)     Fiscal 2003 includes 53 weeks and fiscal 2002 includes 52 weeks.                          | 
|(2)     The fourth quarter of fiscal 2003 includes 14 weeks. All other quarters include 13 weeks. | 

76

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|                                                                                                  |  
|------------------------------------------------------------------------------------------------- | -
|
|
|
|Admissions                                                                                        | $
|Concessions                                                                                       |  
|Other theatre                                                                                     |  
|NCN and other                                                                                     |  
|                                                                                                  |  
|Total revenues                                                                                    |  
|Film exhibition costs                                                                             |  
|Concession costs                                                                                  |  
|Theatre operating expense                                                                         |  
|Rent                                                                                              |  
|Other                                                                                             |  
|General and administrative                                                                        |  
|Preopening expense                                                                                |  
|Theatre and other closure expense                                                                 |  
|Depreciation and amortization                                                                     |  
|Impairment of long-lived assets                                                                   |  
|(Gain) loss on disposition of assets                                                              |  
|                                                                                                  |  
|Total costs and expenses                                                                          |  
|Other expense                                                                                     |  
|Interest expense                                                                                  |  
|Investment income                                                                                 |  
|                                                                                                  |  
|Total other expense                                                                               |  
|                                                                                                  |  
|Earnings (loss) before income taxes                                                               |  
|Income tax provision                                                                              |  
|                                                                                                  |  
|Net earnings (loss)                                                                               | $
|                                                                                                  |  
|Less: Preferred dividends                                                                         |  
|                                                                                                  |  
|Net earnings (loss) for shares of common stock                                                    | $
|                                                                                                  |  
|Net earnings (loss) per share of common stock:                                                    |  
|Basic and diluted                                                                                 | $
|                                                                                                  |  
|                                                                                                  |  
|(1)     Fiscal 2003 includes 53 weeks and fiscal 2002 includes 52 weeks.                          |  
|(2)     The fourth quarter of fiscal 2003 includes 14 weeks. All other quarters include 13 weeks. |  

77

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Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

PART III

Item 10.    Directors and Executive Officers of the Registrant.

Information concerning the Company's Directors and Executive Officers is incorporated herein by reference to "Nominees for Directors", "Executive Officers" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement relating to the 2003 Annual Meeting of Stockholders scheduled to be held on September 18, 2003 (the
"Proxy Statement"), which is incorporated by reference into this Form 10-K and is expected to be filed before August 1, 2003. With the exception of this foregoing information
and other information specifically incorporated by reference into this Form 10-K, the Proxy Statement is not being filed as a part hereof.

Item 11.    Executive Compensation.

Information concerning executive compensation matters is incorporated herein by reference to "Compensation of Management", "Option Grants", "Option Exercises and
Holdings", "Defined Benefit Retirement and Supplemental Executive Retirement Plans", "Compensation of Directors", "Employment Contracts, Termination of Employment and Change in Control Arrangements"
and "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement; provided, however, that the "Report of the Compensation Committee on Executive Compensation", and "Stock
Performance Graph" are not incorporated by reference herein.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information concerning equity compensation plans and the voting securities beneficially owned by each Director of the Company, by all Executive Officers and
Directors of the Company as a group and by each stockholder known by the Company to be the beneficial owner of more than 5% of the outstanding voting securities is incorporated herein by reference to
"Equity Compensation Plan Information", "Security Ownership of Beneficial Owners" and "Beneficial Ownership by Directors and Officers" in the Proxy Statement.

Item 13.    Certain Relationships and Related Transactions.

Information concerning relationships and related transactions is incorporated herein by reference to "Certain Relationships and Related Transactions" in the Proxy
Statement.

Item 14.    Controls and Procedures.



Our
Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)) as of a date within 90 days of the filing date of this Form 10-K Annual Report (the "Evaluation Date"),
have concluded that as of the Evaluation Date, our disclosure controls and procedures were adequate and effective to ensure that material information relating to us would be made known to them by
others within the Company, particularly during the period in which this Form 10-K Annual Report was being prepared.



There
were no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date of the most recent evaluation, nor
any significant deficiencies or material weaknesses in such internal controls requiring corrective actions. As a result, no corrective actions were taken.

