**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-K/A**

**(Amendment No. 1)**

**(MarkOne)**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**For the fiscal year ended March 30,2006**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

**For the transition periodfrom                     *** *to                      

**Commission file number 333-122636**

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**MARQUEE HOLDINGS INC.**

(Exactname of registrant as specified in its charter)

| **Delaware**                              |   | **77-0642885**      |
|-------------------------------------------|--------|---------------------|
| (State or other  jurisdiction of          |   | (I.R.S. Employer    |
| incorporation or  organization)           |   | Identification No.) |
| **920  Main**                             |   | ** **          |
| **Kansas City, Missouri**                 |   | **64105**           |
| (Address of principal  executive offices) |   | (Zip Code)          |

 

Registrant’s telephonenumber, including area code: **(816) 221-4000**

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Securities registeredpursuant to Section 12(b) of the Act: None

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

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act. Yes o  No x

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act. Yes o  No x

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past90 days. Yes x  No o

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. x

Indicate by check mark whether the registrant is alarge accelerated filer or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer: in Rule 12b-2 of the ExchangeAct. (Check One):

| Large accelerated  filer o |   | Accelerated filer o |   | Non-accelerated filer x |
|---------------------------------|--------|--------------------------|--------|------------------------------|

 

Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of theAct). Yes o  No x

Statethe aggregate market value of the voting and non-voting common equity held bynon-affiliates computed by reference to the price at which the common equitywas last sold, or the average bid and asked price of such common equity, as ofthe last business day of the registrant’s most recently completed second fiscalquarter.

No voting stock of AMCEntertainment Inc. is held by non-affiliates of AMCEntertainment Inc.

| Title of each class of common stock            | ** ** | **Number of shares  Outstanding as of May 26, 2006** |
|------------------------------------------------|------------|-----------------------------------------------------------|
| Class A-1 Common Stock, 1¢ par value |       | 382,475.00000                                             |
| Class A-2 Common Stock, 1¢ par value |       | 382,475.00000                                             |
| Class N Common Stock, 1¢ par value   |       | 5,128.77496                                               |
| Class L-1 Common Stock, 1¢ par value |       | 256,085.61252                                             |
| Class L-2 Common Stock, 1¢ par value |       | 256,085.61252                                             |

 

**DOCUMENTS INCORPORATED BYREFERENCE**

None

**ExplanatoryNote:**   MarqueeHoldings Inc., hereby amends Parts II and IV of its Annual Report on Form 10-Kfor the year ended March 30, 2006 to include the amended Item 6.Selected Financial Data, Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations, Item 8. FinancialStatements and Supplementary Data, Item 9A. Controls and Procedures andItem 15. Exhibits and Financial Statement Schedules which gives effect tothe restatement for management-purchased shares and stock option awards,reflects discontinued operations described in Note 3 and adds disclosure abouta related material weakness in our internal control over financial reporting.There have been no other changes, events or other transactions to recognizesince the original filing date.

 

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**MARQUEE HOLDINGSINC.**

**FORM 10-K/A(Amendment No. 1)**

**FOR THE FISCAL YEARENDED MARCH 30, 2006**

**INDEX**

|                  | ** ** | ** **                                                                                  | ** ** | **Page** | ** ** |
|------------------|------------|---------------------------------------------------------------------------------------------|------------|----------|------------|
| **PART II** |       |
| Item 6.          |       | Selected Financial  Data                                                                    |       |     | 6          |   |   |
| Item 7.          |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |       |     | 9          |   |   |
| Item 8.          |       | Financial  Statements and Supplementary Data                                                |       |     | 37         |   |   |
| Item 9A.         |       | Controls and  Procedures                                                                    |       |     | 124        |   |   |
| **PART IV** |       |
| Item 15.         |       | Exhibits and  Financial Statement Schedules                                                 |       |     | 125        |   |   |
|                  |            |                                                                                             |            |          |            |  |  |  |  |

 

2

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**PART II**

**Restatement ofFinancial Statements**

In connection withan ongoing review of its quarterly mark-to-market accounting for its liabilityclassified shares and stock option awards, the Company determined that itsfinancial statements as of and for the year ended March 30, 2006 needed to berestated to correct the following items:

1.                 *Management purchased shares*

**On December 23, 2004, certainmembers of management purchased common shares in the Company. Due to theexistence of certain put options, at the time the shares were purchased, theCompany determined that the management purchased shares for two members ofmanagement should be recorded as liabilities with changes in the estimated fairvalue of those shares recorded through a charge or credit to the statement ofoperations.**

**Additionally, under a ManagementShareholders' Agreement, the Company has a call option allowing it to reacquireshares held by management (including the management purchased shares referredto above) for a period of six months following a change in control or theemployee's termination for any reason (including voluntary termination). Forall terminations except voluntary termination, the call price for the shares isfair value. For voluntary terminations, the call price for the shares is thelower of fair value on the call notice date or the price paid.**

**FAS 123R provides that if theCompany has a call option on shares held by employees and it is probable thatthe employer would prevent the employee from bearing those risks and rewardsassociated with equity share ownership for a reasonable period of time (sixmonths or more) from the date the share is issued, then liabilityclassification is required.**

During February2007, the Company determined that the management purchased shares should havebeen recorded as a component of permanent equity (rather than as liabilities)because (i) the put options referred to above are conditional and do notcontain any embedded redemption rights and (ii) the Company has notexercised its call option on any of the management purchased shares and doesnot intend to do so. Accordingly, the Company has restated the financialstatements as of and for the year-ended March 30, 2006 to reverse thepreviously recorded mark to market effects (income) related to the commonshares purchased by the two members of management that had been incorrectlyclassified as liabilities since December 23, 2004 and to reflect theseshares within stockholders' equity. There was no impact on net cash provided byoperating activities as a result of the above mentioned items.

2.                 *Stock Option Awards*

**On December 23, 2004, certainmembers of management were granted options to purchase Company common stock.Due to the existence of certain put options, at the time the stock options weregranted, the Company determined that the stock options for two members ofmanagement should be recorded as liabilities with changes in the estimated fairvalue of those options recorded through a charge or credit to the statement ofoperations. The Company also has a call option relating to the options (and theunderlying shares) similar to the call option referred to above.**

**During February 2007, the Companydetermined that the options held by one member of management that werepreviously recorded as a liability should have been recorded as a component ofpermanent equity because the Company does not intend to exercise its calloption on the vested options (or shares obtained upon exercise of the options)and since the put option on the vested options (or shares obtained uponexercise of options) is not within the employee's control. Accordingly, theCompany has restated its financial statements as of and for the year endedMarch 30, 2006 to reverse the previously recorded mark to market effectsrelating to the stock options awarded to this member of management that hadbeen incorrectly classified as liabilities and to reflect these options asadditional paid-in capital (rather than as**

3

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**liabilities).There was no impact on net cash provided by operating activities as a result ofthe above mentioned items.**

**TheCompany has restated its financial statements as of and for the year endedMarch 30, 2006 to record the net effect of the adjustments discussed above. Theimpact of the adjustments for the fiscal year ended March 31, 2005 is notmaterial (and was recorded as part of the 2006 restatement adjustments). Thenet effects of the adjustments recorded to restate the 2006 financialstatements are summarized as follows (dollars in thousands):**

| ** **                                  | ** ** | **Stock based** | ** ** | ** **             | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|----------------------|------------|------------------------|------------|------------|------------|
| ** **                                  | ** ** | **Compensation**     | ** ** | **Other Expense** | ** ** | ** ** | ** ** |
| ** **                                  | ** ** | **Expense**(1)       | ** ** | **(Income)**           | ** ** | **Total**  | ** ** |
| Decrease in Other  Long-Term Liabilities(2) |       |                 | $          | 283                    |       |       |       | $ | 1,856 |   |   | $ | 2,139 |   |
| Increase in  Additional Paid-in Capital(3)  |       |                 | $          | 2,397                  |       |       |       | $ | 3,750 |   |   | $ | 6,147 |   |
| Increase in Net Loss                        |       |                 | $          | 2,114                  |       |       |       | $ | 1,894 |   |   | $ | 4,008 |   |

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(1)                Included withinOther G&A

(2)                Refer todiscussion of the adjustment for the management purchased shares and stockoption awards above

(3)                Refer todiscussion of the adjustment for stock option awards above

**Thefollowing table sets forth the previously reported amounts and the restatedamounts reflected in the accompanying Consolidated Financial Statements(dollars in thousands):**

| ** **                                          | ** ** | **52 Weeks Ended March 30, 2006** | ** ** |
|-----------------------------------------------------|------------|------------------------------------------------------------|------------|
| ** **                                          | ** ** | **As previously reported**                       | ** ** | **As restated** | ** ** |
| Statement of  Operations data:                      |       |                                                       |       |   |   |   |   |
| General and administrative: Other                   |       |                                                       | $          | 38,308 |   |   | $ | 40,251 |   |
| Total costs and expenses                            |       |                                                       | 1,710,487  |   |   | 1,668,320 |   |
| Other expense (income)                              |       |                                                       | (11,712    | ) |   | (9,818 | ) |
| Total other expense                                 |       |                                                       | 137,669    |   |   | 137,690 |   |
| Loss from continuing operations before income taxes |       |                                                       | (117,706   | ) |   | (119,132 | ) |
| Income tax provision                                |       |                                                       | 72,100     |   |   | 71,800 |   |
| Net loss                                            |       |                                                       | (212,215   | ) |   | (216,223 | ) |
| Basic and diluted loss per share:                   |       |                                                       |       |   |   |   |   |
| Loss from continuing operations                     |       |                                                       | $          | (221.19 | ) |   | $ | (222.50 | ) |
| Net loss per share                                  |       |                                                       | (247.30    | ) |   | (251.97 | ) |
| Balance Sheet data (at period end):                 |       |                                                       |       |   |   |   |   |
| Other Long Term Liabilities                         |       |                                                       | $          | 419,474 |   |   | $ | 417,335 |   |
| Total Liabilities                                   |       |                                                       | 3,366,848  |   |   | 3,364,709 |   |
| Additional Paid in Capital                          |       |                                                       | 1,307,752  |   |   | 1,313,899 |   |
| Accumulated Deficit                                 |       |                                                       | (256,605   | ) |   | (260,613 | ) |
| Total  Stockholders' Equity                         |       |                                                       | 1,040,503  |   |   | 1,042,642 |   |

 

**Allpreviously reported amounts affected by the restatement that appear elsewherein the footnotes to the Consolidated Financial Statements have also beenrestated. See Note 1 to the Consolidated Financial Statements.**

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**Reclassificationfor Discontinued Operations**

As previouslydisclosed in our Form 10-Q for the period ended December 28, 2006 and aspreviously filed in our Form 8-K filed on February 22, 2007, we havedivested of certain operations that met the criteria for reporting asdiscontinued operations. Under generally accepted accounting principles, we arerequired to reclassify previously reported prior period financial statements toreflect the discontinued operations on a basis comparable to the currentpresentation. Generally accepted accounting principles require our financialstatements that were included in our fiscal 2006 Annual Report on Form 10-Kto be updated for discontinued operations in our fiscal 2007 Annual Report onForm 10-K. We have previously provided certain financial information thathas been revised in advance of filing our fiscal 2007 Annual Report on Form 10-Kin our Form 8-K filed on February 22, 2007. The historical financialinformation included herein has been revised and updated from its originalpresentation to incorporate the following:

·       the reclassification of theresults of operations for certain assets which we sold on May 11, 2006,that meet the criteria for discontinued operations to be presented as such inaccordance with Statement of Financial Accounting Standards No. 144, *Accounting for the Impairment or Disposal of Long Lived Assets*and the addition to Note 3 to the Notes to the Consolidated Financial Statementsin Item 1, Financial Statements (unaudited);

·       reclassifications inManagement's Discussion and Analysis of Financial Condition and Results ofOperations in Item 2, Management’s Discussion and Analysis of FinancialCondition and Results of Operations;

The information includedin this Amendment No. 1 on Form 10-K/A is presented in connection withthe changes described above. The information, with respect to thereclassification for discontinued operations, contained in this Amendment No. 1on Form 10-K/A is presented for the three fiscal years ended March 30,2006, and except as indicated above with respect to restatements, thisinformation has not been updated to reflect financial results subsequent tothat date or any other changes since the date of the Company's Current Reporton Form 8 K dated February 22, 2007. Other than thereclassification and footnote disclosures discussed above related to thereclassification for discontinued operations and the changes related to therestatements discussed above there is no change to the Company's previouslyreported consolidated operating results. There is no change to the Company’spreviously reported consolidated financial condition or cash flows except asdiscussed above related to the restatement. Therefore, this filing should be read together with other documents wehave filed with the SEC subsequent to the filing of the original Current Reporton Form 8-K filed on February 22, 2007. Information in such reports anddocuments updates and supersedes certain information contained in thisdocument.

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**Item 6.Selected Financial Data**

| ** **                                                    | ** ** | **Years Ended**(1)(3)(7)                                         | ** ** |                                                                          |
|---------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|
| **(In thousands, except operating data)** | ** ** | **52 Weeks  Ended  March 30,  2006**(4)(5)

**(restated)*** | ** ** | **From  Inception  July 16,  2004  through  March 31,  2005**(4)(8) | ** ** | ** ** | **April 2, 2004  through  December 23,  2004**(4)(8) | ** ** | **52 Weeks  Ended  April 1,  2004**(4) | ** ** | **53 Weeks  Ended  April 3,  2003**(4) | ** ** | **52 Weeks  Ended  March 28,  2002** | ** ** |   |
| ** **                                                    | ** ** | **(Successor)**                                                       | ** ** | **(Successor)**                                                               | ** ** | ** ** | **(Predecessor)** | ** ** | **(Predecessor)** | ** ** | **(Predecessor)** | ** ** | **(Predecessor)** | ** ** |   |
| **Statement  of Operations Data:**                            |       |                                                                  |       |                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                                      |       |                                                                  |       |                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                               |            |                                                                       |            |                                                                               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

| Admissions                                                       |   |   | $         | 1,138,034 |   |   |    | $      | 297,310 |   |   |      |   | $      | 847,476  |      |   |   | $      | 1,139,108 |   |   |   | $         | 1,145,523 |   |   |   | $ | 835,516 |   |   |
|------------------------------------------------------------------|--------|--------|-----------|-----------|--------|--------|---------|--------|---------|--------|--------|-----------|--------|--------|----------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|-----------|--------|--------|--------|---|---------|--------|--------|
| Concessions                                                      |   |   | 456,028   |      |   |   | 117,266 |   |    |   |   | 328,970   |   |   |     | 436,737   |   |   |   | 450,977   |   |   |   | 342,835   |      |   |
| Other revenue                                                    |   |   | 92,816    |      |   |   | 24,884  |   |    |   |   | 82,826    |   |   |     | 102,387   |   |   |   | 102,292   |   |   |   | 79,978    |      |   |
| Total revenues                                                   |   |   | 1,686,878 |      |   |   | 439,460 |   |    |   |   | 1,259,272 |   |   |     | 1,678,232 |   |   |   | 1,698,792 |   |   |   | 1,258,329 |      |   |
| Costs and Expenses                                               |   |   |      |      |   |   |    |   |    |   |   |      |   |   |     |      |   |   |   |      |   |   |   |      |      |   |
| Film exhibition costs                                            |   |   | 595,353   |      |   |   | 152,747 |   |    |   |   | 452,727   |   |   |     | 605,898   |   |   |   | 625,772   |   |   |   | 451,733   |      |   |
| Concession costs                                                 |   |   | 50,581    |      |   |   | 12,801  |   |    |   |   | 37,880    |   |   |     | 46,868    |   |   |   | 50,065    |   |   |   | 37,822    |      |   |
| Operating expense                                                |   |   | 451,522   |      |   |   | 115,590 |   |    |   |   | 324,427   |   |   |     | 442,974   |   |   |   | 471,028   |   |   |   | 357,934   |      |   |
| Rent                                                             |   |   | 329,878   |      |   |   | 80,776  |   |    |   |   | 223,734   |   |   |     | 288,321   |   |   |   | 277,945   |   |   |   | 214,705   |      |   |
| General  and administrative:                                     |   |   |      |      |   |   |    |   |    |   |   |      |   |   |     |      |   |   |   |      |   |   |   |      |      |   |
| Merger and acquisition costs                                     |   |   | 12,523    |      |   |   | 22,286  |   |    |   |   | 42,732    |   |   |     | 5,508     |   |   |   | 1,128     |   |   |   | —    |      |   |
| Management fee                                                   |   |   | 2,000     |      |   |   | 500     |   |    |   |   | —    |   |   |     | —    |   |   |   | —    |   |   |   | —    |      |   |
| Other(9)                                                         |   |   | 40,251    |      |   |   | 14,615  |   |    |   |   | 33,727    |   |   |     | 56,798    |   |   |   | 65,728    |   |   |   | 36,018    |      |   |
| Preopening expense                                               |   |   | 6,607     |      |   |   | 39      |   |    |   |   | 1,292     |   |   |     | 3,865     |   |   |   | 2,934     |   |   |   | 3,843     |      |   |
| Theatre and other closure expense                                |   |   | 601       |      |   |   | 1,267   |   |    |   |   | 10,758    |   |   |     | 4,068     |   |   |   | 5,416     |   |   |   | 2,124     |      |   |
| Restructuring charge(10)                                         |   |   | 3,980     |      |   |   | 4,926   |   |    |   |   | —    |   |   |     | —    |   |   |   | —    |   |   |   | —    |      |   |
| Depreciation and amortization                                    |   |   | 164,047   |      |   |   | 43,931  |   |    |   |   | 86,052    |   |   |     | 115,296   |   |   |   | 119,835   |   |   |   | 92,920    |      |   |
| Impairment of long-lived assets                                  |   |   | 11,974    |      |   |   | —  |   |    |   |   | —    |   |   |     | 16,272    |   |   |   | 14,564    |   |   |   | —    |      |   |
| Disposition of assets and other gains                            |   |   | (997      | )         |   |   | (302    | )      |    |   |   | (2,715    | )      |   |     | (2,590    | )      |   |   | (1,385    | )      |   |   | (1,821    | )         |   |
| Total costs and expenses                                         |   |   | 1,668,320 |      |   |   | 449,176 |   |    |   |   | 1,210,614 |   |   |     | 1,583,278 |   |   |   | 1,633,030 |   |   |   | 1,195,278 |      |   |
| Other expense (income)(6)                                        |   |   | (9,818    | )         |   |   | (6,778  | )      |    |   |   | —    |   |   |     | 13,947    |   |   |   | —    |   |   |   | 3,754     |      |   |
| Interest expense                                                 |   |   |      |      |   |   |    |   |    |   |   |      |   |   |     |      |   |   |   |      |   |   |   |      |      |   |
| Corporate borrowings                                             |   |   | 139,042   |      |   |   | 52,502  |   |    |   |   | 66,851    |   |   |     | 66,963    |   |   |   | 65,585    |   |   |   | 48,015    |      |   |
| Capital and financing lease obligations                          |   |   | 4,068     |      |   |   | 1,449   |   |    |   |   | 5,848     |   |   |     | 8,698     |   |   |   | 11,295    |   |   |   | 12,745    |      |   |
| Investment (income) expense                                      |   |   | 4,398     |      |   |   | (3,352  | )      |    |   |   | (6,473    | )      |   |     | (2,837    | )      |   |   | (3,491    | )      |   |   | (2,057    | )         |   |
| Earnings (loss) from continuing operations before  income taxes  |   |   | (119,132  | )         |   |   | (53,537 | )      |    |   |   | (17,568   | )      |   |     | 8,183     |   |   |   | (7,627    | )      |   |   | 594       |      |   |
| Income tax provision (benefit)                                   |   |   | 71,800    |      |   |   | (9,280  | )      |    |   |   | 14,760    |   |   |     | 10,400    |   |   |   | 9,400     |   |   |   | 2,300     |      |   |
| Loss from continuing operations                                  |   |   | (190,932  | )         |   |   | (44,257 | )      |    |   |   | (32,328   | )      |   |     | (2,217    | )      |   |   | (17,027   | )      |   |   | (1,706    | )         |   |
| Loss from discontinued operations, net of income tax  benefit(2) |   |   | (25,291   | )         |   |   | (133    | )      |    |   |   | (3,550    | )      |   |     | (8,497    | )      |   |   | (12,519   | )      |   |   | (8,672    | )         |   |
| Net loss                                                         |   |   | $         | (216,223  | )      |   |    | $      | (44,390 | )      |   |      |   | $      | (35,878  | )         |   |   | $      | (10,714   | )      |   |   | $         | (29,546   | )      |   |   | $ | (10,378 | )      |   |
| Preferred dividends                                              |   |   | —    |      |   |   | —  |   |    |   |   | 104,300   |   |   |     | 40,277    |   |   |   | 27,165    |   |   |   | 29,421    |      |   |
| Net loss for shares of common stock                              |   |   | $         | (216,223  | )      |   |    | $      | (44,390 | )      |   |      |   | $      | (140,178 | )         |   |   | $      | (50,991   | )      |   |   | $         | (56,711   | )      |   |   | $ | (39,799 | )      |   |
| Basic and diluted loss  per share of common stock:               |   |   |      |      |   |   |    |   |    |   |   |      |   |   |     |      |   |   |   |      |   |   |   |      |      |   |
| Loss from continuing operations                                  |   |   | $         | (222.50   | )      |   |    | $      | (147.32 | )      |   |      |   | $      | (3.69    | )         |   |   | $      | (1.16     | )      |   |   | $         | (1.12     | )      |   |   | $ | (1.31   | )      |   |
| Loss from discontinued operations                                |   |   | (29.47    | )         |   |   | (0.44   | )      |    |   |   | (0.10     | )      |   |     | (0.23     | )      |   |   | (0.32     | )      |   |   | (0.37     | )         |   |
| Net loss per share                                               |   |   | $         | (251.97   | )      |   |    | $      | (147.76 | )      |   |      |   | $      | (3.79    | )         |   |   | $      | (1.39     | )      |   |   | $         | (1.44     | )      |   |   | $ | (1.68   | )      |   |
| Average  shares outstanding:                                     |   |   |      |      |   |   |    |   |    |   |   |      |   |   |     |      |   |   |   |      |   |   |   |      |      |   |
| Basic and diluted                                                |   |   | 858.12    |      |   |   | 300.41  |   |    |   |   | 37,023    |   |   |     | 36,715    |   |   |   | 39,297    |   |   |   | 23,692    |      |   |