78

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PART IV

Item 15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)(1)  The
following financial statements are included in Part II, Item 8.:

PageReport of Independent Auditors

38Consolidated Statements of OperationsFiscal years (53/52 weeks) ended April 3, 2003, March 28, 2002 and March 29, 2001

39Consolidated Balance SheetsApril 3, 2003 and March 28, 2002

40Consolidated Statements of Cash FlowsFiscal years (53/52 weeks) ended April 3, 2003, March 28, 2002 and March 29, 2001

41Consolidated Statements of Stockholders' Equity (Deficit)Fiscal years (53/52 weeks) ended April 3, 2003, March 28, 2002 and March 29, 2001

42Notes to Consolidated Financial StatementsFiscal years (53/52 weeks) ended April 3, 2003, March 28, 2002 and March 29, 2001

44Statements of Operations By Quarter (Unaudited)Fiscal years (53/52 weeks) ended April 3, 2003 and March 28,2002

76


(a)(2)  Financial
Statement SchedulesAll schedules have been omitted because the necessary information is included in the Notes to the Consolidated Financial
Statements.



Our current report on Form 8-K filed January 14, 2003 reporting under Items 7 and 9.Our current report on Form 8-K filed January 22, 2003 reporting under Items 7 and 9.Our current report on Form 8-K filed February 5, 2003 reporting under Item 9.




A
list of exhibits required to be filed as part of this report on Form 10-K is set forth in the Exhibit Index, which immediately precedes such exhibits, and is
incorporated herein by reference.

79

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| |  | AMC ENTERTAINMENT INC
| |  | ---------------------
| |  | By:                  
| |  | Date:                

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|/s/PETER C. BROWNPeter C. Brown             |  | Chairman of the Board, Chief Executive Officer and President |  | 
|------------------------------------------- |  | ------------------------------------------------------------ |  | 
|/s/CHARLES J. EGAN, JR.Charles J. Egan, Jr. |  | Director                                                     |  | 
|/s/W. THOMAS GRANT, IIW. Thomas Grant, II   |  | Director                                                     |  | 
|/s/PAUL E. VARDEMANPaul E. Vardeman         |  | Director                                                     |  | 
|/s/LEON D. BLACKLeon D. Black               |  | Director                                                     |  | 
|/s/MARC J. ROWANMarc J. Rowan               |  | Director                                                     |  | 
|/s/LAURENCE M. BERGLaurence M. Berg         |  | Director                                                     |  | 
|/s/CHARLES S. PAULCharles S. Paul           |  | Director                                                     |  | 
|/s/CRAIG R. RAMSEYCraig R. Ramsey           |  | Executive Vice President and Chief Financial Officer         |  | 
|/s/KEVIN M. CONNORKevin M. Connor           |  | Senior Vice President, General Counsel and Secretary         |  | 
|/s/CHRIS A. COXChris A. Cox                 |  | Vice President and Chief Accounting Officer                  |  | 

80

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CERTIFICATIONS

I, Peter C. Brown, certify that:

Date:
July 2, 2003

| | /s/PETER C. BROWNPeter C. Brown
Chairman of the Board,
Chief Executive Officer and
President
| | --------------------------------------------------------------------------------------------

81

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CERTIFICATIONS

I, Craig R. Ramsey, certify that:

Date:
July 2, 2003

| | /s/CRAIG R. RAMSEYCraig R. Ramsey
Executive Vice President and
Chief Financial Officer
| | --------------------------------------------------------------------------------------