 

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| ** **                                                    | ** ** | **Years Ended**(1)(3)(7)                                         | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| **(In thousands, except operating data)** | ** ** | **52 Weeks  Ended  March 30,  2006**(4)(5)

**(restated)*** | ** ** | **From  Inception  July 16,  2004  through  March 31,  2005**(4)(8) | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23,  2004**(4)(8) | ** ** | **52 Weeks  Ended  April 1,  2004**(4) | ** ** | **53 Weeks  Ended  April 3,  2003**(4) | ** ** | **52 Weeks  Ended  March 28,  2002** | ** ** |
| ** **                                                    | ** ** | **(Successor)**                                                       | ** ** | **(Successor)** | ** ** | ** ** | ** ** | **(Predecessor)** | ** ** | **(Predecessor)** | ** ** | **(Predecessor)** | ** ** | **(Predecessor)** | ** ** |
| **Balance  Sheet Data (at period end):**                      |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and equivalents                                          |       |                                                                  | $          | 232,366 |   |   | $ | 72,945 |   |   |   |   |   |   |   |   | $ | 333,248 |   |   |   | $ | 244,412 |   |   |   | $ | 219,432 |   |   |
| Corporate borrowings                                          |       |                                                                  | 2,455,686  |   |   | 1,344,531 |   |   |   |   |   |   |   |   | 686,431 |   |   |   | 668,661 |   |   |   | 596,540 |   |   |
| Other long-term liabilities                                   |       |                                                                  | 417,335    |   |   | 354,240 |   |   |   |   |   |   |   |   | 182,467 |   |   |   | 177,555 |   |   |   | 120,770 |   |   |
| Capital and financing lease obligations                       |       |                                                                  | 68,130     |   |   | 65,470 |   |   |   |   |   |   |   |   | 61,281 |   |   |   | 59,101 |   |   |   | 57,056 |   |   |
| Stockholders’ equity                                     |       |                                                                  | 1,042,642  |   |   | 722,038 |   |   |   |   |   |   |   |   | 280,604 |   |   |   | 279,719 |   |   |   | 255,415 |   |   |
| Total assets                                                  |       |                                                                  | 4,407,351  |   |   | 2,797,511 |   |   |   |   |   |   |   |   | 1,506,534 |   |   |   | 1,480,698 |   |   |   | 1,276,970 |   |   |
| **Cash  Flow Data:**                                          |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in) operating activities           |       |                                                                  | $          | 25,694 |   |   | $ | (45,364 | ) |   |   |   | $ | 145,364 |   |   |   | $ | 163,939 |   |   |   | $ | 136,072 |   |   |   | $ | 97,685 |   |   |
| Net cash provided by (used in) investing activities           |       |                                                                  | 107,538    |   |   | (1,260,301 | ) |   |   |   | (692,395 | ) |   |   | (69,378 | ) |   |   | (137,201 | ) |   |   | (144,510 | ) |   |
| Net cash provided by (used in) financing activities           |       |                                                                  | 21,434     |   |   | 1,376,763 |   |   |   |   | 611,034 |   |   |   | (5,274 | ) |   |   | 26,112 |   |   |   | 232,285 |   |   |
| **Other  Data:**                                              |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                                          |       |                                                                  | $          | (117,668 | ) |   | $ | (18,622 | ) |   |   |   | $ | (66,155 | ) |   |   | $ | (95,011 | ) |   |   | $ | (100,932 | ) |   |   | $ | (82,762 | ) |   |
| Proceeds from sale/leasebacks                                 |       |                                                                  | 35,010     |   |   | 50,910 |   |   |   |   | — |   |   |   | 63,911 |   |   |   | 43,665 |   |   |   | 7,486 |   |   |
| **Operating  Data (at period end):**                          |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Screen additions                                              |       |                                                                  | 137        |   |   | — |   |   |   |   | 44 |   |   |   | 114 |   |   |   | 95 |   |   |   | 146 |   |   |
| Screen acquisitions                                           |       |                                                                  | 2,117      |   |   | 3,728 |   |   |   |   | — |   |   |   | 48 |   |   |   | 809 |   |   |   | 68 |   |   |
| Screen dispositions                                           |       |                                                                  | 150        |   |   | 14 |   |   |   |   | 28 |   |   |   | 142 |   |   |   | 111 |   |   |   | 86 |   |   |
| Average screens(11)                                           |       |                                                                  | 3,661      |   |   | 3,355 |   |   |   |   | 3,350 |   |   |   | 3,309 |   |   |   | 3,324 |   |   |   | 2,634 |   |   |
| Number of screens operated                                    |       |                                                                  | 5,829      |   |   | 3,714 |   |   |   |   | 3,728 |   |   |   | 3,712 |   |   |   | 3,692 |   |   |   | 2,899 |   |   |
| Number of theatres operated                                   |       |                                                                  | 428        |   |   | 247 |   |   |   |   | 249 |   |   |   | 250 |   |   |   | 257 |   |   |   | 181 |   |   |
| Screens per theatre                                           |       |                                                                  | 13.6       |   |   | 15.0 |   |   |   |   | 15.0 |   |   |   | 14.8 |   |   |   | 14.4 |   |   |   | 16.0 |   |   |
| Attendance (in  thousands)(11)                                |       |                                                                  | 165,831    |   |   | 44,278 |   |   |   |   | 126,450 |   |   |   | 176,162 |   |   |   | 187,030 |   |   |   | 148,476 |   |   |

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*                     We restated our financial statements for management-purchasedshares and stock option awards. See Note 1 to our consolidated financialstatements.

(1)                 There were no cash dividends declared on common stockduring the last five fiscal years.

(2)                 Fiscal 2004, 2003, and 2002 include losses fromdiscontinued operations related to a theatre in Sweden that was sold during fiscal2004. Fiscal 2006, 2005, 2004, 2003 and 2002 includes losses from discontinuedoperations related to five theatres in Japan that were sold during fiscal 2006and five theatres in Iberia that were sold during fiscal 2007. During fiscal2006 the Successor includes a loss from discontinued operations of $25,291 (netof income tax provision of $20,400). During fiscal 2005 the Successor includesloss from discontinued operations of $133 (net of income tax provision of $80)and the Predecessor includes a loss from discontinued operations of $3,550 (netof income tax provision of $240). Fiscal 2004 includes a $8,497 loss fromdiscontinued operations (net of income tax benefit of $2,000), fiscal 2003includes a $12,519 loss from discontinued operations including a charge forimpairment of long-lived assets of $4,999 (net of income tax benefit of $100),and fiscal 2002 includes a $8,672 loss from discontinued operations including acharge for impairment of long-lived assets of $4,668 (net of income tax benefitof $3,200).

(3)                 Fiscal 2003 includes 53 weeks. All other years have 52weeks.

(4)                 We acquired Gulf States Theatres on March 15, 2002and GC Companies, Inc. on March 29, 2002, which significantlyincreased our size. In the Gulf States Theatres acquisition, we acquired 5theatres with 68 screens in the New Orleans area. In the GC Companiesacquisition, we acquired 66 theatres with 621 screens throughout the UnitedStates. Accordingly, results of operations for the Successor periods endedMarch 30, 2006 and March 31, 2005 and Predecessor periods endedDecember 23, 2004 and April 1, 2004 are not comparable to our resultsfor the prior fiscal year.

(5)                 We acquired Loews Cineplex Entertainment Corporation onJanuary 26, 2006, which significantly increased our size. In the Loewsacquisition we acquired 112 theatres with 1,308 screens throughout the UnitedStates that we consolidate and 40 theatres 

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with 443 screens in Mexicothat we consolidate. Accordingly, results of operations for the Successorperiod ended March 30, 2006 are not comparable to our results for theprior fiscal years.

(6)                 During fiscal 2006, other expense (income) is composedof $8,699 of income related to the derecognition of stored value cardliabilities where management believes future redemption to be remote, insurancerecoveries of $3,032 for property losses related to Hurricane Katrina, net ofdisposition losses of $346, $1,968 of business interruption insurancerecoveries related to Hurricane Katrina, the write-off of deferred financingcost of $1,097 related to our senior secured credit facility in connection withour issuance of the new senior secured credit facility and $2,438 of fees relatedto an unused bridge facility in connection with the Mergers and relatedfinancing transactions. During fiscal 2005, other expense (income) is composedof $6,745 of income related to the derecognition of stored value cardliabilities where management believes future redemption to be remote and $33 ofgain recognized on the redemption of $1,663 of our Senior Subordinated Notesdue 2011. During fiscal 2004, other expense (income) is composed of lossesrecognized on the redemption of $200,000 of our Senior Subordinated Notes due2009 and $83,400 of our Senior Subordinated Notes due 2011. During fiscal 2002,other expense (income) is comprised of transaction expenses incurred inconnection with the issuance of Preferred Stock.

(7)                 As a result of the merger with Marquee, the Successorapplied the purchase method of accounting to the separable assets, includinggoodwill, and liabilities of the accounting acquiree, AMC Entertainment, as ofDecember 23, 2004. Because of the application of purchase accounting,Successor and Predecessor periods are not prepared on comparable bases ofaccounting.

(8)                 In connection with the merger with Marquee, Marquee wasformed on July 16, 2004, and issued debt and held the related proceedsfrom issuance of debt in escrow until consummation of the merger. ThePredecessor consolidated this merger entity in accordance with FIN 46(R). As aresult, both the Predecessor and Successor have recorded interest expense of$12,811, interest income of $2,225 and income tax benefit of $4,500 related toMarquee.

(9)                 Includes stock-based compensation of $3,433 forthe 52 week periods ended March 30, 2006 (Successor), and includes stockbased compensation of $1,201, $0, $8,727, $2,011 and $442 during fiscal 2005Successor, fiscal 2005 Predecessor, fiscal 2004, 2003 and 2002, respectively.

(10)             Restructuring charges related to one-time terminationbenefits and other cost related to the displacement of approximately 200associates in connection with an organizational restructuring, which wascompleted to create a simplified organizational structure, and contribution ofassets by NCN to NCM. This organizational restructuring was substantiallycompleted as of March 30, 2006.

(11)             Includes consolidated theatres only.

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**Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.**

**Overview**

We are one of theworld’s leading theatrical exhibition companies. As of March 30, 2006,after giving effect to the expected disposal of 10 theatres and 120 screens inthe U.S. in connection with the approval of the Mergers and dispositions of 4theatres with 86 screens in Spain and 1 theatre with 20 screens in Portugal, weowned, operated or had interests in 413 theatres with a total of 5,603 screens,with 82%, or 4,597, of our screens in the U.S. and Canada, and 18%, or 1,006,of our screens in Mexico, Argentina, Brazil, Chile, Uruguay, China (Hong Kong),France, Spain and the United Kingdom.

In connection with the Mergers as discussed below, weacquired Loews on January 26, 2006, which significantly increased oursize. In the Merger, we acquired 112 theatres with 1,308 screen in the UnitedStates and 40 theatres with 443 screens in Mexico that are included in ourconsolidated results of operations from January 26, 2006. Accordingly,results of operations for the fifty-two weeks ended March 30, 2006, whichinclude nine weeks of operations of the businesses we acquired, are notcomparable to our results for the fifty-two weeks ended March 31, 2005.For additional information about the Merger, see Note 2 to theConsolidated Financial Statements.

We completed a merger on December 23, 2004 inwhich Marquee Holdings Inc. (“Holdings”) acquired AMC Entertainment Inc.(“AMC Entertainment”). Marquee Inc. (“Marquee”) was formed onJuly 16, 2004. On December 23, 2004, pursuant to a merger agreement,Marquee merged with AMC Entertainment (the “Predecessor”). Upon theconsummation of the merger between Marquee and AMC Entertainment onDecember 23, 2004, AMC Entertainment and its parent Holdings were thesurviving reporting entities (collectively, the “Successor”). The merger wastreated as a purchase with Marquee being the “accounting acquirer” inaccordance with Statement of Financial Accounting Standards No. 141, *Business Combinations*. As a result, theSuccessor applied the purchase method of accounting to the separable assets,including goodwill, and liabilities of the accounting acquiree and Predecessor,AMC Entertainment, as of December 23, 2004, the merger date.

We are organized as an intermediate holding company.Following the consummation of the merger with Marquee on December 23,2004, we became a privately held company, wholly owned by Holdings. Holdings iswholly owned by J.P. Morgan Partners L.P., Apollo Investment Fund V, L.P.,other co-investors and certain members of management. Our principal directlyowned subsidiaries are American Multi-Cinema, Inc. (“AMC”), GrupoCinemex, S.A. de C.V. (“Cinemex”) and AMC Entertainment International, Inc.(“AMCEI”). We conduct our U.S. and Canada theatrical exhibition businessthrough AMC and its subsidiaries and AMCEI and its subsidiaries. We areoperating theatres outside the United States primarily through Cinemex andAMCEI and its subsidiaries.

On March 29, 2005, AMC Entertainment and anotherexhibitor combined their respective cinema screen advertising businesses into anew joint venture company called National CineMedia, LLC (“NCM”). The newcompany engages in the marketing and sale of cinema advertising and promotions products;business communications and training services; and the distribution of digitalalternative content. We contributed fixed assets and exhibitor agreements toNCM. Additionally, we paid termination benefits related to the displacement ofcertain National Cinema Network, Inc. (“NCN”) associates. In considerationof the NCN contributions described above, NCM issued a 37% interest in itsClass A units to NCN. Since that date, NCN’s interest has declined to 29%due to the entry of new investors.

On June 20, 2005, Holdings entered into a mergeragreement with LCE Holdings, Inc. (“LCE Holdings”), the parent of LoewsCineplex Entertainment Corporation (“Loews”), pursuant to which LCE Holdingsmerged with and into Holdings, with Holdings continuing as the holding companyfor the merged businesses, and Loews merged with and into AMC Entertainment,with AMC Entertainment continuing after the merger (the “Merger” andcollectively, “the Mergers”). The transactions closed on January 26, 

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2006. Upon completion ofthe Mergers, the existing stockholders of Holdings hold approximately 60% ofits outstanding capital stock, and the existing stockholders of LCE Holdings,including affiliates of Bain Capital Partners, LLC, The Carlyle Group and SpectrumEquity Investors, hold approximately 40% of Holding’s outstanding capitalstock.

In connection withthe Merger, on January 26, 2006, AMC Entertainment entered into thefollowing financing transactions:

·       theissuance of $325.0 million in aggregate principal amount of 11% SeniorSubordinated Notes due 2016 (the “Notes due 2016”);

·       anew senior secured credit facility with Citicorp North America, Inc.,Banco Nacional De Mexico, S.A., Integrante del Grupo Financiero Banamex and thelenders named therein, consisting of a $650.0 million term loan facilityand a $200.0 million revolving credit facility (the “New Credit Facility”);

·       thetermination of AMC Entertainment’s March 25, 2004 senior secured credit,under which no amounts were outstanding;

·       therepayment of all outstanding amounts under Loews’ existing senior securedcredit facility and the termination of all commitments thereunder (the “LoewsFacility”); and

·       thecompletion of a tender offer and consent solicitation (the “Tender Offer”) forall $315.0 million aggregate principal amount of Loews’ outstanding 9.0%senior subordinated notes due 2014.

The proceeds of the financing transactions were usedto repay amounts outstanding under the Loews Facility, to fund the TenderOffer, to pay related fees and expenses, and to pay fees and expenses relatedto the Merger.

On June 30, 2005, we sold one of our wholly-ownedsubsidiaries, Japan AMC Theatres Inc., including four of our five theatresin Japan. We sold our remaining Japan theatre on September 1, 2005. Theoperations and cash flows of the Japan theatres have been eliminated from ourongoing operations as a result of the disposal transactions. We do not have anysignificant continuing involvement in the operations of the Japan theatres. Theresults of operations of the Japan theatres have been classified asdiscontinued operations, and information presented for all periods reflects thenew classification. The operations of the Japan theatres were previouslyreported in our International theatrical exhibition operating segment.

We disposed of our only theatre in Hong Kong onJanuary 5, 2006 and entered into a license agreement with the purchaserfor continued use of our trademark. These operations did not meet the criteriafor reporting as discontinued operations.

In May 2006, AMCEI and its subsidiary, AMCEntertainment International Limited, sold their interests in AMC EntertainmentEspaña S.A., which owned and operated 4 theatres with 86 screens in Spain, andActividades Multi-Cinemas E Espectáculos, LDA, which owned and operated 1theatre with 20 screens in Portugal. These operations have been classified asdiscontinued operations as a result of our disposition of Yelmo Cineplex, S.L.(“Yelmo”) in December 2006 as we no longer have continuing involvement inthe region.

In December 2006 we disposed of our equity methodinvestment in Yelmo which owned and operated 27 theatres with 310 screens inSpain on the date of sale.

For financial reporting purposes we have threesegments, U.S. and Canada theatrical exhibition (formerly, North Americantheatrical exhibition), International theatrical exhibition and Other, with themost significant activity in Other related to on-screen advertising.

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Our U.S. and Canada and International theatricalexhibition revenues are generated primarily from box office admissions andtheatre concession sales. The balance of our revenues are generated from ancillarysources, including on-screen advertising, rental of theatre auditoriums, feesand other revenues generated from the sale of gift certificates and theatretickets and arcade games located in theatre lobbies.

Box office admissions are our largest source ofrevenue. We predominantly license “first-run” motion pictures from distributorsowned by major film production companies and from independent distributors. Welicense films on a film-by-film and theatre-by-theatre basis. Film exhibitioncosts are accrued based on the applicable admissions revenues and estimates ofthe final settlement pursuant to our film licenses. Licenses that we enter intotypically state that rental fees are based on either aggregate termsestablished prior to the opening of the picture or on a mutually agreedsettlement upon the conclusion of the picture run. Under an aggregate termsformula, we pay the distributor a specified percentage of box office receipts.The settlement process allows for negotiation based upon how a film actuallyperforms.

Concessions sales are our second largest source ofrevenue after box office admissions. Concessions items include popcorn, softdrinks, candy, hot dogs and other products. We negotiate prices for our concessionsproducts and supplies directly with concessions vendors on a national orregional basis to obtain high volume discounts or bulk rates and marketingincentives.

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

During fiscal 2006, films licensed from our tenlargest distributors based on revenues accounted for approximately 88% of ourU.S. and Canada admissions revenues. Our revenues attributable to individualdistributors may vary significantly from year to year depending upon thecommercial success of each distributor’s motion pictures in any given year.

During the period from 1990 to 2005, the annual numberof first-run motion pictures released by distributors in the United Statesranged from a low of 370 in 1995 to a high of 535 in 2005, according to MotionPicture Association 2005 MPA Market Statistics.

We continually upgrade thequality of our theatre circuit by adding new screens through new builds(including expansions) and acquisitions and by disposing of older screensthrough closures and sales. We believe our introduction of the megaplex conceptin 1995 has led to the current industry replacement cycle, which hasaccelerated the obsolescence of older, smaller theatres by setting newstandards for moviegoers. From 1995 through March 30, 2006, AMCEntertainment and Loews added 191 theatres with 3,475 new screens, acquired 431theatres with 3,007 screens and disposed of 666 theatres with 4,018 screens. Asof March 30, 2006, approximately 69%, or 3,168, of our screens werelocated in megaplex theatres.