82

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EXHIBIT INDEX

|EXHIBIT NUMBER |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                   
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1(a)(1)      |  | Interim Operating Agreement dated December 6, 2001 by and among AMC Entertainment Inc. and GC Companies, Inc. (incorporated by reference from Exhibit 10.1 to the Company's Form 8-K (File
No. 001-08747) filed on December 12, 2001).                                                                                                                                                        
|2.1(a)(2)      |  | Amendment dated January 28, 2002 to Interim Operating Agreement dated December 6, 2001 between GC Companies, Inc. and AMC Entertainment, Inc. (Incorporated by reference from Exhibit 2.2 to
Form 10-Q for the thirty-nine weeks ended December 27, 2001.                                                                                                                                     
|2.1(b)(1)      |  | Letter of Intent dated December 6, 2001 by and among AMC Entertainment Inc. and GC Companies, Inc. (incorporated by reference from Exhibit 10.2 to the Company's Form 8-K (File No. 001-08747)
filed on December 12, 2001).                                                                                                                                                                   
|2.1(b)(2)      |  | Letter of Intent, amended as of January 15, 2002, by and among AMC Entertainment, Inc. and GC Companies, Inc. (incorporated by reference from Exhibit 2.5(b)(2) to Amendment No. 1 to the Company's
Registration Statement on Form S-3 (File No. 333-75208) filed on January 25, 2002).                                                                                                       
|2.1(b)(3)      |  | Letter of Intent dated December 6, 2001, amended and restated as of January 28, 2002, between GC Companies, Inc. and AMC Entertainment, Inc. (incorporated by reference from Exhibit 2.3 to
Form 10-Q for the thirty-nine weeks ended December 27, 2001).                                                                                                                                     
|2.1(c)(1)      |  | Support Agreement dated December 6, 2001, by and among AMC Entertainment Inc., the Official Committee of Unsecured Creditors in the Chapter 11 Cases of the GCX Debtors, General Electric Capital Corporation
and Harcourt General, Inc. (incorporated by reference from Exhibit 10.3 to the Company's Form 8-K (File No. 001-08747) filed on December 11, 2001).                             
|2.1(c)(2)      |  | Support Agreement dated December 6, 2001, amended and restated as of January 28, 2002, between AMC Entertainment, Inc., General Electric Capital Corporation, Harcourt General, Inc. and the Official
Committee of Unsecured Creditors in the Chapter 11 Case of the GCX Debtors (incorporated by reference from Exhibit 2.4 to Form 10-Q for the thirty-nine weeks ended December 27, 2001). 
|2.1(c)(3)      |  | Support Agreement dated February 27, 2002, by and among AMC Entertainment Inc., GC Companies, Inc. ("GCX," and together with its Chapter 11 debtor affiliated entities, the "GCX Debtors"), the Official
Committee of Unsecured Creditors in the Chapter 11 Cases of the GCX Debtors and The Bank of Nova Scotia (incorporated by reference from Exhibit 2.1 to Form 8-K filed March 7, 2002).
|2.1(d)(1)      |  | Joint Plan of Reorganization of Debtors and Official Committee of Unsecured Creditors for GC Companies, Inc. and its jointly administered subsidiaries (incorporated by reference from Exhibit 2 to the Company's
Form 8-K (File No. 001-05747) filed on December 28, 2001.                                                                                                                   
|2.1(d)(2)      |  | First Amended Joint Plan of Reorganization of Debtors and Official Committee of Unsecured Creditors for GC Companies, Inc. and its Jointly Administered Subsidiaries filed on January 30, 2002 with the United
States Bankruptcy Court for the District of Delaware. (Incorporated by reference from Exhibit 2.5 to Form 10-Q for the thirty-nine weeks ended December 27, 2001).             
|               |  |                                                                                                                                                                                                                                                                                                                                                                                               

83

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|2.1(d)(3) |  | Modified First Amended Joint Plan of Reorganization of Debtors and Official Committee of Unsecured Creditors for GC Companies, Inc. and its Jointly Administered Subsidiaries filed on March 1, 2002 with the
United States Bankruptcy Court for the District of Delaware (incorporated by reference from Exhibit 2.2 to Form 8-K filed March 7, 2002).                                                                                                                                                                                                                                                           
|--------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1(e)    |  | Stock Purchase Agreement dated January 15, 2002 among GC Companies, Inc., AMC Entertainment, Inc., American Multi-Cinema, Inc. and Centertainment Development, Inc. (incorporated by reference from
Exhibit 2.5(e) to Amendment No. 1 to the Company's Registration Statement on Form S-3 (File No. 333-75208) filed on January 25, 2002).                                                                                                                                                                                                                                                                        
|2.1(f)    |  | Joint Commitment Agreement dated as of February 1, 2002 among AMC Entertainment, Inc., Chestnut Hill Investments LLC, Richard A. Smith, John Berylson, and Demos Kouvaris. (Incorporated by reference from
Exhibit 2.5(f) to the Amendment No. 2 to the Company's Registration Statement on Form S-3 (File No. 333- 75208) filed on February 8, 2002).                                                                                                                                                                                                                                                            
|2.2       |  | Purchase and Sale Agreement, dated as of March 9, 2002, by and among G.S. Theaters, L.L.C., a Louisiana limited liability Company, Westbank Theatres, L.L.C., a Louisiana limited liability company, Clearview Theatres,
L.L.C., a Louisiana limited liability company, Houma Theater, L.L.C., a Louisiana limited liability company, Hammond Theatres, L.L.C., a Louisiana limited liability company, and American Multi-Cinema, Inc. together with Form of Indemnification
Agreement (Appendix J) (incorporated by reference from Exhibit 2.1 to Form 8-K filed March 13, 2002).                                
|3.1(a)    |  | Restated and Amended Certificate of Incorporation of AMC Entertainment Inc. (as amended on December 2, 1997 and September 18, 2001) (Incorporated by Reference from Exhibit 3.1 to the Company's
Form 8-K (File No. 1-8747) filed February 15, 2002).                                                                                                                                                                                                                                                                                                                                                             
|3.1(b)    |  | Certificate of Designations of Series A Convertible Preferred Stock and Series B Exchangeable Preferred Stock of AMC Entertainment Inc. (restated for filing purposes in accordance with Rule 102(c) of
Regulation S-T.) (Incorporated by reference from Exhibit 3.1(b) to the Company's Form 10-Q (File No. 1-8747) for the quarter ended June 27, 2002.                                                                                                                                                                                                                                                         
|3.2       |  | Bylaws of AMC Entertainment Inc. (Incorporated by Reference from Exhibit 3.2 to the Company's Form 10-Q (File No. 1-8747) for the quarter ended June 27, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4.1(a)    |  | Restated and Amended Credit Agreement dated as of April 10, 1997, among AMC Entertainment Inc., as the Borrower, The Bank of Nova Scotia, as Administrative Agent, and Bank of America National Trust and Savings
Association, as Documentation Agent, and Various Financial Institutions, as Lenders, together with the following exhibits thereto: significant subsidiary guarantee, form of notes, form of pledge agreement and form of subsidiary pledge agreement
(Incorporated by reference from Exhibit 4.3 to the Company's Registration Statement on Form S-4 (File No. 333-25755) filed April 24, 1997).
|4.1(b)    |  | Second Amendment, dated January 16, 1998, to Amended and Restated Credit Agreement dated as of April 10, 1997 (Incorporated by Reference from Exhibit 4.2 to the Company's Form 10-Q (File
No. 1-8747) for the quarter ended January 1, 1998).                                                                                                                                                                                                                                                                                                                                                                    
|4.1(c)    |  | Third Amendment, dated March 15, 1999, to Amended and Restated Credit Agreement dated as of April 10, 1997 (Incorporated by reference from Exhibit 4 to the Company's Form 8-K (File No. 1-8747)
dated March 25, 1999).                                                                                                                                                                                                                                                                                                                                                                                           
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