**CRITICAL ACCOUNTINGESTIMATES**

The accounting estimates identified below are criticalto our business operations and the understanding of our results of operations.The impact of, and any associated risks related to, these estimates on ourbusiness operations are discussed throughout Management’s Discussion and Analysisof Financial Condition and Results of Operations where such estimates affectour reported and expected financial results. For a detailed discussion on theapplication of these estimates and other accounting policies, see Notes to theConsolidated Financial Statements. The methods and judgments we use in applyingour accounting estimates have a significant impact on the results we report inour financial statements. Some of our accounting estimates require us to makedifficult and subjective judgments, often as a result of the need to makeestimates of matters that are inherently uncertain. Our most criticalaccounting estimates include the 

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assessment ofrecoverability of long-lived assets, including intangibles, which impactsimpairment of long-lived assets when we impair assets or accelerate theirdepreciation; recoverability of goodwill, which creates the potential forwrite-offs of goodwill; recognition and measurement of current and deferredincome tax assets and liabilities, which impacts our tax provision; recognitionand measurement of our remaining lease obligations to landlords on our closedtheatres and other vacant space, which impacts theatre and other closureexpense; estimation of self-insurance reserves which impacts theatre operatingand general and administrative expenses; recognition and measurement of netperiodic benefit costs for our pension and other defined benefit programs,which impacts general and administrative expense; estimation of film settlementterms and measurement of film rental fees, which impacts film exhibition costsand estimation of the fair value of assets acquired, liabilities assumed andconsideration paid for acquisitions, which impacts the measurement of assetsacquired (including goodwill) and liabilities assumed in a businesscombination. Below, we discuss these areas further, as well as the estimatesand judgments involved.

*Impairments.**  *We review long-lived assets,including intangibles and investments in unconsolidated subsidiaries accountedfor under the equity method, for impairment as part of our annual budgeting processand whenever events or changes in circumstances indicate that the carryingamount of the assets may not be fully recoverable. We review internalmanagement reports on a quarterly basis as well as monitor current andpotential future competition in the markets where we operate for indicators oftriggering events or circumstances that indicate impairment of individualtheatre assets. We evaluate theatres using historical and projected data of theatrelevel cash flow as our primary indicator of potential impairment and considerthe seasonality of our business when evaluating theatres for impairment.Because Christmas and New Years holiday results comprise a significant portionof our operating cash flow, the actual results from this period, which areavailable during the fourth quarter of each fiscal year, are an integral partof our impairment analysis. As a result of these analyses, if the sum of theestimated future cash flows, undiscounted and without interest charges, areless than the carrying amount of the asset, an impairment loss is recognized inthe amount by which the carrying value of the asset exceeds its estimated fairvalue. Assets are evaluated for impairment on an individual theatre basis,which we believe is the lowest level for which there are identifiable cashflows. The impairment evaluation is based on the estimated cash flows fromcontinuing use until the expected disposal date or the fair value of furniture,fixtures and equipment. The expected disposal date does not exceed theremaining lease period and is often less than the remaining lease period whenwe do not expect to operate the theatre to the end of its lease term. The fairvalue of assets is determined as either the expected selling price less sellingcosts (where appropriate) or the present value of the estimated future cashflows. The fair value of furniture, fixtures and equipment has been determinedusing similar asset sales and in some instances the assistance of third partyvaluation studies. The discount rate used in determining the present value ofthe estimated future cash flows was 20% and was based on management’s expectedreturn on assets during fiscal 2006, 2005 and 2004. There is considerablemanagement judgment necessary to determine the future cash flows, fair valueand the expected operating period of a theatre, and, accordingly, actualresults could vary significantly from such estimates. We have recordedimpairments of long-lived assets of $12.0 million, $0 and$16.3 million during fiscal 2006, 2005 and 2004, respectively.

*Goodwill.**  *Our recorded goodwill was$2,018.3 million as of March 30, 2006. We evaluate goodwill forimpairment annually as of the end of the fourth fiscal quarter and any time anevent occurs or circumstances change that reduce the fair value for a reportingunit below its carrying amount. Goodwill is recorded in our U.S. and Canadatheatrical exhibition operating segment, in Cinemex and in our Spain andPortugal theatres, which are also our reporting units for purposes ofevaluating our recorded goodwill for impairment. If the carrying value of thereporting unit exceeds its fair value we are required to reallocate the fairvalue of the reporting unit as if the reporting unit had been acquired in abusiness combination and the fair value of the reporting unit was the pricepaid to acquire the reporting unit. We determine fair value by using anenterprise valuation methodology determined by applying multiples to cash flowestimates less net indebtedness which we believe is an appropriate method todetermine fair value. There is 

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considerable managementjudgment with respect to cash flow estimates and appropriate multiples to beused in determining fair value.

*Incometaxes.**  *Indetermining income for financial statement purposes, we must make certain estimatesand judgments. These estimates and judgments occur in the calculation ofcertain tax liabilities and in the determination of the recoverability ofcertain of the deferred tax assets, which arise from temporary differencesbetween the tax and financial statement recognition of revenue and expense aswell as operating loss and tax credit carryforwards. We must assess thelikelihood that we will be able to recover our deferred tax assets in eachdomestic and foreign tax jurisdiction in which we operate. If recovery is notmore likely than not, we must record a valuation allowance for the deferred taxassets that we estimate are more likely than not unrealizable. Valuation allowancesrecorded against our net deferred tax assets in U.S. tax jurisdictions duringfiscal 2006 increased our provision for income taxes by approximately$116 million. As of March 30, 2006, we had recorded approximately$9.0 million of net deferred tax assets (net of valuation allowances of$441 million) related to the estimated future tax benefits of temporary differencesbetween the tax bases of assets and liabilities and amounts reported in theaccompanying consolidated balance sheets, as well as operating loss and taxcredit carryforwards. The recoverability of these deferred income tax assets isdependent upon our ability to generate future taxable income in the relevanttaxing jurisdictions. Projections of future taxable income require considerablemanagement judgment about future attendance levels, revenues and expenses.

*Theatreand Other Closure Expense.**  *Theatre and other closure expense is primarilyrelated to payments made or expected to be made to landlords to terminateleases on certain of our closed theatres, other vacant space and theatres wheredevelopment has been discontinued. Theatre and other closure expense isrecognized at the time the theatre closes, space becomes vacant or developmentis discontinued. Expected payments to landlords are based on actual ordiscounted contractual amounts. We estimate theatre closure expense based oncontractual lease terms and our estimates of taxes and utilities. The discountrate we use to estimate theatre and other closure expense is based on estimatesof our borrowing costs at the time of closing. Prior to the merger with Marqueeour discount rates ranged from 6.6% to 21.0%. As a result of the merger withMarquee, we have remeasured our liability for theatre closure at a rate of7.55%, our estimated borrowing cost on the date of this merger. We haverecorded theatre and other closure expense of $0.6 million and$1.3 million during the Successor periods ended March 30, 2006 andMarch 31, 2005 and $10.7 million and $4.1 million during thePredecessor periods ended December 23, 2004 and April 1, 2004,respectively. Accretion expense for Predecessor exit activities initiated afterDecember 31, 2002, and all accretion expense for Successor exitactivities, is included as a component of theatre and other closure expense.

*CasualtyInsurance.**  *Weare self-insured for general liability up to $400,000 per occurrence and carrya $400,000 deductible limit per occurrence for workers compensation claims. Weutilize actuarial projections of our estimated ultimate losses that we will beresponsible for paying and as a result there is considerable judgment necessaryto determine our casualty insurance reserves. The actuarial method that we useincludes an allowance for adverse developments on known claims and an allowancefor claims which have been incurred but which have not been reported. As ofMarch 30, 2006 and March 31, 2005, we had recorded casualty insurancereserves of $26.4 million and $22.1 million, respectively. We have recordedexpense related to general liability and workers compensation claims of$10.9 million and $2.1 million during the Successor periods endedMarch 30, 2006 and March 31, 2005, respectively, and$8.3 million and, $10.6 million during the Predecessor periods endedDecember 23, 2004 and April 1, 2004, respectively.

*Pensionand Postretirement Assumptions.**  *Pension and postretirement benefitobligations and the related effects on operations are calculated usingactuarial models. Two critical assumptions, discount rate and expected returnon assets, are important elements of plan expense and/or liability measurement.We evaluate these critical assumptions at least annually. Other assumptionsinvolve demographic factors such 

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as retirement, expectedincreases in compensation, mortality and turnover. These assumptions are evaluatedperiodically and are updated to reflect our experience. Actual results in anygiven year will often differ from actuarial assumptions because of economic andother factors.

The discount rate enables us to state expected futurecash flows at a present value on the measurement date. We have little latitudein selecting this rate, as it is required to represent the market rate forhigh-quality fixed income investments. A lower discount rate increases thepresent value of benefit obligations and increases pension and postretirementexpense. For our principal pension plans, a 50 basis point decrease in thediscount rate would increase pension expense by approximately $630,000. For ourpostretirement plans, a 50 basis point decrease in the discount rate wouldincrease postretirement expense by approximately $41,000. We maintained ourdiscount rate at 53¤4%for the AMC Entertainment plans and 51¤2%for the Loews’ plans for fiscal 2007. We have recorded expenses for our pensionand postretirement plans of $4.7 million and $1.8 million during theSuccessor periods ended March 30, 2006 and March 31, 2005,respectively, and $5.3 million and, $6.0 million during thePredecessor periods ended December 23, 2004 and April 1, 2004,respectively. We expect that our total pension and postretirement expense willincrease by approximately $2.5 million from fiscal 2006 to fiscal 2007,$0.9 million of which results from the acquisition of LCE plan. Ourunrecognized net actuarial gain for pension and postretirement plans was$5.5 million as of March 30, 2006. In connection with a recentreorganization, there was a reduction in certain pension and postretirementplan participants, which resulted in curtailment gains in fiscal 2006 foraccounting purposes of $2.3 million.

To determine the expected long-term rate of return onpension plan assets, we consider the current and expected asset allocations, aswell as historical and expected returns on various categories of plan assetsobtained from our investment portfolio manager. A 50 basis point decrease inthe expected return on assets of our qualified defined benefit pension planwould increase pension expense on our principal plans by approximately $223,000per year. Note 11 to the Consolidated Financial Statements includesdisclosure of our pension plan and postretirement plan assumptions andinformation about our pension plan assets.

*FilmExhibition Costs.**  *Wepredominantly license “first-run” motion pictures on a film-by-film andtheatre-by-theatre basis from distributors owned by major film productioncompanies and from independent distributors. We obtain these licenses based onseveral factors, including number of seats and screens available for aparticular picture, revenue potential and the location and condition of ourtheatres. We pay rental fees on a negotiated basis.

Licenses that we enter into typically state thatrental fees are based on either aggregate terms established prior to theopening of the picture or on a mutually agreed settlement upon the conclusionof the picture run. Under an aggregate terms formula, we pay the distributor aspecified percentage of box office receipts. The settlement process allows fornegotiation based upon how a film actually performs.

We accrue film exhibition costs based on theapplicable box office receipts and estimates of the final settlement pursuantto the film licenses entered into with our distributors. Generally, less thanone third of our quarterly film exhibition cost is estimated at period-end. Thelength of time until these costs are known with certainty depends on theultimate duration of the film play, but is typically “settled” within two tothree months of a particular film’s opening release. Upon settlement with ourfilm distributors, film cost expense and the related film cost payable areadjusted to the final film settlement. Such adjustments have been historicallyinsignificant. However, actual film costs and film costs payable could differmaterially from those estimates. For fiscal years 2006, 2005 and 2004 therewere no significant changes in our film cost estimation and settlementprocedures.

As of March 30, 2006 and March 31, 2005, wehad recorded film payables of $66 million and $53 million,respectively. We have recorded film exhibition costs of $595 million and$153 million during the Successor periods ended March 30, 2006 andMarch 31, 2005 and $453 million and, $606 million during thePredecessor periods ended December 23, 2004 and April 1, 2004,respectively.

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*Acquisitions.**  *We account for our acquisitions oftheatrical exhibition businesses using the purchase method. The purchase methodrequires that we estimate the fair value of the individual assets and liabilitiesacquired as well as various forms of consideration given including cash, commonstock, senior subordinated notes and bankruptcy related claims. We haveobtained independent third party valuation studies for certain of the assetsand liabilities acquired to assist us in determining fair value. The estimationof the fair value of the assets and liabilities acquired including deferred taxassets and liabilities related to such amounts and consideration given involvesa number of judgments and estimates that could differ materially from theactual amounts.

We completed the Merger with Loews on January 26,2006. The acquisition was treated as a purchase in accordance with Statement ofFinancial Accounting Standards No. 141, *BusinessCombinations* for an estimated purchase price of $540,671,000.Consideration was provided through a stock issuance by Holdings. Theconsolidated financials include only the results of Loews operations from thedate of the Merger.

We completed the merger with Marquee onDecember 23, 2004. The merger was treated as a purchase with Marquee beingthe “accounting acquirer” in accordance with Statement of Financial AccountingStandards No. 141, *BusinessCombinations*. As a result, the Successor applied the purchase methodof accounting to the separable assets, including goodwill, and liabilities ofthe accounting acquiree and Predecessor, AMC Entertainment, as ofDecember 23, 2004, the merger date. The consolidated financial statementspresented herein are those of the accounting acquirer from its inception onJuly 16, 2004 through March 30, 2006, and those of its Predecessor,AMC Entertainment, for all periods presented through the merger date.

We also consummatedacquisitions in fiscal 2004 as discussed in Note 2 to the ConsolidatedFinancial Statements. During fiscal 2004 we acquired the assets of Megastar fora cash purchase price of $15 million.

**Operating Results**

All periods commencing on or after December 24th,2004 are referred to herein as a “Successor” period. The thirty-eightweeks that ended December 23rd, 2004 and the year ended April 1, 2004occurred prior to the consummation of the Mergers and are referred to herein as“Predecessor” periods. As a result of the merger with Marquee, we are requiredto separately present our operating results for the Predecessor and theSuccessor in the thirty-eight weeks ended December 23, 2004 and thefourteen weeks ended March 31, 2005 under generally accepted accountingprinciples. In the following discussion, the results for the combined fifty-twoweeks ended March 31, 2005 are adjusted to reflect the pro forma effect ofthe merger with Marquee as if they had occurred on April 2, 2004. Proforma adjustments relate primarily to decreased rent expense, resulting fromunfavorable leases; increased depreciation and amortization, resulting fromincreases in fixed asset and intangibles values and increased interest expenseresulting from increases in corporate borrowings. The pro forma basis amountsfor the combined fifty-two weeks ended March 31, 2005 are comparedto the fifty-two weeks ended April 1, 2004 on a historical basis. Webelieve this is the most meaningful and practical way to comment on our resultsof operations.

The results of operations below include adjustment forthe effects of purchase accounting adjustments for the Successor only andtherefore are not comparable to the Predecessor periods. Refer to the discussionsbelow for detail regarding the effects of purchase accounting adjustments withregard to comparability. The following table sets forth our revenues, costs andexpenses attributable to our United States and Canada and Internationaltheatrical exhibition operations and Other businesses. Reference is made toNote 16 to the Consolidated Financial Statements for additionalinformation about our operations by operating segment.

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**OPERATING RESULTS**

| **(Dollars in thousands)**   | ** ** | **52 Weeks  Ended  March 30,  2006  (restated)*** | ** ** | **14 Weeks  Ended  March 31,  2005** | ** ** | ** ** | ** ** | **38 Weeks  Ended  December 23,  2004** | ** ** | **Pro Forma  Adjustments** | ** ** | **Pro Forma  52 Weeks  Ended  March 31,  2005** | ** ** | **52 Weeks  Ended  April 1,  2004** | ** ** | **Pro Forma  Adjustments** | ** ** | **Pro Forma  52 Weeks  Ended  April 1,  2004** | ** ** |
|----------------------------------------|------------|-------------------------------------------------------------|------------|------------------------------------------------|------------|------------|------------|---------------------------------------------------|------------|---------------------------------|------------|----------------------------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                             | ** ** | **(Successor)**                                             | ** ** | **(Successor)**                                | ** ** | ** ** | ** ** | **(Predecessor)**                                 | ** ** | ** **                      | ** ** | **(Predecessor)**                                              | ** ** | **(Predecessor)**                             | ** ** | ** **                      | ** ** | ** **                                                    | ** ** |
| **Revenues**                           |       |                                                        |       |                                           |       |       |       |                                              |       |                            |       |                                                           |       |                                          |       |                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. and Canada theatrical  exhibition |       |                                                        |       |                                           |       |       |       |                                              |       |                            |       |                                                           |       |                                          |       |                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| Admissions                                             |   |   | $         | 1,110,464 |   |   |    | $      | 292,514 |   |   |   |      |   | $      | 836,254   |   |   |   |   |      |   |   | $      | 1,128,768 |   |   |   | $      | 1,125,922 |   |   |      |   |   |   |   | $ | 1,125,922 |   |   |
|--------------------------------------------------------|--------|--------|-----------|-----------|--------|--------|---------|--------|---------|--------|--------|--------|-----------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|-----------|--------|--------|--------|--------|---|-----------|--------|--------|
| Concessions                                            |   |   | 443,580   |      |   |   | 115,997 |   |    |   |   |   | 326,086   |   |   |      |   |   |   |   | 442,083   |   |   |   | 434,024   |   |   |   |   |      |   |   | 434,024   |   |   |
| Other theatre                                          |   |   | 76,485    |      |   |   | 14,052  |   |    |   |   |   | 43,306    |   |   |      |   |   |   |   | 57,358    |   |   |   | 49,241    |   |   |   |   |      |   |   | 49,241    |   |   |
|                                                   |   |   | 1,630,529 |      |   |   | 422,563 |   |    |   |   |   | 1,205,646 |   |   |      |   |   |   |   | 1,628,209 |   |   |   | 1,609,187 |   |   |   |   |      |   |   | 1,609,187 |   |   |
| International theatrical  exhibition                   |   |   |      |      |   |   |    |   |    |   |   |   |      |   |   |      |   |   |   |   |      |   |   |   |      |   |   |   |   |      |   |   |      |   |   |
| Admissions                                             |   |   | 27,570    |      |   |   | 4,796   |   |    |   |   |   | 11,222    |   |   |      |   |   |   |   | 16,018    |   |   |   | 13,186    |   |   |   |   |      |   |   | 13,186    |   |   |
| Concessions                                            |   |   | 12,448    |      |   |   | 1,269   |   |    |   |   |   | 2,884     |   |   |      |   |   |   |   | 4,153     |   |   |   | 2,713     |   |   |   |   |      |   |   | 2,713     |   |   |
| Other theatre                                          |   |   | 3,424     |      |   |   | 365     |   |    |   |   |   | 709       |   |   |      |   |   |   |   | 1,074     |   |   |   | 692       |   |   |   |   |      |   |   | 692       |   |   |
|                                                   |   |   | 43,442    |      |   |   | 6,430   |   |    |   |   |   | 14,815    |   |   |      |   |   |   |   | 21,245    |   |   |   | 16,591    |   |   |   |   |      |   |   | 16,591    |   |   |
| Other                                                  |   |   | 12,907    |      |   |   | 10,467  |   |    |   |   |   | 38,811    |   |   |      |   |   |   |   | 49,278    |   |   |   | 52,454    |   |   |   |   |      |   |   | 52,454    |   |   |
| Total revenues                                         |   |   | $         | 1,686,878 |   |   |    | $      | 439,460 |   |   |   |      |   | $      | 1,259,272 |   |   |   |   |      |   |   | $      | 1,698,732 |   |   |   | $      | 1,678,232 |   |   |      |   |   |   |   | $ | 1,678,232 |   |   |
| **Costs and Expenses**                                 |   |   |      |      |   |   |    |   |    |   |   |   |      |   |   |      |   |   |   |   |      |   |   |   |      |   |   |   |   |      |   |   |      |   |   |
| U.S. and Canada theatrical  exhibition                 |   |   |      |      |   |   |    |   |    |   |   |   |      |   |   |      |   |   |   |   |      |   |   |   |      |   |   |   |   |      |   |   |      |   |   |
| Film exhibition costs                                  |   |   | $         | 583,626   |   |   |    | $      | 150,557 |   |   |   |      |   | $      | 447,412   |   |   |   |   |      |   |   | $      | 597,969   |   |   |   | $      | 599,746   |   |   |      |   |   |   |   | $ | 599,746   |   |   |
| Concession costs                                       |   |   | 47,922    |      |   |   | 12,575  |   |    |   |   |   | 37,161    |   |   |      |   |   |   |   | 49,736    |   |   |   | 46,191    |   |   |   |   |      |   |   | 46,191    |   |   |
| Theatre operating expense                              |   |   | 421,665   |      |   |   | 103,578 |   |    |   |   |   | 286,706   |   |   |      |   |   |   |   | 390,284   |   |   |   | 389,665   |   |   |   |   |      |   |   | 389,665   |   |   |
| Rent                                                   |   |   | 317,181   |      |   |   | 77,804  |   |    |   |   |   | 214,927   |   |   |      | (3,229 | )      |   |   | 289,502   |   |   |   | 277,584   |   |   |   | (4,344 | )         |   |   | 273,240   |   |   |
| Preopening expense                                     |   |   | 5,768     |      |   |   | 39      |   |    |   |   |   | 1,292     |   |   |      |   |   |   |   | 1,331     |   |   |   | 2,921     |   |   |   |   |      |   |   | 2,921     |   |   |
| Theatre and other closure  expense                     |   |   | 1,313     |      |   |   | 988     |   |    |   |   |   | 10,758    |   |   |      |   |   |   |   | 11,746    |   |   |   | 3,570     |   |   |   |   |      |   |   | 3,570     |   |   |
|                                                   |   |   | 1,377,475 |      |   |   | 345,541 |   |    |   |   |   | 998,256   |   |   |      | (3,229 | )      |   |   | 1,340,568 |   |   |   | 1,319,677 |   |   |   | (4,344 | )         |   |   | 1,315,333 |   |   |
| International theatrical  exhibition                   |   |   |      |      |   |   |    |   |    |   |   |   |      |   |   |      |   |   |   |   |      |   |   |   |      |   |   |   |   |      |   |   |      |   |   |
| Film exhibition costs                                  |   |   | 11,727    |      |   |   | 2,190   |   |    |   |   |   | 5,315     |   |   |      |   |   |   |   | 7,505     |   |   |   | 6,152     |   |   |   |   |      |   |   | 6,152     |   |   |
| Concession costs                                       |   |   | 2,659     |      |   |   | 226     |   |    |   |   |   | 719       |   |   |      |   |   |   |   | 945       |   |   |   | 677       |   |   |   |   |      |   |   | 677       |   |   |
| Theatre operating expense                              |   |   | 14,888    |      |   |   | 1,551   |   |    |   |   |   | 6,281     |   |   |      |   |   |   |   | 7,832     |   |   |   | 6,462     |   |   |   |   |      |   |   | 6,462     |   |   |
| Rent                                                   |   |   | 12,697    |      |   |   | 2,972   |   |    |   |   |   | 8,807     |   |   |      | (2,231 | )      |   |   | 9,548     |   |   |   | 10,737    |   |   |   | (3,065 | )         |   |   | 7,672     |   |   |
| Preopening expense                                     |   |   | 839       |      |   |   | —  |   |    |   |   |   | —    |   |   |      |   |   |   |   | —    |   |   |   | 944       |   |   |   |   |      |   |   | 944       |   |   |
| Theatre and other closure  expense                     |   |   | (712      | )         |   |   | —  |   |    |   |   |   | —    |   |   |      |   |   |   |   | —    |   |   |   | —    |   |   |   |   |      |   |   | —    |   |   |
|                                                   |   |   | 42,098    |      |   |   | 6,939   |   |    |   |   |   | 21,122    |   |   |      | (2,231 | )      |   |   | 25,830    |   |   |   | 24,972    |   |   |   | (3,065 | )         |   |   | 21,907    |   |   |
| Other                                                  |   |   | 14,969    |      |   |   | 10,461  |   |    |   |   |   | 31,440    |   |   |      |   |   |   |   | 41,901    |   |   |   | 46,847    |   |   |   |   |      |   |   | 46,847    |   |   |
| Theatre and other closure  expense (included in Other) |   |   | —    |      |   |   | 279     |   |    |   |   |   | —    |   |   |      |   |   |   |   | 279       |   |   |   | 498       |   |   |   |   |      |   |   | 498       |   |   |
| General and administrative  expense:                   |   |   |      |      |   |   |    |   |    |   |   |   |      |   |   |      |   |   |   |   |      |   |   |   |      |   |   |   |   |      |   |   |      |   |   |
| Merger and Acquisition Costs                           |   |   | 12,523    |      |   |   | 22,286  |   |    |   |   |   | 42,732    |   |   |      |   |   |   |   | 65,018    |   |   |   | 5,508     |   |   |   |   |      |   |   | 5,508     |   |   |
| Management Fee                                         |   |   | 2,000     |      |   |   | 500     |   |    |   |   |   | —    |   |   |      | 1,500  |   |   |   | 2,000     |   |   |   | —    |   |   |   | 2,000  |      |   |   | 2,000     |   |   |
| Other                                                  |   |   | 40,251    |      |   |   | 14,615  |   |    |   |   |   | 33,727    |   |   |      |   |   |   |   | 48,342    |   |   |   | 56,798    |   |   |   |   |      |   |   | 56,798    |   |   |
| Restructuring Charge                                   |   |   | 3,980     |      |   |   | 4,926   |   |    |   |   |   | —    |   |   |      |   |   |   |   | 4,926     |   |   |   | —    |   |   |   |   |      |   |   | —    |   |   |
| Depreciation and  amortization                         |   |   | 164,047   |      |   |   | 43,931  |   |    |   |   |   | 86,052    |   |   |      | 27,798 |   |   |   | 157,781   |   |   |   | 115,296   |   |   |   | 38,041 |      |   |   | 153,337   |   |   |
| Impairment of long-lived  assets                       |   |   | 11,974    |      |   |   | —  |   |    |   |   |   | —    |   |   |      |   |   |   |   | —    |   |   |   | 16,272    |   |   |   |   |      |   |   | 16,272    |   |   |
| Disposition of assets and  other gains                 |   |   | (997      | )         |   |   | (302    | )      |    |   |   |   | (2,715    | )      |   |      |   |   |   |   | (3,017    | )      |   |   | (2,590    | )      |   |   |   |      |   |   | (2,590)   |   |   |