84

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|4.1(d) |  | Fourth Amendment, dated March 29, 2000, to Amended and Restated Credit Agreement dated as of April 10, 1997. (Incorporated by reference from Exhibit 4.1(d) to the Company's Form 10-K (File
No. 1-8747) for the year ended March 30, 2000).                                                                                                               
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.1(e) |  | Fifth Amendment, dated April 10, 2001, to Amended and Restated Credit Agreement dated as of April 10, 1997. (Incorporated by reference from Exhibit 4.1(e) to the Company's Form 8-K (File
No. 1-8747) dated May 7, 2001).                                                                                                                                 
|4.2(a) |  | Indenture dated March 19, 1997, respecting AMC Entertainment Inc.'s 91/2% senior subordinated notes due 2009 (Incorporated by reference from Exhibit 4.1 to the Company's
Form 8-K (File No. 1-8747) dated March 19, 1997).                                                                                                                                
|4.2(b) |  | First Supplemental Indenture respecting AMC Entertainment Inc.'s 91/2% senior subordinated notes due 2009 (Incorporated by reference from Exhibit 4.4(b) to Amendment No. 2. to the
Company's Registration Statement on Form S-4 (File No. 333-29155) filed August 4, 1997).                                                                               
|4.2(c) |  | Agreement of Resignation, Appointment and Acceptance, dated August 30, 2000, among the Company, The Bank of New York and HSBC Bank USA respecting AMC Entertainment Inc.'s 91/2% senior
subordinated notes due 2009. (Incorporated by reference from Exhibit 4.2(c) to the Company's Form 10-Q (File No. 1-8747) for the quarter ended September 28, 2000).
|4.3(a) |  | Indenture, dated January 27, 1999, respecting AMC Entertainment Inc.'s 91/2% senior subordinated notes due 2011. (Incorporated by reference from Exhibit 4.3 to the Company's
Form 10-Q (File No. 1-8747) for the quarter ended December 31, 1998).                                                                                                        
|4.3(b) |  | First Supplemental Indenture dated March 29, 2002 respecting AMC Entertainment Inc.'s 91/2% senior subordinated notes due 2011. (Incorporated by reference from Exhibit 4 to
Form 8-K (File No. 1-8747) dated April 10, 2002).                                                                                                                             
|4.3(c) |  | Agreement of Resignation, Appointment and Acceptance, dated August 30, 2000, among the Company, The Bank of New York and HSBC Bank USA respecting AMC Entertainment Inc.'s 91/2% senior
subordinated notes due 2011. (Incorporated by reference from Exhibit 4.3(a) to the Company's Form 10-Q (File No. 1-8747) for the quarter ended September 28, 2000).
|4.4    |  | Registration Rights Agreement, dated January 27, 1999, respecting AMC Entertainment Inc.'s 91/2% senior subordinated notes due 2011 (Incorporated by reference from Exhibit 4.4 to
the Company's Form 10-Q (File No. 1-8747) for the quarter ended December 31, 1998).                                                                                     
|4.5    |  | Indenture, dated January 16, 2002, respecting AMC Entertainment Inc.'s 97/8% Senior Subordinated Notes due 2012 (incorporated by reference from Exhibit 4.5 to Amendment No. 1
to the Company's Registration Statement on Form S-3 (File No. 333-75208) filed on January 25, 2002).                                                                        
|4.6    |  | Registration Rights Agreement, dated January 16, 2002, respecting AMC Entertainment Inc.'s 97/8% Senior Subordinated Notes (incorporated by reference from Exhibit 4.6 to Amendment
No. 1 to the Company's Registration Statement on Form S-3 (File No. 333-75208) filed on January 25, 2002).                                                             
|4.7    |  | In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, certain instruments respecting long-term debt of the Registrant have been omitted but will be furnished to the Commission upon request.                                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                                                                                                                            

85

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|9       |  | Durwood Voting Trust (Amended and Restated 1992 Durwood, Inc. voting Trust Agreement dated August 12, 1998). (Incorporated by reference from exhibit 99.2 to the Company's Schedule 13D (File No. 5-34911)
 filed July 22, 1999).                                                         
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|9.1     |  | First Amendment to Durwood Voting Trust (Amended and Restated 1992 Durwood, Inc. Voting Trust Agreement dated August 12, 1997) dated October 29, 2002). (Incorporated by reference from Exhibit 9.1 to
AMCE's Form 10-Q for the quarter ended September 26, 2002).                        
|10.1    |  | AMC Entertainment Inc. 1983 Stock Option Plan (Incorporated by reference from Exhibit 10.1 to AMCE's Form S-1 (File No. 2-84675) filed June 22, 1983).                                                                                                                                    
|10.2    |  | AMC Entertainment Inc. 1984 Employee Stock Purchase Plan (Incorporated by reference from Exhibit 28.1 to AMCE's Form S-8 (File No. 2-97523) filed July 3, 1984).                                                                                                                          
|10.3(a) |  | AMC Entertainment Inc. 1984 Employee Stock Option Plan (Incorporated by reference from Exhibit 28.1 to AMCE's Form S-8 and Form S-3 (File No. 2-97522) filed July 3, 1984).                                                                                                               
|10.3(b) |  | AMC Entertainment Inc. 1994 Stock Option and Incentive Plan, as amended (Incorporated by reference from Exhibit 10.5 to AMCE's Form 10-Q (File No. 1-8747) for the quarter ended December 31,
1998).                                                                                      
|10.3(c) |  | Form of Non-Qualified (NON-ISO) Stock Option Agreement (Incorporated by reference from Exhibit 10.2 to AMCE's Form 10-Q (File No. 0-12429) for the quarter ended December 26, 1996).                                                                                                      
|10.3(d) |  | AMC Entertainment Inc. 1999 Stock Option and Incentive Plan, as amended. (Incorporated by reference from Exhibit 4.3 to the Company's Registration Statement on Form S-8 (File No. 333-92615) filed
December 13, 1999).                                                                   
|10.3(e) |  | AMC Entertainment Inc. 1999 Stock Option Plan for Outside Directors (Incorporated by reference from Exhibit 4.3 to the Company's Registration Statement on Form S-8 (File No. 333-92617) filed
December 13, 1999.                                                                         
|10.4    |  | American Multi-Cinema, Inc. Savings Plan, a defined contribution 401(k) plan, restated January 1, 1989, as amended (Incorporated by reference from Exhibit 10.6 to AMCE's Form S-1 (File
No. 33-48586) filed June 12, 1992, as amended).                                                  
|10.5(a) |  | Defined Benefit Retirement Income Plan for Certain Employees of American Multi-Cinema, Inc. dated January 1, 1989, as amended (Incorporated by reference from Exhibit 10.7 to AMCE's Form S-1 (File
No. 33-48586) filed June 12, 1992, as amended).                                       
|10.5(b) |  | AMC Supplemental Executive Retirement Plan dated January 1,1994 (Incorporated by reference from Exhibit 10.7(b) to AMCE's Form 10-K (File No. 0-12429) for the fiscal year ended March 30,
1995).                                                                                         
|10.6    |  | Employment agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and Philip M. Singleton which commenced on July 1, 2001. (Incorporated by Reference from Exhibit 10.6 to Amendment
No. 1 to the Company's Form 10-K (File No. 1-8747) for the year ended March 29, 2001).
|10.7    |  | Employment Agreement between AMC Entertainment Inc. and Peter C. Brown which commenced on July 1, 2001. (Incorporated by Reference from Exhibit 10.7 to Amendment No. 1 to the Company's
Form 10-K (File No. 1-8747) for the year ended March 29, 2001).                                  
|        |  |                                                                                                                                                                                                                                                                                           