| Total costs and expenses |   |   | $ | 1,668,320 |   |   |   | $ | 449,176 |   |   |   |   |   | $ | 1,210,614 |   |   |   | $ | 23,838 |   |   |   | $ | 1,683,628 |   |   |   | $ | 1,583,278 |   |   |   | $ | 32,632 |   |   |   | $ | 1,615,910 |   |   |
|--------------------------|--------|--------|---|-----------|--------|--------|--------|---|---------|--------|--------|--------|--------|--------|---|-----------|--------|--------|--------|---|--------|--------|--------|--------|---|-----------|--------|--------|--------|---|-----------|--------|--------|--------|---|--------|--------|--------|--------|---|-----------|--------|--------|

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*                     We restated our financial statements for management-purchasedshares and stock option awards. See Note 1 to our consolidated financialstatements.

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**For the Year EndedMarch 30, 2006 and Pro Forma Year Ended March 31, 2005**

**Revenues.****  **Total revenues decreased 0.7%, or$11,854,000, during the year ended March 30, 2006 compared to the proforma year ended March 31, 2005. This decrease was mitigated byapproximately $118,840,000 of additional admission and concessions revenuesresulting from the Merger.

U.S.and Canada theatrical exhibition revenues increased 0.1%, or $2,320,000 duringthe year ended March 30, 2006 compared to the pro forma year endedMarch 31, 2005. Admissions revenues decreased 1.6% or $18,304,000 duringthe year ended March 30, 2006 compared to the pro forma year endedMarch 31, 2005, due to a 5.4% decrease in total attendance, partiallyoffset by a 4.0% increase in average ticket prices and the increased attendanceand admissions revenues ($70,846,000) due to the Merger. Attendance atcomparable theatres (theatres opened on or before April 2, 2004 andoperated throughout the last two fiscal years) was down 11.8%. Industry-widebox office declined 4%, with attendance estimated to be down nearly 7% in theaggregate (down 10.0% for comparable screens), offset by average ticket priceincreases estimated to be up 3%. The year over year performance of our U.S. andCanada comparable screens versus industry-wide comparable screens wasimpacted primarily by competition from new build openings. The increase inaverage ticket price was primarily due to our practice of periodicallyreviewing ticket prices and the discounts we offer and making selectiveadjustments based upon such factors as general inflationary trends andconditions in local markets. Concessions revenues increased 0.3%, or$1,497,000, during the year ended March 30, 2006 compared to the pro formayear ended March 31, 2005 due to a 6.0% increase in average concessionsper patron related to price increases and an increase in units sold per patron,partially offset by the decrease in attendance. Concession revenues increasedby $27,276,000 due to the Merger. Other theatre revenues increased 33.3% duringthe year ended March 30, 2006 compared to the pro forma year endedMarch 31, 2005. Included in other theatre revenues are our share ofon-screen advertising revenues generated by NCN and NCM. The increase in othertheatre revenues was primarily due to increases in on-screen advertisingrevenues.

Internationaltheatrical exhibition revenues increased $22,197,000, during the year endedMarch 30, 2006 compared to the pro forma year ended March 31, 2005.Admissions revenues increased $12,791,000 due to the theatres acquired inMexico in the Merger. Overall, admissions revenues increased $11,552,000,during the year ended March 30, 2006 compared to the pro forma year endedMarch 31, 2005 primarily due to the theatres acquired in Mexico.Concession revenues increased $7,942,000 due to the theatres acquired in Mexicoin the Merger. Overall, concession revenues increased $8,295,000 during theyear ended March 30, 2006 compared to the pro forma year endedMarch 31, 2005 due primarily to the theatres acquired in Mexico.

Revenuesfrom Other decreased 73.8% during the year ended March 30, 2006 comparedto the pro forma year ended March 31, 2005 due to the contribution ofNCN’s net assets to NCM on March 29, 2005. The revenues of NCN duringfiscal 2006 are related to run-off of customer contracts entered into prior toMarch 29, 2005. Our share of advertising revenues generated by NCM areincluded in U.S. and Canada other theatre revenues.

**Costs and expenses.  **Totalcosts and expenses decreased 0.9%, or $15,308,000, during the year endedMarch 30, 2006 compared to the pro forma year ended March 31, 2005.The effect of the Merger was an increase in total costs and expenses ofapproximately $110,401,000.

U.S. and Canada theatrical exhibition costs andexpenses increased 2.8% during the year ended March 30, 2006 compared tothe pro forma year ended March 31, 2005. Film exhibition costs decreased2.4% during the year ended March 30, 2006 compared to the pro forma yearended March 31, 2005 due to the decrease in admissions revenues, offset bya decrease in the percentage of admissions paid to film distributors. As apercentage of admissions revenues, film exhibition costs were 52.6% in thecurrent period as compared with 53.0% in the pro forma prior period due to morefavorable film rental terms primarily from the Merger. Concession costsdecreased 3.6% during the year ended March 30, 2006 compared to the proforma year ended March 31, 2005 due to the decrease in concessions costsas a percentage of concession revenues, partially offset by the increase inconcessions revenues. As a percentage of concessions revenues concession costswere 10.8% in the current period compared with 11.3% in the pro forma prior 

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period. As a percentage of revenues, theatre operatingexpense was 25.9% in the current period as compared to 24.0% in the pro formaprior period. Rent expense increased 9.6% during the year ended March 30,2006 compared to the pro forma year ended March 31, 2005 primarily due tothe Merger which increased rent expense by $18,415,000. The 2005 pro formaadjustment for $3,229,000 to reduce rent expense results from amortization ofstep-ups in unfavorable leases recorded in connection with the merger withMarquee. During the year ended March 30, 2006, we recognized $601,000 oftheatre and other closure expense due primarily to accretion of the closureliability related to theatres closed during prior periods. During the pro formayear ended March 31, 2005, we recognized $11,746,000 of theatre and otherclosure expense related primarily to the closure of three theatres with 22screens.

Internationaltheatrical exhibition costs and expenses increased $16,268,000 during the yearended March 30, 2006 compared to the pro forma year ended March 31,2005. Film exhibition costs increased $4,897,000 due to the theatres acquiredin Mexico in the Merger. Overall, film exhibition costs increased $4,222,000during the year ended March 30, 2006 compared to the pro forma year endedMarch 31, 2005 due primarily to the theatres acquired in Mexico.Concession costs increased $1,735,000 due to the theatres acquired in Mexico inthe Merger. Overall, concession costs increased $1,714,000 during the yearended March 30, 2006 compared to the pro forma year ended March 31,2005 due primarily to the theatres acquired in Mexico. As a percentage ofrevenues, theatre operating expense was 34.3% in the current period compared to36.9% in the pro forma prior period. Rent expense increased 33.0% during theyear ended March 30, 2006 compared to the pro forma year endedMarch 31, 2005 primarily as a result of the Merger. The 2005 pro formaadjustment for $2,231,000 to reduce rent expense results from amortization ofstep-ups in unfavorable leases recorded in connection with the merger withMarquee. We continually monitor the performance of our international theatresand factors such as our ability to obtain film product, changing consumerpreferences for filmed entertainment in international markets and our abilityto sublease vacant retail space which could negatively impact operating resultsand result in future closures, sales, dispositions and theatre closure chargesprior to expiration of underlying lease agreements.

Costs and expenses from Other decreased 64.3% duringthe year ended March 30, 2006 compared to the pro forma year endedMarch 31, 2005 due to the contribution of net assets by NCN to NCM. 

**Generaland Administrative:**

**Merger and acquisition costs.  **Mergerand acquisition costs decreased $52,495,000 from $65,018,000 to $12,523,000during the year ended March 30, 2006 compared to the pro forma year endedMarch 31, 2005. The prior year costs were higher primarily due to thecosts associated with our merger with Marquee consummated during the thirdquarter of fiscal 2005. Current year costs are primarily comprised of costsrelated to the Merger and other potential acquisition and divestitureactivities.

**Management fees.  **Managementfees were $2,000,000 for the year ended March 30, 2006 and the pro formayear ended March 31, 2005. For fiscal 2007, management fees of $1,250,000will be paid quarterly, in advance, to our Sponsors in exchange for consultingand other services.

**Other.  **Othergeneral and administrative expense decreased 16.7%, or $8,091,000, during theyear ended March 30, 2006 compared to the pro forma year endedMarch 31, 2005 primarily due to a $4,648,000 decrease in incentive-basedcompensation, due to our decline in operating results and a $6,102,000 decreasein salaries and benefits as a result of our organizational restructuringactivities.

**Restructuring Charge.  **Restructuringcharges were $3,980,000 during the year ended March 30, 2006 as comparedto $4,926,000 during the pro forma year ended March 31, 2005. Theseexpenses are primarily related to one-time termination benefits and other costsrelated to the displacement of approximately 200 associates related to anorganizational restructuring, which was completed to create a simplifiedorganizational structure and contribution of assets by NCN to NCM. Ourorganizational restructuring is complete.

**Depreciation and Amortization.  **Depreciationand amortization increased 4.0%, or $6,266,000, compared to the pro forma priorperiod, due primarily to the Merger. The 2005 pro forma adjustment for 

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$27,798,000 to increasedepreciation and amortization primarily resulted from an increase in asset basisof approximately $130,000,000 recorded in connection with the merger withMarquee.

**Impairment of Long-Lived Assets.  **Duringfiscal 2006 we recognized a non-cash impairment loss of $11,974,000 on fourtheatres with 66 screens (in Ohio, Illinois, New York and New Jersey). Theentire charge was taken against property. The estimated future cash flows ofthese theatres, undiscounted and without interest charges, were less than thecarrying value of the theatre assets. We continually evaluate the future plansfor certain of our theatres, which may include selling theatres or closingtheatres and terminating the leases. No impairment loss was recorded in fiscal2005.

**Disposition of Assets and OtherGains.  **Disposition of assets and other gains were$997,000 in the current period compared to $3,017,000 in the pro forma priorperiod. The current and pro forma prior periods include $935,000 and$2,610,000, respectively, of settlements received related to fireproofingclaims at various theatres (see Note 12—Commitments and Contingencies toConsolidated Financial Statements). The current period also includesmiscellaneous disposal gains of $62,000. The pro forma prior period also includedmiscellaneous gains of $407,000.

**Other Income.  **Otherincome includes $8,699,000 of income related to the derecognition of storedvalue card liabilities where we believe future redemption to be remote,insurance recoveries of $3,032,000 for property losses related to HurricaneKatrina, net of disposition losses of $346,000 and $1,968,000 of businessinterruption insurance recoveries related to Hurricane Katrina, partiallyoffset by financing costs incurred in connection with the write off of ourdeferred financing charges of $3,535,000. Other income, for the prior year on apro forma basis, primarily included $6,745,000 of income related to thederecognition of stored value card liabilities.

**Interest Expense.  **Interestexpense increased $15,112,000 during the year ended March 30, 2006compared to the pro forma year ended March 31, 2005. The increaseprimarily relates to increased borrowings used to fund the Merger. Included inthe pro forma period ended March 31, 2005 is an adjustment for $1,348,000of additional interest expense which primarily records the borrowings from themerger with Marquee as if they had occurred at the beginning of the period.

On January 26, 2006, we issued $325,000,000 of11% senior subordinated notes due 2016 (“Notes due 2016”) and secured the newSenior Secured Credit Facility for $850,000,000, of which $650,000,000 is currentlyoutstanding as a variable rate term note. Interest on these notes was$6,528,000 and $7,985,000, respectively during fiscal 2006. We also incurredinterest expense related to debt held by Cinemex of $2,110,000 during fiscal2006.

**InvestmentLoss (Income).  **Investment loss was $4,398,000 for theSuccessor period ended March 30, 2006 compared to income of $5,929,000 forthe pro forma period ended March 31, 2005. Included in the pro formaperiod ended March 31, 2005 is an adjustment for $3,896,000 reducinginterest income which would have been received if the merger with Marquee hadoccurred as of the beginning of the period. Equity in losses ofnon-consolidated entities were $7,807,000 in the Successor period endedMarch 30, 2006 compared to income of $293,000 in the prior year. Currentyear equity in losses related to our investment in NCM were $5,476,000.Interest income for the Successor period ended March 30, 2006 was$2,930,000. Prior periods interest income was higher primarily due to the escrowfunds and increased cash available for investment during the period.

**Income Tax Provision (Benefit).  **Theprovision for income taxes from continuing operations was $71,800,000 for theSuccessor period ended March 30, 2006 compared to a benefit of $6,420,000for the pro forma period ended March 31, 2005. The provision for theSuccessor period ended March 30, 2006 included a charge for a fullvaluation allowance on all U.S. tax jurisdiction net deferred tax assets withthe exception of those U.S. net deferred tax assets acquired in connection withthe Merger. The pro forma period ended March 31, 2005 includes a pro formabenefit adjustment of $11,900,000 resulted from the items described above withthe merger with Marquee. The pro forma period ended March 31, 2005included $61,032,000 in costs associated with the merger with Marquee whichwere treated as non-deductible. See Note 9 to the Consolidated FinancialStatements.

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**Lossfrom Discontinued Operations, Net.  **On May 11,2006, we sold AMC Entertainment España S.A. and Actividades Multi-CinemeasE Espectáculos, LDA (collectively “Iberia”), including 4 theatres with 86screens in Spain and 1 theatre with 20 screens in Portugal. At the date of thesale these operations did not meet the criteria for discontinued operationsbecause of continuing involvement in the region through an equity methodinvestment in Yelmo. In December 2006, we disposed of our investment inYelmo, including 27 theatres with 310 screens in Spain, and the results ofthe operations in Iberia have now been classified as discontinued operations.On June 30, 2005, we sold Japan AMC Theatres, Inc., including fourtheatres in Japan with 63 screens, and classified its operations asdiscontinued operations. The information presented for all periods reflectthese as discontinued operations. See Note 3—Discontinued Operations for thecomponents of the loss from discontinued operations.

**Loss for Shares of Common Stock.****  **Loss for shares of common stock was $216,223,000and $97,450,000 for the Successor period ended March 30, 2006 and the proforma period ended March 31, 2005, respectively.

**Pro Forma Year Ended March 31, 2005 and Pro Forma YearEnded April 1, 2004**

**Revenues.****  **Total revenues increased 1.2%, or $20,500,000, on apro forma basis, during the year ended March 31, 2005 compared to the yearended April 1, 2004.

U.S. and Canada theatricalexhibition revenues increased 1.2%, on a pro forma basis, from the prior year.Admissions revenues increased 0.3%, on a pro forma basis, due to a 3.8%increase in average ticket price partially offset by a 3.4% decrease inattendance. The increase in average ticket prices was primarily due to ourpractice of periodically reviewing ticket prices and the discounts we offer andmaking selective adjustments based upon such factors as general inflationarytrends and conditions in local markets. Attendance decreased primarily due to a5.8% decrease in attendance at comparable theatres (theatres opened on orbefore April 4, 2003) related to overall popularity and mix of film product anda decrease in attendance due to theatre closures, partially offset by anincrease in attendance at new theatres. We closed 6 theatres with 42 screensand opened three theatres with 44 screens since fiscal 2004. Concessionsrevenues increased 1.9%, on a pro forma basis, due to a 5.4% increase inaverage concessions per patron related to price increases partially offset bythe decrease in attendance.

International theatricalexhibition revenues increased 28.1%, on a pro forma basis. Admissions revenuesincreased 21.5%, on a pro forma basis, due to a 20.6% increase in attendanceand a 0.7% increase in average ticket price due primarily to a weaker U.S.dollar. Concession revenues, on a pro forma basis, increased 53.1% due to a26.9% increase concessions per patron and the increase in total attendance.Concessions per patron increased primarily due to the weaker U.S. dollar.

Revenues from NCN andother decreased 6.1%, on a pro forma basis, from the prior year due to adecrease in advertising revenues resulting from a reduction in screens servedby NCN. This decline resulted from an initiative to improve profitability byeliminating marginally profitable contracts with certain theatre circuits.