86

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|10.8  |  | Executive Medical Expense Reimbursement and Supplemental Accidental Death or Dismemberment Insurance Plan, as restated effective as of February 1, 1991 (Incorporated by reference from Exhibit 10.13 to AMCE's
Form S-1 (File No. 33-48586) filed June 12, 1992, as amended).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.9  |  | Division Operations Incentive Program (Incorporated by reference from Exhibit 10.15 to AMCE's Form S-1 (File No. 33-48586) filed June 12, 1992, as amended).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.10 |  | Summary of American Multi-Cinema, Inc. Executive Incentive Program (Incorporated by reference from Exhibit 10.36 to AMCE's Registration Statement on Form S-2 (File No. 33-51693) filed December 23,
1993).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.11 |  | American Multi-Cinema, Inc. Retirement Enhancement Plan (Incorporated by reference from Exhibit 10.26 to AMCE's Registration Statement on Form S-4 (File No. 333-25755) filed April 24,
1997).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.12 |  | Employment agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and Richard M. Fay which commenced on July 1, 2001. (Incorporated by Reference from Exhibit 10.15 to Amendment
No. 1 to the Company's Form 10-K (File No. 1-8747) for the year ended March 29, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.13 |  | AMC Non-Qualified Deferred Compensation Plans (Incorporated by reference from Exhibit 10.37 to Amendment No. 2 to AMCE's Registration Statement on Form S-2 (File No. 33-51693) filed February 18,
1994.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.14 |  | American Multi-Cinema, Inc. Executive Savings Plan (Incorporated by reference from Exhibit 10.28 to AMCE's Registration Statement on Form S-4 (File No. 333-25755) filed April 24,
1997).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.15 |  | Agreement of Sale and Purchase dated November 21, 1997 among American Multi-Cinema, Inc. and AMC Realty, Inc., as Seller, and Entertainment Properties Trust, as Purchaser (Incorporated by reference from
Exhibit 10.1 of the Company's Current Report on Form 8-K (File No. 1-8747) filed December 9, 1997).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.16 |  | Option Agreement dated November 21, 1997 among American Multi-Cinema, Inc. and AMC Realty, Inc., as Seller, and Entertainment Properties Trust, as Purchaser (Incorporated by reference from Exhibit 10.2
of the Company's Current Report on Form 8-K (File No. 1-8747) filed December 9, 1997).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.17 |  | Right to Purchase Agreement dated November 21, 1997, between AMC Entertainment Inc., as Grantor, and Entertainment Properties Trust as Offeree (Incorporated by reference from Exhibit 10.3 of the Company's
Current Report on Form 8-K (File No. 1-8747) filed December 9, 1997.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.18 |  | Lease dated November 21, 1997 between Entertainment Properties Trust, as Landlord, and American Multi-Cinema, Inc., as Tenant (Incorporated by reference from Exhibit 10.4 of the Company's Current Report on
Form 8-K (File No. 1-8747) filed December 9, 1997). (Similar leases have been entered into with respect to the following theatres: Mission Valley 20, Promenade 16, Ontario Mills 30, Lennox 24, West Olive 16,
Studio 30 (Houston), Huebner Oaks 24, First Colony 24, Oak View 24, Leawood Town Center 20, South Barrington 30, Gulf Pointe 30, Cantera 30, Mesquite 30, Hampton Town Center 24, Palm Promenade 24,
 Westminster Promenade 24, Hoffman Center 22, Elmwood Palace 20, Westbank Palace 16, Clearview Palace 12, Hammond Palace 10, Houma Palace 10, Livonia 20, Forum 30 and Studio 24 (Olathe).
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|10.19 |  | Guaranty of Lease dated November 21, 1997 between AMC Entertainment, Inc., as Guarantor, and Entertainment Properties Trust, as Owner (Incorporated by reference from Exhibit 10.5 of the Company's Current
Report on Form 8-K (File No. 1-8747) filed December 9, 1997, (Similar guaranties have been entered into with respect to the following theatres: Mission Valley 20, Promenade 16, Ontario Mills 30, Lennox 24, West
Olive 16, Studio 30 (Houston), Huebner Oaks 24, First Colony 24, Oak View 24, Leawood Town Center 20, South Barrington 30, Gulf Pointe 30, Cantera 30, Mesquite 30, Hampton Town Center 24, Palm
Promenade 24, Westminster Promenade 24, Hoffman Center 22, Elmwood Palace 20, Westbank Palace 16, Clearview Palace 12, Hammond Palace 10, Houma Palace 10, Livonia 20, Forum 30 and Studio 24
(Olathe).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.20 |  | Employment agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and Richard T. Walsh which commenced July 1, 2001. (Incorporated by Reference from Exhibit 10.25 to the Company's
Form 10-K (File No. 1-8747) for the year ended March 29, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.21 |  | Form of Non-Qualified (Non-ISO) Stock Option Agreement used in November 13, 1998 option grants to Mr. Peter C. Brown and Mr. Philip M. Singleton (Incorporated by reference from Exhibit 10.6
to the Company's Form 10-Q (File No. 1-8747) for the quarter ended December 31, 1998).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.22 |  | Retainer agreement with Raymond F. Beagle, Jr. dated October 1, 2002. (Incorporated by Reference from Exhibit 10.27 to the Company's Form 10-Q (File No. 1-8747) for the quarter ended
September 26, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|10.23 |  | Non-Qualified (Non-ISO) Stock Option Agreement used in June 18, 1999 option grants to Mr. Richard M. Fay and Mr. Richard T. Walsh. (Incorporated by reference from exhibit 10.1 to the Company's
Form 10-Q (File No. 1-8747) for the quarter ended July 1, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.24 |  | Employment agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and John D. McDonald which commenced July 1, 2001. (Incorporated by Reference from Exhibit 10.29 to Amendment
No. 1 to the Company's Form 10-K (File No. 1-8747) for the year ended March 29, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.25 |  | Form of Option Agreement under 1999 Stock Option Plan for Outside Directors used in December 3, 1999 option grants to Mr. Chares J. Egan, Jr., Mr. W. Thomas Grant, II,