**Costs and expenses.**   Totalcosts and expenses increased 4.2%, on a pro forma basis, or $67,718,000 duringthe year ended March 31, 2005 compared to the year ended April 1, 2004.

U.S. and Canada theatrical exhibition costs andexpenses increased 1.9%, on a pro forma basis, from the prior year. Filmexhibition costs decreased 0.3%, on a pro forma basis, due to a decrease in thepercentage of admissions paid to film distributors partially offset by theincrease in admissions revenues. As a percentage of admissions revenues, film exhibitioncosts were 53.0% in the current year as compared with 53.3% in the prior year.Concession costs increased 7.7%, on a pro forma basis, due to the increase inconcession costs as a percentage of concessions revenues and the increase inconcession revenues. As a percentage of concessions revenues, concession costswere 11.3%, on a pro forma basis, in the current year compared with 10.6% inthe prior year. As a percentage of revenues, theatre operating expense was24.0% 

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in the current year, on apro forma basis, as compared to 24.2% in the prior year. Rent expense increased6.0%, on a pro forma basis, due primarily to the opening of theatres andscreens since April 1, 2004 and the sale and lease back of the real estateassets associated with three theatres for proceeds of $63,911,000 on March 30,2004. The pro forma adjustments for $3,229,000 and $4,344,000, respectively, toreduce rent expense result from the amortization of step-ups in unfavorableleases recorded in connection with the merger with Marquee. During fiscal 2005,on a pro forma basis, we recognized $11,746,000 of theatre and other closureexpense related primarily to accruals for future minimum rentals on three theatreswith 22 screens closed during the current period. During fiscal 2004, on a proforma basis, we incurred $3,570,000 of theatre and other closure expenserelated primarily to a payment to a landlord to terminate a lease on a theatreclosed during the current period and due to accruals for future minimum rentalson three theatres with 20 screens closed during the year. Theatres closed priorto their lease expiration may require payments to the landlords to terminatethe leases, which we estimate could approximate $250,000, in the aggregate,over the next three years.

International theatrical exhibition costs and expensesincreased 17.9%, on a pro forma basis. Film exhibition costs increased 22.0%,on a pro forma basis, due to the increase in admissions revenues partiallyoffset by a decrease in the percentage of admissions paid to film distributors.As a percentage of admissions revenues, film exhibition costs were 46.9%, on apro forma basis, in the current period as compared with 46.7% in the priorperiod. Concession costs increased 39.6%, on a pro forma basis, due to theincrease in concession revenues partially offset by a decrease in concessioncosts as a percentage of concession revenues. As a percentage of concessionsrevenues, concession costs were 22.8%, on a pro forma basis, in the currentyear compared with 25.0% in the prior year. Theatre operating expense increased21.2%, on a pro forma basis, primarily at new theatres, and rent expenseincreased 24.5%, on a pro forma basis, primarily due to the operating of newtheatres. The pro forma adjustments for $2,231,000 and $3,065,000,respectively, to reduce rent expense result from the amortization of step-upsin unfavorable leases recorded in connection with the merger with Marquee. Wecontinually monitor the performance of our international theatres, and factorssuch as our ability to obtain film product, changing consumer preferences forfilmed entertainment in international markets and our ability to subleasevacant retail space could negatively impact operating results and result infuture closures, sales, dispositions and theatre closure charges prior toexpiration of underlying lease agreements. International theatrical exhibitioncosts and expenses were negatively impacted by a weaker U.S. dollar, althoughthis did not contribute materially to consolidated loss from continuingoperations.

Costs and expenses fromNCN and other decreased 10.6%, on a pro forma basis, due primarily to thereduction in overhead costs associated with the integration of NCN'sadministrative functions into our home office location and decreased revenues.

**General andAdministrative:**

**Mergerand acquisition.**   Merger and acquisition costsincreased $59,510,000 during the current year, on a pro forma basis. Thecurrent period reflects costs associated with the merger with Marquee of$63,057,000 and $1,943,000 for other strategic initiatives. Prior period costswere primarily for professional and consulting expenses directly related to apossible business combination with Loews Cineplex Entertainment Corporationthat did not occur.

**Managementfee.**   The pro forma adjustments for $1,500,000and $2,000,000, respectively, to increase management fee expense represent theadjustments necessary to record the annual management fee of $2,000,000 whichis required to be paid quarterly, in advance, to our Sponsors in exchange forconsulting and other services under an agreement entered into in connectionwith the merger with Marquee.

**Other.**   Othergeneral and administrative expense decreased 14.9%, on a pro forma basis. Stockbased compensation decreased $7,526,000, during the current year, on a proforma basis, compared to the 

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prior year. The currentpro forma period reflects that certain of the performance measures for fiscal2005 have not been met and related discretionary awards under the 2003Long-Term Incentive Plan (“LTIP”) will not be made. Accordingly, we recorded noexpense or accrual for fiscal 2005 performance grants under the LTIP. The priorperiod reflects expense from the plan approval date, September 18, 2003 throughApril 1, 2004. Current year stock based compensation expense of $1,201,000relates to options issued by our parent, Holdings, for certain members of ourmanagement. See Note 8 to the Consolidated Financial Statements includedherein.

**RestructuringCharge.**   Restructuring charges were $4,926,000during the current pro forma year. These expenses are related to one-timetermination benefits and other costs related to the displacement ofapproximately 200 associates related to an organizational restructuring, whichwas completed to create a simplified organizational structure, and acontribution of assets by NCN to NCM.

**Depreciationand Amortization.**   Depreciation and amortizationincreased 2.9%, on a pro forma basis, or $4,444,000, due primarily to increasesin depreciation resulting from new theatres. The 2005 pro forma adjustments for$27,798,000 and $38,041,000, respectively, to increase depreciation andamortization primarily resulted from an increase in asset basis ofapproximately $130,000,000 recorded in connection with the merger with Marquee.

**Impairmentof Long-Lived Assets.**   No impairment loss wasrecorded in fiscal 2005. During fiscal 2004, we recognized a non-cashimpairment loss of $16,272,000 on 10 theatres with 176 screens. We recognizedan impairment loss of $9,866,000 on seven U.S. theatres with 114 screens (inTexas, Maryland, California, Illinois, Wisconsin and Minnesota), $3,525,000 onone theatre in the United Kingdom with 12 screens and $2,881,000 on twoCanadian theatres with 50 screens. Our impairment loss included $16,209,000related to property and $63,000 related to intangible assets. Included in theselosses is an impairment of $3,482,000 on 3 theatres with 70 screens that wereincluded in impairment losses recognized in previous periods. The estimatedfuture cash flows of these theatres, undiscounted and without interest charges,were less than the carrying value of the theatre assets. We continuallyevaluate the future plans for certain of our theatres, which may includeselling theatres or closing theatres and terminating the leases. We haveidentified 30 multiplex theatres with 261 screens that we may close over thenext one to three years due to expiration of leases or early leaseterminations. Prior to and including fiscal 2004, $10,763,000 of impairmentcharges have been taken on these theatre assets and the economic lives of thesetheatre assets have been revised to reflect management's best estimate of theeconomic lives of the theatre assets for purposes of recording depreciation.

**Dispositionof Assets and Other Gains.**   Disposition of assetsand other gains increased from a gain of $2,590,000 during the prior year to again of $3,017,000 during the current year, on a pro forma basis. The pro formacurrent period includes settlement gains of $2,610,000 related to variousfireproofing claims at two theatres and a $111,000 settlement that was receivedfrom a construction contractor related to one Canadian theatre. The pro formacurrent period also includes a gain of $334,000 related to a sale of NCNequipment. The prior period includes a $1,298,000 gain on the disposition ofthree theatres and two parcels of real estate held for sale, settlements of$925,000 received related to various fireproofing claims at two theatres and$367,000 related to a settlement with a construction contractor at one theatre.

**OtherIncome and Expense.**   During the current year, ona pro forma basis, we recognized $6,745,000 of income related to thederecognition of stored value card liabilities where management believes futureredemption to be remote. In the prior year, on March 25, 2004, we redeemed $200,000,000of our 91¤2% senior subordinated notes due2009 (the “Notes due 2009”) for $204,750,000. We recognized a loss of$8,590,000 in connection with the redemption, including a call premiumof $4,750,000, unamortized issue costs of $3,291,000 and unamortized discountof $549,000. On March 25, 2004, we redeemed $83,406,000 or our 91¤2% senior subordinated notes due2011 (the “Notes due 2011”) for $87,367,000. We recognized a loss of$5,357,000 in connection with the redemption including a call premium of$3,961,000, unamortized 

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issue costs of $1,126,000and unamortized discount of $270,000. The losses are included within other expensein the Consolidated Statements of Operations for the year ended April 1, 2004.

**Interest Expense.**   Interestexpense was $127,998,000 and $131,873,000 for the pro forma periods ended March31, 2005 and April 1, 2004, respectively. The current year decrease isprimarily changes in interest rates on outstanding variable rate debt. Includedin the pro forma periods ended March 31, 2005 and April 1, 2004 are adjustmentsfor $1,348,000 and $56,212,000 of additional interest expense which primarilyrecords the borrowings from the merger with Marquee as if they had occurred atthe beginning of the periods.

On August 18, 2004, AMCE issued $250,000,000 of ourFixed Notes due 2012 and $205,000,000 of our Floating Notes due 2010, theinterest rate of which is currently 7.04% per annum. On August 18, 2004,Holdings issued $304,000,000 aggregate principal amount at maturity of DiscountNotes for gross proceeds of $169,917,760. Interest expense associated with theDiscount Notes is included in our Consolidated Statements of Operations throughDecember 23, 2004.

On February 24, 2004, we sold $300,000,000 aggregateprincipal amount of 8% senior subordinated notes due 2014 (the “Notes due 2014”).We used the net proceeds (approximately $294,000,000) to redeem the Notes due2009 and a portion of the Notes due 2011. On March 25, 2004, we redeemed$200,000,000 of our Notes due 2009 and $83,406,000 of the Notes due 2011.

**InvestmentIncome.**   Investment income was $5,929,000 and$2,837,000 for the pro forma periods ended March 31, 2005 and April 1, 2004.Investment income for the pro forma period ended March 31, 2005 compared to thepro forma period ended April 1, 2004 increased primarily due to the interestincome on funds held in escrow related to the merger with Marquee and increasedcash available for investment during the current period and includes a proforma adjustment to interest income of $3,896,000. No adjustments werenecessary for the pro forma period ended April 1, 2004.

**IncomeTax Provision.**   The benefit for income taxes fromcontinuing operations for the pro forma period ended March 31, 2005 was$6,420,000 after including a pro forma adjustment for $11,900,000. The proforma period includes $61,032,000 in costs related to the merger with Marqueewhich are currently being treated as non-deductible. The difference ineffective rate from the statutory rate of 35% during the pro forma period endedMarch 31, 2005 was primarily due to currently non-deductible costs related tothe merger with Marquee and increase in foreign deferred tax assets for whichwe provided a valuation allowance. The difference in effective rate from thestatutory rate of 35% during the pro forma period ended April 1, 2004 wasprimarily due to foreign deferred tax assets (primarily in Spain, the UnitedKingdom and France) for which we provided a $6,681,000 valuation allowance. Thepro forma periods ended March 31, 2005 and April 1, 2004 include a pro formabenefit adjustment of $11,900,000 and $33,200,000, respectively, resulting fromthe items described above in connection with the merger with Marquee.

**Loss From DiscontinuedOperations, Net.**   On May 11, 2006, we sold AMCEntertainment Espana S.A. and Actividades Multi Cinemeas E Espectaculos, LDA(collectively “Iberia”), including 4 theatres with 86 screens in Spain and 1theatre with 20 screens in Portugal. At the date of the sale these operationsdid not meet the criteria for discontinued operations because of continuinginvolvement in the region through an equity method investment in Yelmo. InDecember 2006, we disposed of our investment in Yelmo, including 27 theatreswith 310 screens in Spain, and the results of the operations in Iberia have nowbeen classified as discontinued operations. On June 30, 2005, we sold Japan AMCTheatres, Inc., including four theatres in Japan with 63 screens, andclassified its operations as discontinued operations. On December 4, 2003, wesold one theatre in Sweden with 18 screens and incurred a loss on sale of$5,591,000. The results of operations of the Sweden theatre have beenclassified as discontinued operations. The information presented for allperiods reflect these as discontinued operations. See Note 3—DiscontinuedOperations for the components of the loss from discontinued operations.

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**Loss for Shares of CommonStock.**   Loss for shares of common stock for theyear was $97,450,000 and $106,635,000 for the pro forma periods ended March 31,2005 and April 1, 2004. Preferred Stock dividends of 19,697 shares of PreferredStock valued at $40,277,000 were recorded in fiscal 2004.

**LIQUIDITY ANDCAPITAL RESOURCES**

Ourconsolidated revenues are primarily collected in cash, principally through boxoffice admissions and theatre concessions sales. We have an operating “float”which partially finances our operations and which generally permits us tomaintain a smaller amount of working capital capacity. This float existsbecause admissions revenues are received in cash, while exhibition costs(primarily film rentals) are ordinarily paid to distributors from 20 to45 days following receipt of box office admissions revenues. Film distributorsgenerally release the films which they anticipate will be the most successfulduring the summer and holiday seasons. Consequently, we typically generatehigher revenues during such periods.

**Holding CompanyStatus**

Holdings is a holding company with no operations ofits own and has no ability to service interest or principal on its DiscountNotes due 2014 other than through any dividends it may receive from AMC Entertainment.

Under certaincircumstances, AMC Entertainment will be restricted from paying dividends toHoldings by the terms of the indentures relating to its notes and its New  Credit Facility. AMC Entertainment’s  New Credit Facility and note indenturescontain provisions which limit the amount of dividends and advances which itmay pay or make to Holdings. Under the most restrictive of these provisions,set forth in the New Credit Facility, the amount of loans and dividends whichthe Company could make to Holdings could not exceed $118 million in theaggregate. Under the note Indentures, a loan to Holdings would have to be onterms no less favorable to the Company than could be obtained in a comparabletransaction on an arm’s length  basiswith an unaffiliated third party and be in the best interest of the Company.Provided no event of default has occurred or would result, the New CreditFacility also permits AMC Entertainment to pay cash dividends to Holdings forspecified purposes, including indemnification claims, taxes, up to$4 million annually for operating expenses, repurchases of  equity awards to satisfy tax withholdingobligations, specified  management fees,fees and expenses of permitted equity and debt offerings and to pay for therepurchase of stock from employees, directors and consultants under benefitplans up to specified amounts. Depending on the net senior secured leverageratio, as defined in the New Credit Facility, AMC Entertainment may also payHoldings a portion of net cash proceeds from specified asset sales.

**Cash Flows fromOperating Activities**

Cashflows provided by (used in) operating activities, as reflected in theConsolidated Statements of Cash Flows, were $25,694,000, $(45,364,000),$145,364,000 and $163,939,000 for the Successor period ended March 30,2006, Successor period ended March 31, 2005, the Predecessor period endedDecember 23, 2004 and the Predecessor period ended April 1, 2004,respectively. The decrease in cash provided by operating activities for theSuccessor period ended March 30, 2006 compared with the pro forma combinedperiod for the prior year is primarily due to declines in attendance and thetiming of payments for accrued expenses and other liabilities. The cash used inoperating activities for the Successor period ended March 31, 2005 was primarilydue to payments of $37,061,000 in transaction costs related to the merger withMarquee. The decrease in operating cash flows for the Predecessor period endedDecember 23, 2004 compared to the Predecessor period ended April 1,2004 was also primarily due to transaction costs related to the merger withMarquee of which $23,971,000 were paid during the Predecessor period endedDecember 23, 2004. We had a working capital deficit as of March 30,2006 of $115,995,000 versus a deficit as of March 31, 2005 of $134,330,000.We have the ability to borrow against our credit facility to meet obligationsas they come due (subject to limitations on the incurrence of 

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indebtedness in our various debt instruments) and hadapproximately $90,000,000 and $163,000,000 available on our credit facility tomeet these obligations for the periods ended March 30, 2006 andMarch 31, 2005, respectively.

**Cash Flows fromInvesting Activities**

Cash flows provided by(used in) investing activities, as reflected in the Consolidated Statements ofCash Flows, were $107,538,000, $(1,260,301,000), $(692,395,000) and$(69,378,000) for the Successor period ended March 30, 2006, Successorperiod ended March 31, 2005, the Predecessor period endedDecember 23, 2004 and the Predecessor period ended April 1, 2004,respectively. Cash flows for the Successor period ended March 30, 2006include cash acquired from the Merger of $142,512,000, proceeds from the saleleaseback of two theatres of $35,010,000 and proceeds from the sale of theJapan theatres of $53,456,000, partially offset by capital expenditures of$117,668,000. The cash acquired from the Merger represented the cash held byLoews at the date of the Merger. The Merger was non-cash, funded by theissuance of our common stock. Cash outflows for investing activities include apayment to common and preferred stockholders net of cash acquired of$1,268,564,000 related to the merger with Marquee for the Successor periodended March 31, 2005 and an increase of $627,338,000 in restricted cashrelated to investment of the proceeds from the Senior Notes issued in order tofinance the merger with Marquee during the Predecessor period endedDecember 23, 2004 and capital expenditures of $18,622,000, $66,155,000 and$95,011,000 during the Successor period ended March 31, 2005, Predecessorperiods ended December 23, 2004 and April 1, 2004, respectively. Asof March 30, 2006, we had construction in progress of $34,796,000. We had8 U.S. theatres with a total of 117 screens and two Mexico theatres with atotal of 21 screens under construction as of March 30, 2006 that we expectto open in fiscal 2007. We expect that our gross capital expenditures in fiscal2007 will be approximately $141,000,000.

On December 23, 2004 we completed the merger withMarquee. Pursuant to the terms of the merger agreement, each issued andoutstanding share of AMC Entertainment’s common stock and Class B stockwas converted into the right to receive $19.50 in cash and each issued andoutstanding share of AMC Entertainment’s preferred stock was converted into theright to receive $2,727.27 in cash. The total amount of consideration paid inthe merger with Marquee was $1,665,200,000.

Holdings used the net proceeds from the sale of ournotes (as described below), together with our existing cash balances and theproceeds from the equity contribution from Holdings (consisting of equitycontributed by the Marquee Sponsors, the co-investors and certain members ofmanagement and the net proceeds of an offering of Holdings’ notes), to financethe merger with Marquee.

In connection with and as a result of the merger withMarquee, AMC Entertainment’s stock is no longer publicly traded and we delistedAMC Entertainment’s common stock, 662¤3 ¢ par value,from the American Stock Exchange on December 23, 2004.

On December 19, 2003, we acquired certain of theoperations and related assets of MegaStar Cinemas, L.L.C. for an estimated cashpurchase price of $15,037,000. In connection with the acquisition, we assumedleases on three theatres with 48 screens in Minneapolis and Atlanta. All threeof the theatres feature stadium seating and have been built since 2000.

On March 29, 2002, we acquired GC Companiespursuant to a stock purchase agreement and a plan of reorganization that wasconfirmed by the bankruptcy court on March 18, 2002. Our purchase price of$168,931,000 (net of $6.5 million from the sale of GC Companies’ portfolioof venture capital investments on the effective date) included anticipated cashpayments of $68,472,000, the issuance of $72,880,000 aggregate principal amountof our Notes due 2011 with a fair value of $71,787,000 and the issuance of2,578,581 shares of AMC Entertainment common stock with an aggregate fair valueof $35,172,000 based on a fair value of $13.64 per share (the closing price pershare on the effective date of the plan). We used available cash for the cashpayments under the plan of reorganization.

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The final purchase price for GC Companies was notdeterminable until all creditor claims disputed by the GC Companiespost-confirmation unsecured creditors committee were consensually resolved or determinedby the bankruptcy court. The GC Companies bankruptcy case was closed onMay 26, 2004. Through March 31, 2005, we had issued $72,880,000aggregate principal amount of our senior subordinated notes due 2011 and2,430,433 shares of AMC Entertainment common stock and paid approximately$66,118,000 in cash to creditors of GC Companies.

On March 15, 2002, we acquired the operations andrelated assets of Gulf States Theatres for a cash purchase price ofapproximately $45,800,000. The acquisition includes five theatres with 68screens in the New Orleans, Louisiana area. All five of the theatres featurestadium seating and have been built since 1997 and strengthen our position inthe New Orleans market. Operating results of the acquired theatres are includedin the Consolidated Statements of Operations from March 15, 2002.

In connection with the acquisition of Gulf StatesTheatres, we entered into leases of the real estate assets associated with thefive theatres with Entertainment Properties Trust for a term of 20 yearswith an initial annual base rent of $7,200,000. Of the $45,000,000 purchaseprice, $5,800,000 was paid to Entertainment Properties Trust for specifiednon-real estate assets which Entertainment Properties Trust acquired from GulfStates Theatres and resold to us at cost. We will pay $300,000 annually forfive years from the date of acquisition in connection with consulting andnon-competition agreements related to the acquisition.