Mr. Charles S. Paul and Mr. Paul E. Vardeman. (Incorporated by reference from Exhibit 10.37 to the Company's Form 10-K (File No. 1-8747) for the year ended March 30, 2000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.26 |  | Non-Qualified (Non-ISO) Stock Option Agreement used in June 18, 1999 option grant to Mr. John D. McDonald. (Incorporated by reference from Exhibit 10.37 to the Company's Form 10-K (File
No. 1-8747) for the year ended March 30, 2000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|10.27 |  | Form of Non-Qualified (Non-ISO) Stock Option Agreement used in April 17, 2001 grants to Mr. Peter C. Brown, Mr. Philip M. Singleton, Mr. Richard M. Fay, Mr. Richard T. Walsh
and Mr. John D. McDonald. (Incorporated by Reference from Exhibit 10.32 to the Company's Form 10-K (File No. 1-8747) for the year ended March 29, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.28 |  | Form of Restricted Stock Award Agreement used in April 17, 2001 awards to Mr. Peter C. Brown, Mr. Philip M. Singleton, Mr. Richard M. Fay, Mr. Richard T. Walsh and
Mr. John D. McDonald. (Incorporated by Reference from Exhibit 10.33 to the Company's Form 10-K (File No. 1-8747) for the year ended March 29, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|10.29 |  | Forgiveness of Debt Agreement between AMC Entertainment Inc. and Peter C. Brown dated June 6, 2002. (Incorporated by Reference from Exhibit 10.34 to the Company's Form 10-K (File No. 1-8747)
for the year ended March 28, 2002).                                                                                                                                                                                                                                                                                                    
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.30 |  | Forgiveness of Debt Agreement between AMC Entertainment Inc. and Philip M. Singleton dated June 6, 2002. (Incorporated by Reference from Exhibit 10.35 to the Company's Form 10-K (File
No. 1-8747) for the year ended March 28, 2002).                                                                                                                                                                                                                                                                                               
|10.31 |  | Employment agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and Craig R. Ramsey which commenced on July 1, 2001. (Incorporated by Reference from Exhibit 10.36 to the Company's
Form 10-Q (File No. 1-8747) for the quarter ended June 27, 2002).                                                                                                                                                                                                                                                                
|10.32 |  | Investment Agreement entered into April 19, 2001 by and among AMC Entertainment Inc. and Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P., Apollo Investment Fund V,
 L.P., Apollo Overseas Partners V, L.P., Apollo Management IV, L.P. and Apollo Management V, L.P. (Incorporated by reference from Exhibit 4.7 to the Company's Form 8-K (File No. 1-8747) filed on
April 20, 2001).                                                                                                                            
|10.33 |  | Standstill Agreement by and among AMC Entertainment Inc., and Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P., Apollo Investment Fund V, L.P., Apollo Overseas
Partners V, L.P., Apollo Management IV, L.P. and Apollo Management V, L.P., dated as of April 19, 2001. (Incorporated by reference from Exhibit 4.8 to the Company's Form 8-K (File No. 1-8747) filed on
April 20, 2001).                                                                                                                           
|10.34 |  | Registration Rights Agreement dated April 19, 2001 by and among AMC Entertainment Inc. and Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P., Apollo Investment Fund V,
 L.P., Apollo Overseas Partners V, L.P. (Incorporated by reference from Exhibit 4.9 to the Company's Form 8-K (File No. 1-8747) filed on April 20, 2001).                                                                                                                                                                                    
|10.35 |  | Securities Purchase Agreement dated June 29, 2001 by and among Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P., Apollo Investment Fund V, L.P., Apollo Overseas
Partners V, L.P., Apollo Management IV, L.P., Apollo Management V, L.P., AMC Entertainment Inc., Sandler Capital Partners V, L.P., Sandler Capital Partners V FTE, L.P. and Sandler Capital
Partners V Germany, L.P. (Incorporated by reference from Exhibit 4.6 to the Company's Form 10-Q (File No. 1-8747) for the quarter ended June 28, 2001).
|*21.  |  | Subsidiaries of AMC Entertainment Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|*23.  |  | Consent of PricewaterhouseCoopers LLP to the use of their report of independent accountants included in Part II, Item 8. of this annual report.                                                                                                                                                                                                                                                                                                                                                                                       
|*99.1 |  | Section 906 Certifications of Peter C. Brown (Chief Executive Officer) and Craig R. Ramsey (Chief Financial Officer) furnished in accordance with Securities Act Release 33-8212.                                                                                                                                                                                                                                                                                                                                                     
|*99.2 |  | Code of Ethics for Principal Officers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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