On June 30, 2005, we sold one of our wholly-ownedsubsidiaries, Japan AMC Theatres, Inc., including four of our five theatresin Japan for $44,861,000 and, on September 1, 2005, sold our remainingJapan theatre for a sales price of $8,595,000.

Subsequent to the current fiscal year, inMay 2006, AMCEI and its subsidiary AMC Entertainment International Limitedsold its interests in AMC Entertainment España S.A., which owned and operatedfour theatres with 86 screens in Spain, and Actividades Multi-Cinemas EEspectáculos, LDA, which owned and operated one theatre with 20 screens inPortugal for a sales price of $35,446,000.

Subsequent to the end of fiscal year 2006, we soldfour theatres with 42 screens in the U.S. as required by and in connection withthe approval of the Mergers for an aggregate net sales price of approximately$30.7 million. We expect additional sales proceeds of approximately$40.5 million related to six theatres with 78 screens required to bedisposed of in connection with the approval of the Mergers.

We fund the costs of constructing new theatres throughexisting cash balances, cash generated from operations or borrowed funds, asnecessary. We generally lease our theatres pursuant to long-term non-cancelableoperating leases which may require the developer, who owns the property, toreimburse us for the construction costs. We may decide to own the real estate assetsof new theatres and, following construction, sell and leaseback the real estateassets pursuant to long-term non-cancelable operating leases. During fiscal2006, we sold and leased back two theatres with 32 screens.

During fiscal 1998, wesold the real estate assets associated with 13 theatres to EntertainmentProperties Trust (“EPT”) for an aggregate purchase price of $283,800,000 (the“Sale and Lease Back Transaction”). We leased the real estate assets associatedwith the theatres from EPT pursuant to non-cancelable operating leases withterms ranging from 13 to 15 years at an initial lease rate of 10.5% withoptions to extend for up to an additional 20 years. The leases are triplenet leases that require us to pay substantially all expenses associated withthe operation of the theatres, such as taxes and other governmental charges,insurance, utilities, service, maintenance and any ground lease payments.During fiscal 2000, we sold the building and improvements associated with oneof our theatres to EPT for proceeds of $17,600,000 under terms similar to theabove Sale and Leaseback Transaction. During fiscal 2002, we sold the land atthis theatre to EPT for proceeds of $7,486,000 under terms similar to the aboveSale and Leaseback Transaction and at an initial lease rate of 10.75%. Duringfiscal 2003, we sold the real 

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estate assetsassociated with 2 theatres to EPT for proceeds of $43,665,000 and then leasedthe real estate assets associated with these theatres pursuant tonon-cancelable operating leases with terms of 20 years at an initial leaserate of 11% with options to extend for up to an additional 15 years. OnMarch 30, 2004, we sold the real estate assets associated with 3 theatresto EPT for proceeds of $63,911,000 and then leased the real estate assetsassociated with these theatres pursuant to non-cancelable operating leases withterms of 20 years at an initial lease rate of 9.5% with options to extendfor up to 15 additional years. On March 31, 2005, we sold the real estateassets associated with one theatre and adjoining retail space to EPT for proceedsof $50,910,000 and then leased the real estate assets associated with thetheatre pursuant to a non-cancelable operating lease with terms of20 years at an initial lease rate of 9.24% with options to extend for upto 14 additional years. On March 30, 2006, we sold the real estate assetsassociated with two theatres to EPT for proceeds of $35,010,000 and then leasedthe real estate assets associated with the theatres pursuant to a non-cancelableoperating lease with terms of approximately 15 and 17 years at an initiallease rate of 9.25% with options to extend each for up to 15 additional years

Historically, we haveeither paid for or leased the equipment used in a theatre. We may purchaseleased equipment from lessors if prevailing market conditions are favorable.During the Successor period ended March 31, 2005 we purchased certainleased furniture, fixtures and equipment at two theatres for $25,292,000.During fiscal 2004 we purchased certain leased furniture, fixtures andequipment at five Canadian theatres for $15,812,000.

**Cash Flows fromFinancing Activities**

Cash flows provided by (used in) financing activities,as reflected in the Consolidated Statements of Cash Flows, were $21,434,000,$1,376,763,000, $611,034,000 and $(5,274,000) for the Successor period endedMarch 30, 2006, Successor period ended March 31, 2005, thePredecessor period ended December 23, 2004 and the Predecessor periodended April 1, 2004, respectively. Cash flows from financing activitiesfor the Successor period ended March 30, 2006 primarily include proceedsof $325,000,000 from the issuance of the Notes due 2016 and $650,000,000 fromthe Term Loan B which were used to repurchase $939,363,000 of debt, as well as$24,895,000 paid for financing costs which will be deferred and amortized overthe life of the debt. On September 29, 2005 we received $6,661,000additional construction allowance from our landlord Entertainment PropertiesTrust related to three of our Canada theatres which allowed for sale leasebackaccounting at these locations and reduced our financing lease obligations by approximately$31,292,000, reduced the net book value of building assets related to theselocations by approximately $15,839,000 and resulted in a deferred gain of$22,114,000. The deferred gain is amortized as a reduction of rent expense overthe remaining terms of the leases. Cash flows from financing activities for theSuccessor period ended March 31, 2005 include proceeds from Holdings’ issuanceof common stock of $769,350,000, proceeds of $169,918,000 related to theissuance of Holdings’ Discount Notes due 2014 and proceeds of $455,000,000related to the issuance of Senior Notes. Cash flows from financing activitiesfor the Predecessor period ended December 23, 2004, include proceedsrelated to the issuance of notes of $624,918,000 to finalize the merger withMarquee, which includes gross proceeds of $169,918,000 from the Holdings’Discount Notes due 2014.

For a discussion of our most recent financingtransactions in fiscal year 2006, see “Merger with Loews FinancingTransactions” below.

As a result of the merger with Marquee, AMCEntertainment became the obligor of $250,000,000 in aggregate principal amountof 85¤8%Senior Notes due 2012 (the “Fixed Notes due 2012”) and $205,000,000 inaggregate principal amount of Senior Floating Notes due 2010 (the “FloatingNotes due 2010” and collectively, the “Senior Notes”) that were previouslyissued by Marquee Inc. on August 18, 2004. The Senior Notes(i) rank senior in right of payment to any of AMC Entertainment’s existingand future subordinated indebtedness, rank equally in right of payment with anyof its existing and future senior indebtedness and are effectively subordinatedin right of payment to any of its secured indebtedness and (ii) are fullyand un

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conditionally guaranteedon a joint and several, senior unsecured basis by each of AMC Entertainment’sexisting and future wholly owned subsidiaries that is a guarantor or directborrower under its other indebtedness. The Senior Notes are structurallysubordinated to all existing and future liabilities and preferred stock of AMCEntertainment’s subsidiaries that do not guarantee the notes.

The Fixed Notes due 2012 bear interest at the rate of85¤8%per annum, payable on February 15 and August 15 of each year,commencing February 15, 2005. The Fixed Notes due 2012 are redeemable atour option, in whole or in part, at any time on or after August 15, 2008at 104.313% of the principal amount thereof, declining ratably to 100% of theprincipal amount thereof on or after August 15, 2010. The Floating Notesdue 2010 bear interest at a rate per annum, reset quarterly, equal to 41¤4%plus the three-month LIBOR interest rate. Interest on the Floating Notesdue 2010 is payable quarterly on February 15, May 15, August 15and November 15 and interest payments commenced on November 15, 2004.The interest rate is 9.01% per annum for the quarterly period endingMay 14, 2006 and is 9.42% for the quarterly period ending August 14,2006. The Floating Notes due 2010 are redeemable, in whole or in part, on orafter August 15, 2006 at 103.00% of the principal amount thereof,declining ratably to 100% of the principal amount thereof on or afterAugust 15, 2009. The Fixed Notes due 2012 and Floating Notes due 2010 alsocontain covenants which restrict the incurrence of additional seniorindebtedness based on the senior leverage ratio as defined in the indentures.

In connection with the merger with Marquee, Holdingsissued $304,000,000 principal amount at maturity of its 12% senior discountnotes due 2014 (“Discount Notes due 2014”) for gross proceeds of $169,917,760.The only operations of Holdings prior to the merger with Marquee were relatedto this financing. Because AMC Entertainment was the primary beneficiary ofHoldings, which was considered a variable interest entity as defined in FIN46(R), *Consolidation of Variable InterestEntities, an Interpretation of ARB No. 51,* the Predecessor wasrequired to consolidate Holdings’ operations and financial position into itsfinancial statements as of and through the period ended December 23, 2004.The results of operations of Holdings included within the Predecessor’sConsolidated Statements of Operations for the period from April 2, 2004through December 23, 2004 include interest expense of $7,135,000 andinterest income of $831,000.

Prior to August 15, 2009, unless Holdings electsto pay cash interest as described below, interest on the Discount Notes due2014 will accrete from the date of issuance of the notes until August 15,2009, compounded semiannually. Thereafter, interest on the Discount Notes due2014 will accrue and be payable in cash semi-annually on each February 15and August 15, commencing on February 15, 2010, at a rate of 12% perannum.

On any interest payment date prior to August 15,2009, Holdings may elect to commence paying cash interest (from and after suchinterest payment date) in which case (i) Holdings will be obligated to paycash interest on each subsequent interest payment date, (ii) the DiscountNotes due 2014 will cease to accrete after such interest payment date and(iii) the outstanding principal amount at the maturity of each note willbe equal to the accreted value of such note as of such interest payment date.

Concurrently with the consummation of the merger withMarquee, AMC Entertainment entered into an amendment to its credit facility. Werefer to this amended credit facility as the “amended credit facility.” Theamended credit facility modified a previous Second Amended and Restated CreditAgreement dated as of March 26, 2004 which was superseded in connectionwith the execution of the “amended credit facility” which was scheduled tomature on April 9, 2009. The amended credit facility was replaced with theNew Credit Facility on January 26, 2006.

On February 24, 2004, AMC Entertainment sold$300,000,000 aggregate principal amount of 8% Senior Subordinated Notes due2014 (the “Notes due 2014”). It used the net proceeds (approximately$294,000,000) to redeem its notes due 2009 and a portion of our notes due 2011.The Notes due 2014 bear interest at the rate of 8% per annum, payable inMarch and September. The Notes due 2014 are redeem

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able at our option, inwhole or in part, at any time on or after March 1, 2009 at 104.000% of theprincipal amount thereof, declining ratably to 100% of the principal amountthereof on or after March 1, 2012, plus in each case interest accrued tothe redemption date. The Notes due 2014 are unsecured and are subordinated to allAMC Entertainment’s existing and future senior indebtedness (as defined in theindenture governing the Notes due 2014). The Notes due 2014 rank equally withAMC Entertainment’s Notes due 2011, Notes due 2012 and Notes due 2016.

On January 16, 2002, AMC Entertainment sold$175,000,000 aggregate principal amount of its 97¤8% SeniorSubordinated notes due 2012 (the “Notes due 2012”). Net proceeds from theissuance of the Notes due 2012 (approximately $168,000,000) were used to reduceborrowings under AMC Entertainment’s credit facility, to pursue our currentbusiness strategy, including the acquisition of GC Companies, and for generalcorporate purposes. The Notes due 2012 bear interest at the rate of 97¤8%per annum, payable February 1 and August 1 of each year. The Notesdue 2012 are redeemable at our option, in whole or in part, at any time on orafter February 1, 2007 at 104.938% of the principal amount thereof,declining ratably to 100% of the principal amount thereof on or afterFebruary 1, 2010, plus in each case interest accrued to the redemptiondate. The Notes due 2012 are unsecured and are subordinated to all AMCEntertainment’s existing and future senior indebtedness (as defined in theindenture governing the Notes due 2012). The Notes due 2012 rank equally withits Notes due 2011, Notes due 2014 and Notes due 2016.

On January 27, 1999, AMC Entertainment sold$225,000,000 aggregate principal amount of its 91¤2% SeniorSubordinated notes due 2011 (the “Notes dues 2011”). Net proceeds from theissuance of the Notes due 2011 (approximately $219,000,000) were used to reduceborrowings under its credit facility. On March 29, 2002, AMC Entertainmentissued an additional $72,880,000 aggregate principal amount of Notes due 2011(with a fair value of $71,787,000) as part of our acquisition of GCCompanies, Inc. The Notes due 2011 bear interest at the rate of 91¤2%per annum, payable February 1 and August 1 of each year. The Notesdue 2011 are redeemable at our option, in whole or in part, at any time on orafter February 1, 2004 at 104.75% of the principal amount thereof,declining ratably to 100% of the principal amount thereof on or afterFebruary 1, 2007, plus in each case interest accrued to the redemptiondate. The Notes due 2011 are unsecured and are subordinated to all AMCEntertainment’s existing and future senior indebtedness (as defined in theindenture governing the Notes due 2011). On March 25, 2004, AMCEntertainment redeemed $83,406,000 of its notes due 2011 for $87,367,000. Aloss of $5,357,000 was recognized in connection with the redemption including acall premium of $3,962,000, unamortized issue costs of $1,125,000 andunamortized discount of $270,000. The loss is included within other expense onthe Consolidated Statements of Operations.

The merger with Marquee constituted a “change ofcontrol” under the Notes due 2011 in the aggregate principal amount of$214,474,000, which allowed the holders of those notes to require AMCEntertainment to repurchase their notes at 101% of their aggregate principalamount plus accrued and unpaid interest to the date of purchase. We commencedthis change of control offer on January 11, 2005 and were required topurchase the notes no later than 60 days from that date. The change ofcontrol offer was required to remain open for at least 20 business days andexpired on February 10, 2005. Bondholders tendered $1,663,000 of the Notesdue 2011 which were repurchased using existing cash.

On March 19, 1997, AMC Entertainment sold$200,000,000 aggregate principal amount of its 91¤2% SeniorSubordinated notes due 2009 (the “Notes due 2009”). It used the net proceedsfrom the issuance of the Notes due 2009 (approximately $194,000,000) to reduceborrowings under its credit facility. The Notes due 2009 were redeemed onMarch 25, 2004 for $204,750,000. A loss on redemption of $8,590,000 was recognizedin connection with the redemption including a call premium of $4,750,000,unamortized issue costs of $3,291,000 and unamortized discount of $549,000. Theloss is included within other expense on the Consolidated Statements ofOperations.

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The indentures relating to our outstanding notes allowus to incur all permitted indebtedness (as defined therein) withoutrestriction, which includes all amounts borrowed under our credit facility. Theindentures also allow us to incur any amount of additional debt as long as wecan satisfy the coverage ratio of each indenture, both at the time of the event(under the indenture for the Notes due 2011) and after giving effect thereto ona pro forma basis (under the indentures for the Notes due 2011, Notes due 2012,Fixed Notes due 2012, Floating Notes due 2010 and Discount Notes due 2014).Under the indenture relating to the Notes due 2012, Notes due 2014 and 11%Senior Subordinated Notes due 2016 (“Notes due 2016”), the most restrictive ofthe indentures, we could borrow approximately $6.3 million as ofMarch 30, 2006 in addition to permitted indebtedness (assuming an interestrate of 11% per annum on the additional borrowings). If we cannot satisfy thecoverage ratios of the indentures, generally we can incur, in addition toamounts borrowed under the credit facility, no more than $100.0 million ofnew “permitted indebtedness” under the terms of the indentures relating to the2011, 2012, 2014 and 2016 notes and Discount Notes due 2014.

The indentures relating to the above-describednotes also contain covenants limiting dividends, purchases or redemptions ofstock, transactions with affiliates, and mergers and sales of assets, andrequire us to make an offer to purchase the notes upon the occurrence of achange in control, as defined in the indentures. Upon a change of control (asdefined in the indentures), we would be required to make an offer to repurchaseall of the outstanding, Notes due 2016, Notes due 2011, Notes due 2012, Notesdue 2014, Fixed Notes due 2012, Floating Notes due 2010 and Discount Notes due2014 at a price equal to 101% of the principal amount thereof plus accrued andunpaid interest to the date of repurchase.

**Merger with LoewsFinancing Transactions**

In connection withthe Merger with Loews, on January 26, 2006, we entered into the followingfinancing transactions:

·       theissuance of $325.0 million in aggregate principal amount of the Notes due2016;

·       theNew Credit Facility, consisting of a $650.0 million term loan facility(which was fully drawn upon at closing) and a $200.0 million revolvingcredit facility (which was unutilized at closing);

·       thetermination of the amended credit facility;

·       therepayment of all outstanding amounts under the Loews Facility; and

·       thecompletion of the Tender Offer for all $315.0 million aggregate principalamount of Loews’ outstanding 9.0% senior subordinated notes due 2014.

In addition, certain subsidiaries acquired in theMerger with Loews currently have approximately $114 million of borrowingsunder the Cinemex Credit Facility and $32 million in capital and financinglease obligations.

The proceeds of thefinancing transactions were used to repay amounts outstanding under the LoewsFacility, to fund the Tender Offer, to pay related fees and expenses, and topay fees and expenses related to the Merger with Loews.

*New Credit Facility*

The New Credit Facility is with a syndicate of banksand other financial institutions and provides AMC Entertainment financing of upto $850.0 million, consisting of a $650.0 million term loan facilitywith a maturity of seven years and a $200.0 million revolving creditfacility with a maturity of six years. The revolving credit facility willinclude borrowing capacity available for Mexican peso-denominated revolvingloans, for letters of credit and for swingline borrowings on same-day notice.

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Borrowings under the New Credit Facility bear interestat a rate equal to an applicable margin plus, at our option, either a base rateor LIBOR. The initial applicable margin for borrowings under the revolvingcredit facility is 0.75% with respect to base rate borrowings and 1.75% withrespect to LIBOR borrowings, and the initial applicable margin for borrowingsunder the term loan facility is 1.50% with respect to base rate borrowings and2.125% with respect to LIBOR borrowings. The applicable margin for such borrowingsmay be reduced, subject to AMCE attaining certain leverage ratios. In additionto paying interest on outstanding principal under the New Credit Facility, AMCEntertainment is required to pay a commitment fee to the lenders under therevolving credit facility in respect of the unutilized commitments thereunderat a rate equal to 0.375% (subject to reduction upon attainment of certainleverage ratios). It will also pay customary letter of credit fees. AMCEntertainment may voluntarily repay outstanding loans under the New CreditFacility at any time without premium or penalty, other than customary“breakage” costs with respect to LIBOR loans. AMC Entertainment is required torepay $1,625,000 of the term loan quarterly, beginning March 30, 2006 throughSeptember 30, 2012, with any remaining balance due on January 26,2013.

All obligations under the New Credit Facility areguaranteed by each of AMC Entertainment’s wholly-owned domesticsubsidiaries. All obligations under the New Credit Facility, and the guaranteesof those obligations (as well as cash management obligations and any interesthedging or other swap agreements), are secured by substantially all of AMCEntertainment’s assets as well as those of each subsidiary guarantor.

The New Credit Facility contains a number of covenantsthat, among other things, restrict, subject to certain exceptions, AMC Entertainment’sability, and the ability of our subsidiaries, to sell assets; incur additionalindebtedness; prepay other indebtedness (including the Notes); pay dividendsand distributions or repurchase their capital stock; create liens on assets;make investments; make certain acquisitions; engage in mergers orconsolidations; engage in certain transactions with affiliates; amend certaincharter documents and material agreements governing subordinated indebtedness,including the notes due 2011, 2012, 2014 and 2016; change the businessconducted by it and its subsidiaries; and enter into agreements that restrictdividends from subsidiaries.

In addition, the NewCredit Facility requires, commencing with the fiscal quarter endedMarch 30, 2006, that AMC Entertainment and its subsidiaries maintain amaximum net senior secured leverage ratio as long as the commitments under therevolving credit facility remain outstanding. The New Credit Facility alsocontains certain customary affirmative covenants and events of default.

*11% SeniorSubordinated Notes due 2016*

The notes were issued by AMC Entertainment under anindenture, dated January 26, 2006, with HSBC Bank USA, National Association,as trustee, bear interest at a rate of 11% per annum, payable onFebruary 1 and August 1 of each year (commencing on August 1,2006), and have a maturity date of February 1, 2016.

The notes are general unsecured senior subordinatedobligations of AMC Entertainment, fully and unconditionally guaranteed, jointlyand severally, on a senior subordinated basis by each of our existing andfuture domestic restricted subsidiaries that guarantee our other indebtedness.

AMC Entertainment may redeem some or all of the notesat any time on or after February 1, 2011 at 105.5% of the principal amountthereof, declining ratably to 100% of the principal amount thereof on or afterFebruary 1, 2014. In addition, AMC Entertainment may redeem up to 35% ofthe aggregate principal amount of the notes using net proceeds from certainequity offerings completed on or prior to February 1, 2009. If AMCEntertainment experiences a change of control (as defined in the Indenture), itwill be required to make an offer to repurchase the notes at a price equal to101% of the principal amount thereof, plus accrued and unpaid interest, if any,to the date of purchase.

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The Indenture contains covenants limiting otherindebtedness, dividends, purchases or redemptions of stock, transactions with affiliatesand mergers and sales of assets. The Indenture also contains provisionssubordinating our obligations under the notes to our obligations under our NewCredit Facility and other senior indebtedness.

On May 15, 2006, wemade an offer to exchange, by prospectus, up to $325,000,000 in aggregate principalamount of 11% Series B Senior Subordinated Notes due 2016, which have beenregistered under the Securities Act of 1933, as amended, for our outstanding11% Series A Senior Subordinated Notes due 2016. We completed the exchangeoffer on June 13, 2006.

*Cinemex CreditFacility*

In August 2004, Cadena Mexicana de ExhibiciónS.A. de C.V., a wholly-owned subsidiary of Cinemex and an indirect wholly-ownedsubsidiary of Loews, entered into a senior secured credit facility, which remainsin place after the consummation of the Merger with Loews. The initial amountdrawn under the Cinemex senior secured credit facility was 1,026.4 millionMexican pesos (approximately $90.0 million as of August 16, 2004).Cinemex drew 106.4 million Mexican pesos (approximately $10 millionin August 2005) under the delayed draw feature of its senior securedcredit facility. Approximately $103.9 million was outstanding under thesenior secured credit facility as of March 30, 2006. InDecember 2005, Cadena Mexicana entered into an amended and restated seniorsecured revolving credit facility which provides for an available revolvingcredit line of the peso equivalent of $25.0 million with Banco Inbursa, S.A.and Scotiabank Inverlat, S.A. (the revolving credit facility ispeso-denominated debt). During January and February of 2006 Cinemexdrew 105.4 million Mexican pesos under the revolving credit facility(approximately $9.8 million was outstanding as of March 30, 2006).All obligations of Cadena Mexicana under the Cinemex senior secured creditfacility and revolving credit facility are guaranteed by Cinemex and each existingand future operating subsidiary of Cadena Mexicana, except for specifiedexcluded subsidiaries.

The Cinemex borrowings are non-recourse to Loews, andthus, are non-recourse to AMCE. Interest on the Cinemex term loan is payable inarrears on a monthly basis at the Interbank Equilibrium Interest Rate (Tasa deInteres Interbancaria de Equilibrio) for a period of 28 days (the TIIErate), plus an applicable margin of 1.50% in years one and two, 1.75% in yearthree and 2.00% in years four and five. The interest rate on the Cinemex termloan as of March 30, 2006 was 9.31%. This rate was adjusted to 8.5% onapproximately $68.8 million of the Cinemex borrowings by an interest rateswap entered into on July 28, 2003 and was redesignated as a hedge of theCinemex senior secured credit facility on August 16, 2004. The interestrate on the remaining approximately $35.1 million of the Cinemexborrowings was adjusted to 9.89% by an interest rate swap entered into onAugust 5, 2005. The Cinemex term loan matures on August 16, 2009 andwill amortize beginning on February 16, 2007 in installments ranging from10% to 30% per annum over the five-year period.

The Cinemex senior secured credit facilities containcustomary affirmative and negative covenants with respect to Cadena Mexicanaand each of the guarantors and, in certain instances, Cadena Mexicana’s subsidiariesthat are not guarantors, as defined in the credit agreement. Affirmativecovenants include the requirement to furnish periodic financial statements andensure that the obligations of Cadena Mexicana and the guarantors under theCinemex senior secured credit facilities rank at least *pari passu* with all existing debt of suchparties. Negative covenants include limitations on disposition of assets,capital expenditures, dividends and additional indebtedness and liens. Thesenior secured credit facilities also include certain financial covenants,including, without limitation, a maximum total leverage ratio, a maximum totalnet debt to equity ratio, a minimum interest coverage ratio, a maximumtrue-lease adjusted leverage ratio and a minimum consolidated net worthrequirement.

For additional information relating to covenantscontained in the indentures governing the notes, see Note 7 to ourConsolidated Financial Statements for the fiscal year ended March 30,2006.

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As of March 30, 2006, we were in compliance withall financial covenants relating to the New Credit Facility, the Cinemex CreditFacility, the Notes due 2016, the Notes due 2011, the Notes due 2012, Notes due2014, the Fixed Notes due 2012, the Floating Notes due 2010, and the DiscountNotes due 2014.

We believe that cash generated from operations andexisting cash and equivalents will be sufficient to fund operations and plannedcapital expenditures and potential acquisitions for at least the next twelvemonths and enable us to maintain compliance with covenants related to the newCredit Facility and the notes.

On March 19, 2002, AMC Entertainment completed apublic offering of 9,000,000 shares of Common Stock at a public offering priceof $10.50 per share and granted the underwriters a 30-day option to purchasean additional 1,350,000 shares of common stock at $10.50 per share to coverover-allotments. On March 28, 2002, the underwriters exercised theiroption to purchase these shares. Net proceeds from the offering of the sharesof common stock of $100,800,000 were used to fund the acquisition of GC Companies.

On April 19, 2001,AMC Entertainment issued shares of Series A convertible preferred stockand Series B exchangeable preferred stock for an aggregate purchase priceof $250,000,000. Net proceeds from the sale (including transaction expenses) ofapproximately $225,000,000 were used to reduce outstanding indebtedness underour credit facility. On September 13, 2001, pursuant to the certificate ofdesignations relating to the preferred stock, all shares of Series Bexchangeable preferred stock were exchanged for an equal number of shares ofSeries A convertible preferred stock. Dividends on the Series Aconvertible preferred stock accumulated at an annual rate of 6.75% and werepayable in additional shares of Series A convertible preferred stock untilApril 2004. At our option, dividends on Series A convertiblepreferred stock were payable in cash or additional shares of Series Aconvertible preferred stock from April 2004 until April 2008. All outstandingshares of preferred stock were redeemed in connection with the merger withMarquee.

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**Commitments andContingencies**

Minimum annual cash payments required under existingcapital and financing lease obligations, maturities of corporate borrowings, futureminimum rental payments under existing operating leases, FF&E and leaseholdpurchase provisions, ADA related betterments and pension funding that haveinitial or remaining non-cancelable terms in excess of one year as ofMarch 30, 2006 are as follows:

| ** ** | ** ** | **Minimum  Capital and  Financing  Lease  Payments** | ** ** | **Principal  Amount of  Corporate  Borrowings** | ** ** | **Interest  Payments on  Corporate  Borrowings**(1) | ** ** | **Minimum  Operating  Lease  Payments** | ** ** | **Capital  Related  Betterments**(2) | ** ** | **Pension  Funding**(3) | ** ** | **Total  Commitments** | ** ** |
|------------|------------|-----------------------------------------------------------|------------|------------------------------------------------------|------------|----------------------------------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|-------------------------|------------|------------------------|------------|
| ** ** | ** ** | **(In thousands)**                                   | ** ** |
| 2007       |       |                                                      | $          | 11,056                                               |       |                                                     | $          | 26,690                                  |       |                                 | $          | 197,707                 |       |                   | $          | 408,007 |   |   | $ | 67,055 |   |   |   | $ | 1,400 |   |   |   | $ | 711,915 |   |   |
| 2008       |       |                                                      | 10,333     |                                                 |       | 28,392                                                   |       |                                    | 195,143    |                                 |       | 422,674                 |       |                   | 16,100     |   |   |   | — |   |   |   | 672,642 |   |   |
| 2009       |       |                                                      | 9,969      |                                                 |       | 46,283                                                   |       |                                    | 192,323    |                                 |       | 419,634                 |       |                   | 16,100     |   |   |   | — |   |   |   | 684,309 |   |   |
| 2010       |       |                                                      | 9,925      |                                                 |       | 40,600                                                   |       |                                    | 203,301    |                                 |       | 416,863                 |       |                   | 4,500      |   |   |   | — |   |   |   | 675,189 |   |   |
| 2011       |       |                                                      | 9,975      |                                                 |       | 424,311                                                  |       |                                    | 204,161    |                                 |       | 408,945                 |       |                   | —     |   |   |   |   |   |   |   | 1,047,392 |   |   |
| Thereafter |       |                                                      | 85,306     |                                                 |       | 1,988,283                                                |       |                                    | 474,539    |                                 |       | 3,341,769               |       |                   | —     |   |   |   | — |   |   |   | 5,889,897 |   |   |
| Total      |       |                                                      | $          | 136,564                                              |       |                                                     | $          | 2,554,559                               |       |                                 | $          | 1,467,174               |       |                   | $          | 5,417,892 |   |   | $ | 103,755 |   |   |   | $ | 1,400 |   |   |   | $ | 9,681,344 |   |   |

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**(1)****                **Interest expense on the term loanand the floating rate notes were estimated at 7.206% and 9.46%, respectively,based upon the published LIBOR at 5/23/06.

**(2)**                 Includescommitted capital expenditures including the estimated cost of ADA relatedbetterments. Does not include planned, but non-committed capital expenditures.

**(3)**                 Wefund our pension plan such that the plan is 90% funded. While future funding isanticipated, the funding amount is currently unknown. The retiree health planis not funded.

*Amended andRestated Fee Agreement*

In connection with the Merger with Loews, onJanuary 26, 2006, Holdings, AMCE and the Sponsors entered into an Amendedand Restated Fee Agreement (the “Management Fee Agreement”), which replaces theDecember 23, 2004 fee agreement among Holdings, AMCE, and the MarqueeSponsors. The Management Fee Agreement provides for an annual management fee of$5.0 million, payable quarterly and in advance to each Sponsor, on a prorata basis, for the twelve year duration of the agreement, as well asreimbursements for each Sponsor’s respective out-of-pocket expenses inconnection with the management services provided under the Management FeeAgreement.

In addition, the Management Fee Agreement will providefor reimbursements by Holdings and AMCE to the Sponsors for their out-of-pocketexpenses, and by AMCE to Holdings of up to $3.5 million for fees payableby Holdings in any single fiscal year in order to maintain AMCE’s corporateexistence, corporate overhead expenses and salaries or other compensation ofcertain employees.

Upon the consummation of a change in controltransaction or an IPO, the Sponsors will receive, in lieu of quarterly paymentsof the annual management fee, a fee equal to the net present value of the aggregateannual management fee that would have been payable to the Sponsors during theremainder of the term of the fee agreement (assuming a twelve year term fromthe date of the original fee agreement), calculated using the treasury ratehaving a final maturity date that is closest to the twelfth anniversary of thedate of the original fee agreement date.

The Management FeeAgreement also provides that AMCE will indemnify the Sponsors against alllosses, claims, damages and liabilities arising in connection with themanagement services provided by the Sponsors under the fee agreement.

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**Conclusion**

We believe that cashgenerated from operations and existing cash and equivalents will be sufficientto fund operations and planned capital expenditures currently and for at leastthe next 12 months and enable us to maintain compliance with covenantsrelated to the new senior secured credit facility and the notes. We areconsidering various options with respect to the utilization of cash and equivalentsin excess of our anticipated operating needs. Such options might include, butare not limited to, acquisitions of theatres or theatre companies and repaymentof corporate borrowings.

**Impact of Inflation**

Historically, theprincipal impact of inflation and changing prices upon us has been to increasethe costs of the construction of new theatres, the purchase of theatreequipment, rent and the utility and labor costs incurred in connection withcontinuing theatre operations. Film exhibition costs, our largest cost ofoperations, are customarily paid as a percentage of admissions revenues andhence, while the film exhibition costs may increase on an absolute basis, thepercentage of admissions revenues represented by such expense is not directlyaffected by inflation. Except as set forth above, inflation and changing priceshave not had a significant impact on our total revenues and results ofoperations.

**New AccountingPronouncements**

In February 2006, the FASB agreed to issue FASBStaff Position (FSP) No. 123(R)-4, *Classificationof Options and Similar Instruments Issued as Employee Compensation That Allowfor Cash Settlement upon the Occurrence of a Contingent Event*, whichrequires companies to consider the probability of the occurrence of acontingent event that is outside the employees’ control (i.e., change in control,or death or disability) in determining the classification of an employee stockoption or similar instrument under FASB Statement No. 123(R), *Share-Based Payment*, where the award requires orpermits cash settlement upon the contingent event. The FSP requires companiesto classify employee stock options and similar instruments with contingent cashsettlement features as equity awards provided the contingent event that permitsor requires cash settlement is not considered probable of occurring. As we havealready adopted SFAS 123(R), we would be required to apply the guidance inthe first reporting period beginning after the date the final FSP is posted tothe FASB website and would be required to apply the proposed guidanceretrospectively to prior-period results to whichSFAS 123(R) was applied. We do not believe the adoption of FSP 123 R-4will have an impact on our consolidated financial position, results ofoperations, or cash flows.

In October 2005, the FASB issued FASB StaffPosition (FSP) 13-1, *Accounting forRental Costs Incurred during a Construction Period*. FSP 13-1clarifies there is no distinction between the right to use a leased assetduring the construction period and the right to use that asset after theconstruction period. Accordingly, we will no longer be able to capitalizerental costs during the construction period and will begin expensing them aspreopening expense prior to the theatre opening date. This FSP is effective forthe first reporting period beginning after December 15, 2005. We haveadopted this FSP during the fourth quarter of fiscal 2006 which results inrecognition of preopening expense during the “rent holiday”.

In May 2005, the FASB issued SFAS No. 154, *Accounting Changes and Error Corrections a replacement of APB OpinionNo. 20 and FASB Statement No. 3* (SFAS 154), which requiresretrospective application to prior periods’ financial statements of changes inaccounting principle, unless it is impracticable to determine either the periodspecific effects or the cumulative effect of the change. It also requires thata change in depreciation, amortization, or depletion method for long-lived,nonfinancial assets be accounted for as a change in accounting estimate affectedby a change in accounting principle. We are not currently contemplating anaccounting change which would be impacted by SFAS 154.

35

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In March 2004, the FASB issued Emerging Issues TaskForce Issue No. 03 1. The Meaning of Other Than Temporary Impairment and itsApplication to Certain Investments (“EITF 03 1”). EITF 03 1 includes newguidance for evaluating and recording impairment losses on debt and equityinvestments, as well as new disclosure requirements for investments that aredeemed to be temporarily impaired. In September 2004, the FASB issued StaffPosition EITF Issue 03 1 1, which delays the effective date until additionalguidance is issued for the application of the recognition and measurementprovisions of EITF 03 1 to investment in securities that are impaired. We donot believe that the adoption of EITF 03 1 will have a material impact on ourfinancial condition or result of operations.

36

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**Item 8. FinancialStatements and Supplementary Data**

**RESPONSIBILITY FOR PREPARATION OF FINANCIAL STATEMENTS**

**Marquee Holdings Inc.**

**TO THE STOCKHOLDERS OF MARQUEE HOLDINGS INC.**

The accompanyingconsolidated financial statements and related notes of Marquee Holdings Inc.and subsidiaries were prepared by management in conformity with accountingprinciples generally accepted in the United States of America appropriate inthe circumstances. In preparing the financial statements, management has madejudgments and estimates based on currently available information. Management isresponsible for the information; representations contained elsewhere in thisAnnual Report are consistent with the financial statements.

The Company has aformalized system of internal accounting controls designed to providereasonable assurance that assets are safeguarded and that its financial recordsare reliable. Management monitors the system for compliance to measure itseffectiveness and recommends possible improvements. The Company has aformalized system of internal accounting controls designed to provide reasonableassurance that assets are safeguarded and that its financial records arereliable. Management monitors the system for compliance to measure itseffectiveness and recommends possible improvements.

The Company identified the following material weaknessin its internal control over financial reporting—Controls over the applicationof Statement of Financial Accounting Standard (“SFAS”) No. 123R *Stock Based Compensation*, SFAS 150 *Accountingfor Certain Financial Instruments with Characteristics of both Liabilities andEquity* and FSP 123(R)-4 *Classification of Optionsand Similar Instruments Issued as Employee Compensation That Allow for CashSettlement upon the Occurrence of a Contingent Event to Stock Options*,their underlying shares and associated “Put” rights which failed to identifythe mis-classification of certain options and shares as liabilities whichshould have been classified as Permanent Equity and the resulting incorrectexpense recognition related thereto. Solely as a result of this materialweakness, we concluded that our disclosure controls and procedures were noteffective as of March 30, 2006.

TheAudit Committee of the Board of Directors (consisting solely of Directors notemployed by the Company) reviews the process involved in the preparation of theCompany’s annual audited financial statements, and in this regard meets(jointly and separately) with the independent registered public accountingfirm, management and internal auditors to review matters relating to financialreporting and accounting procedures and policies, the adequacy of internalcontrols and the scope and results of the audit performed by the independentregistered public accounting firm.

****

**Chairmanof the Board, Chief Executive Officer**

**andPresident**

******

**ExecutiveVice President and**

**ChiefFinancial Officer**

37

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**TO THE BOARD OF DIRECTORS ANDSTOCKHOLDERS OF MARQUEE HOLDINGS INC.:**

In our opinion, the accompanying consolidated balancesheets and the related consolidated statements of operations, of stockholders’equity and of cash flows present fairly, in all material respects, thefinancial position of Marquee Holdings Inc. and its subsidiary, (the“Successor”), at March 30, 2006 and March 31, 2005, and the resultsof their operations and their cash flows for the 52 week period endedMarch 30, 2006 and for the period from July 16, 2004 (date ofinception) through March 31, 2005, in conformity with accountingprinciples generally accepted in the United States of America. These financialstatements are the responsibility of the Successor’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits. We conducted our audits of these statements in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made by management, andevaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

As discussed in Note 1, the Company restated itsfinancial statements for the 52 week period ended March 30, 2006.

/s/ PricewaterhouseCoopers LLP

Kansas City, MissouriJune 27, 2006, except for the loss per share discussed inNote 1, as to which the date is December 8, 2006, except forNote 3, as to which the date is February 20, 2007, and except for theeffects of the restatement discussed in Note 1, as to which the date isApril 11, 2007.

**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**TO THE BOARD OF DIRECTORS ANDSTOCKHOLDERS OF MARQUEE HOLDINGS INC.:**

In our opinion, theaccompanying consolidated statements of operations, of stockholders’ equity andof cash flows present fairly, in all material respects, the results of operationsand of cash flows of AMC Entertainment Inc. and its subsidiaries (the“Predecessor”) for the period from April 2, 2004 through December 23,2004 and for the 52 week period ended April 1, 2004, in conformity withaccounting principles generally accepted in the United States of America. Thesefinancial statements are the responsibility of the Predecessor’s management.Our responsibility is to express an opinion on these financial statements basedon our audits. We conducted our audits of these statements in accordance withthe standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, and evaluatingthe overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Kansas City, MissouriJune 21, 2005, except for the loss per share discussed inNote 1, as to which the date is December 8, 2006, and except forNote 3, as to which the date is February 20, 2007

38

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**Marquee Holdings Inc.CONSOLIDATED STATEMENTS OF OPERATIONS**

| **(In thousands)**                                         | ** ** | **52 Weeks Ended  March 30, 2006  (restated)** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23,  2004** | ** ** | **52 Weeks Ended  April 1, 2004** | ** ** |
|-----------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|---------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                      | ** ** | **(Successor)**                                                    | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                             | ** ** | **(Predecessor)**                                     | ** ** |
| Revenues                                                        |       |                                                               |       |                                                                                |       |       |       |                                                          |       |                                                  |       |   |   |   |   |   |   |   |   |
| Admissions                                                      |       |                                                               | $          | 1,138,034                                                                           |       |       |       | $                                                             | 297,310    |                                                  |       |   |   |   | $ | 847,476 |   |   |   | $ | 1,139,108 |   |   |
| Concessions                                                     |       |                                                               | 456,028    |                                                                                |       |       | 117,266    |                                                          |       |                                                  |       |   | 328,970 |   |   |   | 436,737 |   |   |
| Other theatre                                                   |       |                                                               | 92,816     |                                                                                |       |       | 24,884     |                                                          |       |                                                  |       |   | 82,826 |   |   |   | 102,387 |   |   |
| Total revenues                                                  |       |                                                               | 1,686,878  |                                                                                |       |       | 439,460    |                                                          |       |                                                  |       |   | 1,259,272 |   |   |   | 1,678,232 |   |   |
| Costs and Expenses                                              |       |                                                               |       |                                                                                |       |       |       |                                                          |       |                                                  |       |   |   |   |   |   |   |   |   |
| Film exhibition costs                                           |       |                                                               | 595,353    |                                                                                |       |       | 152,747    |                                                          |       |                                                  |       |   | 452,727 |   |   |   | 605,898 |   |   |
| Concession costs                                                |       |                                                               | 50,581     |                                                                                |       |       | 12,801     |                                                          |       |                                                  |       |   | 37,880 |   |   |   | 46,868 |   |   |
| Operating expense                                               |       |                                                               | 451,522    |                                                                                |       |       | 115,590    |                                                          |       |                                                  |       |   | 324,427 |   |   |   | 442,974 |   |   |
| Rent                                                            |       |                                                               | 329,878    |                                                                                |       |       | 80,776     |                                                          |       |                                                  |       |   | 223,734 |   |   |   | 288,321 |   |   |
| General and  administrative:                                    |       |                                                               |       |                                                                                |       |       |       |                                                          |       |                                                  |       |   |   |   |   |   |   |   |   |
| Merger and acquisition  costs                                   |       |                                                               | 12,523     |                                                                                |       |       | 22,286     |                                                          |       |                                                  |       |   | 42,732 |   |   |   | 5,508 |   |   |
| Management fee                                                  |       |                                                               | 2,000      |                                                                                |       |       | 500        |                                                          |       |                                                  |       |   | — |   |   |   | — |   |   |
| Other                                                           |       |                                                               | 40,251     |                                                                                |       |       | 14,615     |                                                          |       |                                                  |       |   | 33,727 |   |   |   | 56,798 |   |   |
| Preopening expense                                              |       |                                                               | 6,607      |                                                                                |       |       | 39         |                                                          |       |                                                  |       |   | 1,292 |   |   |   | 3,865 |   |   |
| Theatre and other closure  expense                              |       |                                                               | 601        |                                                                                |       |       | 1,267      |                                                          |       |                                                  |       |   | 10,758 |   |   |   | 4,068 |   |   |
| Restructuring charges                                           |       |                                                               | 3,980      |                                                                                |       |       | 4,926      |                                                          |       |                                                  |       |   | — |   |   |   | — |   |   |
| Depreciation and  amortization                                  |       |                                                               | 164,047    |                                                                                |       |       | 43,931     |                                                          |       |                                                  |       |   | 86,052 |   |   |   | 115,296 |   |   |
| Impairment of long-lived  assets                                |       |                                                               | 11,974     |                                                                                |       |       | —     |                                                          |       |                                                  |       |   | — |   |   |   | 16,272 |   |   |
| Disposition of assets and  other gains                          |       |                                                               | (997       | )                                                                                   |       |       | (302       | )                                                             |       |                                                  |       |   | (2,715 | ) |   |   | (2,590 | ) |   |
| Total costs and expenses                                        |       |                                                               | 1,668,320  |                                                                                |       |       | 449,176    |                                                          |       |                                                  |       |   | 1,210,614 |   |   |   | 1,583,278 |   |   |
| Other expense (income)                                          |       |                                                               |       |                                                                                |       |       |       |                                                          |       |                                                  |       |   |   |   |   |   |   |   |   |
| Other expense (income)                                          |       |                                                               | (9,818     | )                                                                                   |       |       | (6,778     | )                                                             |       |                                                  |       |   | — |   |   |   | 13,947 |   |   |
| Interest expense                                                |       |                                                               |       |                                                                                |       |       |       |                                                          |       |                                                  |       |   |   |   |   |   |   |   |   |
| Corporate borrowings                                            |       |                                                               | 139,042    |                                                                                |       |       | 52,502     |                                                          |       |                                                  |       |   | 66,851 |   |   |   | 66,963 |   |   |
| Capital and financing  lease obligations                        |       |                                                               | 4,068      |                                                                                |       |       | 1,449      |                                                          |       |                                                  |       |   | 5,848 |   |   |   | 8,698 |   |   |
| Investment expense  (income)                                    |       |                                                               | 4,398      |                                                                                |       |       | (3,352     | )                                                             |       |                                                  |       |   | (6,473 | ) |   |   | (2,837 | ) |   |
| Total other expense                                             |       |                                                               | 137,690    |                                                                                |       |       | 43,821     |                                                          |       |                                                  |       |   | 66,226 |   |   |   | 86,771 |   |   |
| Earnings (loss) from  continuing operations before income taxes |       |                                                               | (119,132   | )                                                                                   |       |       | (53,537    | )                                                             |       |                                                  |       |   | (17,568 | ) |   |   | 8,183 |   |   |
| Income tax provision  (benefit)                                 |       |                                                               | 71,800     |                                                                                |       |       | (9,280     | )                                                             |       |                                                  |       |   | 14,760 |   |   |   | 10,400 |   |   |
| Loss from continuing  operations                                |       |                                                               | (190,932   | )                                                                                   |       |       | (44,257    | )                                                             |       |                                                  |       |   | (32,328 | ) |   |   | (2,217 | ) |   |
| Loss from discontinued  operations, net of income tax benefit   |       |                                                               | (25,291    | )                                                                                   |       |       | (133       | )                                                             |       |                                                  |       |   | (3,550 | ) |   |   | (8,497 | ) |   |
| Net loss                                                        |       |                                                               | $          | (216,223                                                                            | )          |       |       | $                                                             | (44,390    | )                                                     |       |   |   |   | $ | (35,878 | ) |   |   | $ | (10,714 | ) |   |
| Preferred dividends                                             |       |                                                               | —     |                                                                                |       |       | —     |                                                          |       |                                                  |       |   | 104,300 |   |   |   | 40,277 |   |   |
| Loss available for shares  of common stock                      |       |                                                               | $          | (216,223                                                                            | )          |       |       | $                                                             | (44,390    | )                                                     |       |   |   |   | $ | (140,178 | ) |   |   | $ | (50,991 | ) |   |
| Basic and diluted loss per share of common stock:               |       |                                                               |       |                                                                                |       |       |       |                                                          |       |                                                  |       |   |   |   |   |   |   |   |   |
| Loss from continuing  operations                                |       |                                                               | $          | (222.50                                                                             | )          |       |       | $                                                             | (147.32    | )                                                     |       |   |   |   | $ | (3.69 | ) |   |   | $ | (1.16 | ) |   |
| Loss from discontinued  operations                              |       |                                                               | (29.47     | )                                                                                   |       |       | (0.44      | )                                                             |       |                                                  |       |   | (0.10 | ) |   |   | (0.23 | ) |   |
| Net loss per share                                              |       |                                                               | $          | (251.97                                                                             | )          |       |       | $                                                             | (147.76    | )                                                     |       |   |   |   | $ | (3.79 | ) |   |   | $ | (1.39 | ) |   |
| Average shares  outstanding:                                    |       |                                                               |       |                                                                                |       |       |       |                                                          |       |                                                  |       |   |   |   |   |   |   |   |   |
| Basic and diluated                                              |       |                                                               | 858.12     |                                                                                |       |       | 300.41     |                                                          |       |                                                  |       |   | 37,023 |   |   |   | 36,715 |   |   |

 

*See Notes to Consolidated FinancialStatements.*

39

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**Marquee Holdings Inc.CONSOLIDATED BALANCE SHEETS**

| ** **                                                                                                                                                                                             | ** ** | **March 30, 2006  (restated)**                  | ** ** | **March 31, 2005** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                                                                             | ** ** | **(Successor)**                                           | ** ** | **(Successor)**              | ** ** |
| ** **                                                                                                                                                                                             | ** ** | **(In thousands, except share data)** | ** ** |
| **Assets**                                                                                                                                                                                             |       |                                                      |       |                         |       |   |   |   |   |
| Current assets:                                                                                                                                                                                        |       |                                                      |       |                         |       |   |   |   |   |
| Cash and equivalents                                                                                                                                                                                   |       |                                                      | $          | 232,366                      |       |   |   | $ | 72,945 |   |   |
| Receivables, net of  allowance for doubtful accounts of $1,339 and $862 as of March 30, 2006  and March 31, 2005, respectively                                                               |       |                                                      | 54,725     |                         |       |   | 41,430 |   |   |
| Other current assets                                                                                                                                                                                   |       |                                                      | 34,647     |                         |       |   | 65,972 |   |   |
| Current assets held for  sale                                                                                                                                                                          |       |                                                      | 4,726      |                         |       |   | — |   |   |
| Total  current assets                                                                                                                                                                                  |       |                                                      | 326,464    |                         |       |   | 180,347 |   |   |
| Property, net                                                                                                                                                                                          |       |                                                      | 1,501,048  |                         |       |   | 854,463 |   |   |
| Intangible assets, net                                                                                                                                                                                 |       |                                                      | 273,308    |                         |       |   | 189,544 |   |   |
| Goodwill                                                                                                                                                                                               |       |                                                      | 2,018,318  |                         |       |   | 1,401,740 |   |   |
| Deferred income taxes                                                                                                                                                                                  |       |                                                      | 3,564      |                         |       |   | 53,019 |   |   |
| Other long-term  assets                                                                                                                                                                                |       |                                                      | 172,312    |                         |       |   | 118,398 |   |   |
| Non-current assets  held for sale                                                                                                                                                                      |       |                                                      | 112,337    |                         |       |   | — |   |   |
| Total  assets                                                                                                                                                                                          |       |                                                      | $          | 4,407,351                    |       |   |   | $ | 2,797,511 |   |   |
| **Liabilities  and Stockholders’ Equity**                                                                                                                                                         |       |                                                      |       |                         |       |   |   |   |   |
| Current liabilities:                                                                                                                                                                                   |       |                                                      |       |                         |       |   |   |   |   |
| Accounts  payable                                                                                                                                                                                      |       |                                                      | $          | 150,383                      |       |   |   | $ | 121,146 |   |   |
| Accrued  expenses and other liabilities                                                                                                                                                                |       |                                                      | 157,227    |                         |       |   | 119,802 |   |   |
| Deferred  revenues and income                                                                                                                                                                          |       |                                                      | 95,812     |                         |       |   | 70,284 |   |   |
| Current  maturities of corporate borrowings and capital and financing lease  obligations                                                                                                               |       |                                                      | 30,804     |                         |       |   | 3,445 |   |   |
| Current  liabilities held for sale                                                                                                                                                                     |       |                                                      | 8,233      |                         |       |   | — |   |   |
| Total  current liabilities                                                                                                                                                                             |       |                                                      | 442,459    |                         |       |   | 314,677 |   |   |
| Corporate borrowings                                                                                                                                                                                   |       |                                                      | 2,428,996  |                         |       |   | 1,344,531 |   |   |
| Capital and financing  lease obligations                                                                                                                                                               |       |                                                      | 64,016     |                         |       |   | 62,025 |   |   |
| Other long-term  liabilities                                                                                                                                                                           |       |                                                      | 417,335    |                         |       |   | 354,240 |   |   |
| Non-current  liabilities held for sale                                                                                                                                                                 |       |                                                      | 11,903     |                         |       |   | — |   |   |
| Total  liabilities                                                                                                                                                                                     |       |                                                      | 3,364,709  |                         |       |   | 2,075,473 |   |   |
| Commitments and  contingencies                                                                                                                                                                         |       |                                                      |       |                         |       |   |   |   |   |
| Stockholders’  equity:                                                                                                                                                                            |       |                                                      |       |                         |       |   |   |   |   |
| Common  Stock ($.01 par value, 7,000,000 shares authorized; 0 and  769,350 shares issued and outstanding as of March 30, 2006 and  March 31, 2005, respectively)                   |       |                                                      | —     |                         |       |   | 8 |   |   |
| Class A-1  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  382,475.00000 and 0 shares issued and outstanding as of March 30, 2006  and March 31, 2005, respectively) |       |                                                      | 4          |                         |       |   | — |   |   |
| Class A-2  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  382,475.00000 and 0 shares issued and outstanding as of March 30, 2006  and March 31, 2005, respectively) |       |                                                      | 4          |                         |       |   | — |   |   |
| Class N  Common Stock nonvoting ($.01 par value, 375,000 shares authorized;  5,128.77496 and 0 shares issued and outstanding as of March 30, 2006 and  March 31, 2005, respectively)    |       |                                                      | —     |                         |       |   | — |   |   |
| Class L-1  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  256,085.61252 and 0 shares issued and outstanding as of March 30, 2006  and March 31, 2005, respectively) |       |                                                      | 3          |                         |       |   | — |   |   |
| Class L-2  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  256,085.61252 and 0 shares issued and outstanding as of March 30, 2006  and March 31, 2005, respectively) |       |                                                      | 3          |                         |       |   | — |   |   |
| Additional  paid-in capital                                                                                                                                                                            |       |                                                      | 1,313,899  |                         |       |   | 766,035 |   |   |
| Accumulated  other comprehensive income (loss)                                                                                                                                                         |       |                                                      | (10,658    | )                            |       |   | 385 |   |   |
| Accumulated  deficit                                                                                                                                                                                   |       |                                                      | (260,613   | )                            |       |   | (44,390 | ) |   |
| Total  stockholders’ equity                                                                                                                                                                       |       |                                                      | 1,042,642  |                         |       |   | 722,038 |   |   |
| Total liabilities and  stockholders’ equity                                                                                                                                                       |       |                                                      | $          | 4,407,351                    |       |   |   | $ | 2,797,511 |   |   |

 

*See Notes to Consolidated Financial Statements.*

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**Marquee Holdings Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS**

| ** **                                                                                                                                                                    | ** ** | **52 Weeks  Ended  March 30, 2006  (restated)** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **52 Weeks  Ended  April 1, 2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                                                                                                                    | ** ** | **(Successor)**                                                | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**                                 | ** ** |
| ** **                                                                                                                                                                    | ** ** | **(In thousands)**                                             | ** ** |
| **INCREASE (DECREASE) IN CASH AND EQUIVALENTS**                                                                                                                               |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| **Cash flows from operating activities:**                                                                                                                                     |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| Net loss                                                                                                                                                                      |       |                                                           | $          | (216,223                                                                            | )          |       |       | $                                                                 | (44,390    | )                                                 |       |   |   |   | $ | (35,878 | ) |   |   | $ | (10,714 | ) |   |
| Adjustments to reconcile  net loss to net cash provided by operating activities:                                                                                              |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| Depreciation and  amortization                                                                                                                                                |       |                                                           | 169,527    |                                                                                |       |       | 46,084     |                                                              |       |                                              |       |   | 92,091 |   |   |   | 124,572 |   |   |
| Amortization of discount  on corporate borrowings                                                                                                                             |       |                                                           | 20,190     |                                                                                |       |       | 12,043     |                                                              |       |                                              |       |   | 8,056 |   |   |   | 356 |   |   |
| Non-cash portion of  stock-based compensation                                                                                                                                 |       |                                                           | 3,433      |                                                                                |       |       | 1,201      |                                                              |       |                                              |       |   | — |   |   |   | 8,727 |   |   |
| Non-cash portion of  pension and postretirement expense                                                                                                                       |       |                                                           | 4,706      |                                                                                |       |       | 1,815      |                                                              |       |                                              |       |   | 5,273 |   |   |   | 6,029 |   |   |
| Impairment of long-lived  assets                                                                                                                                              |       |                                                           | 11,974     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | 16,272 |   |   |
| Deferred income taxes                                                                                                                                                         |       |                                                           | 90,640     |                                                                                |       |       | (7,582     | )                                                                 |       |                                              |       |   | 10,578 |   |   |   | 14,547 |   |   |
| Equity in (earnings) loss  from investments                                                                                                                                   |       |                                                           | 7,807      |                                                                                |       |       | —     |                                                              |       |                                              |       |   | (290 | ) |   |   | 8 |   |   |
| Disposition of assets and  other gains                                                                                                                                        |       |                                                           | —     |                                                                                |       |       | (2         | )                                                                 |       |                                              |       |   | (294 | ) |   |   | (2,590 | ) |   |
| Loss on sale—discontinued  operations                                                                                                                                    |       |                                                           | —     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | 5,591 |   |   |
| Loss on repurchase of  Notes due 2009 and 2011                                                                                                                           |       |                                                           | —     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | 13,947 |   |   |
| Change in assets and  liabilities, net of effects from acquisitions:                                                                                                          |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| Receivables                                                                                                                                                                   |       |                                                           | 9,797      |                                                                                |       |       | 14,152     |                                                              |       |                                              |       |   | (24,219 | ) |   |   | (5,388 | ) |   |
| Other assets                                                                                                                                                                  |       |                                                           | 31,053     |                                                                                |       |       | (23,758    | )                                                                 |       |                                              |       |   | 20,438 |   |   |   | (9,525 | ) |   |
| Accounts payable                                                                                                                                                              |       |                                                           | (46,035    | )                                                                                   |       |       | 6,785      |                                                              |       |                                              |       |   | 5,250 |   |   |   | (5,368 | ) |   |
| Accrued expenses and  other liabilities                                                                                                                                       |       |                                                           | (61,245    | )                                                                                   |       |       | (52,320    | )                                                                 |       |                                              |       |   | 60,098 |   |   |   | 3,565 |   |   |
| Other, net                                                                                                                                                                    |       |                                                           | 70         |                                                                                |       |       | 608        |                                                              |       |                                              |       |   | 4,261 |   |   |   | 3,910 |   |   |
| Net cash provided by  (used in) operating activities                                                                                                                          |       |                                                           | 25,694     |                                                                                |       |       | (45,364    | )                                                                 |       |                                              |       |   | 145,364 |   |   |   | 163,939 |   |   |
| **Cash flows from investing activities:**                                                                                                                                     |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| Capital expenditures                                                                                                                                                          |       |                                                           | (117,668   | )                                                                                   |       |       | (18,622    | )                                                                 |       |                                              |       |   | (66,155 | ) |   |   | (95,011 | ) |   |
| Proceeds from  sale/leasebacks                                                                                                                                                |       |                                                           | 35,010     |                                                                                |       |       | 50,910     |                                                              |       |                                              |       |   | — |   |   |   | 63,911 |   |   |
| Net change in  reimbursable construction advances                                                                                                                             |       |                                                           | (1,252     | )                                                                                   |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Increase in restricted  cash                                                                                                                                                  |       |                                                           | —     |                                                                                |       |       | (627,338   | )                                                                 |       |                                              |       |   | (627,338 | ) |   |   | — |   |   |
| Release of restricted  cash                                                                                                                                                   |       |                                                           | —     |                                                                                |       |       | 627,338    |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Acquisition of Loews, net  of cash acquired                                                                                                                                   |       |                                                           | 142,512    |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Acquisition of AMCE, net  of cash acquired                                                                                                                                    |       |                                                           | —     |                                                                                |       |       | (1,268,564 | )                                                                 |       |                                              |       |   | — |   |   |   | — |   |   |
| Acquisition of MegaStar  Cinemas, L.L.C., net of cash acquired                                                                                                           |       |                                                           | —     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | (13,374 | ) |   |
| Acquisition of  GC Companies, Inc., net of cash acquired and proceeds from sale of  venture capital investments                                                     |       |                                                           | —     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | (2,075 | ) |   |
| Purchase of leased  furniture, fixtures and equipment                                                                                                                         |       |                                                           | —     |                                                                                |       |       | (25,292    | )                                                                 |       |                                              |       |   | — |   |   |   | (15,812 | ) |   |
| Proceeds (payments) on  disposal—discontinued operations                                                                                                                 |       |                                                           | 53,456     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | (5,252 | ) |   |
| Proceeds from disposition  of long-term assets                                                                                                                                |       |                                                           | 3,032      |                                                                                |       |       | 173        |                                                              |       |                                              |       |   | 277 |   |   |   | 9,289 |   |   |
| Other, net                                                                                                                                                                    |       |                                                           | (7,552     | )                                                                                   |       |       | 1,094      |                                                              |       |                                              |       |   | 821 |   |   |   | (11,054 | ) |   |
| Net cash provided by  (used in) investing activities                                                                                                                          |       |                                                           | 107,538    |                                                                                |       |       | (1,260,301 | )                                                                 |       |                                              |       |   | (692,395 | ) |   |   | (69,378 | ) |   |
| **Cash flows from financing activities:**                                                                                                                                     |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| Proceeds from issuance of  11% Senior Subordinated Notes due 2016                                                                                                        |       |                                                           | 325,000    |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Proceeds from issuance of  Senior Secured Credit Facility                                                                                                                     |       |                                                           | 650,000    |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Proceeds from issuance of  8% Senior Subordinated Notes due 2014                                                                                                    |       |                                                           | —     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | 294,000 |   |   |
| Repayment of LCE credit  facility                                                                                                                                             |       |                                                           | (620,425   | )                                                                                   |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Repurchase of LCE 9%  Senior Subordinated Notes due 2014                                                                                                                 |       |                                                           | (318,938   | )                                                                                   |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Repurchase of Notes due  2009 and 2011                                                                                                                                   |       |                                                           | —     |                                                                                |       |       | (1,663     | )                                                                 |       |                                              |       |   | — |   |   |   | (292,117 | ) |   |
| Borrowing under Cinemex  credit facility                                                                                                                                      |       |                                                           | 6,000      |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Proceeds from issuance of  Common Stock                                                                                                                                       |       |                                                           | —     |                                                                                |       |       | 769,350    |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Proceeds from issuance of  85¤8% senior unsecured fixed rate notes  due 2012                                                                                   |       |                                                           | —     |                                                                                |       |       | 250,000    |                                                              |       |                                              |       |   | 250,000 |   |   |   | — |   |   |
| Proceeds from issuance of  senior unsecured floating rate notes due 2010                                                                                                 |       |                                                           | —     |                                                                                |       |       | 205,000    |                                                              |       |                                              |       |   | 205,000 |   |   |   | — |   |   |
| Proceeds from issuance of  12% senior discount notes due 2014                                                                                                            |       |                                                           | —     |                                                                                |       |       | 169,918    |                                                              |       |                                              |       |   | 169,918 |   |   |   | — |   |   |
| Proceeds from financing  lease obligations                                                                                                                                    |       |                                                           | 6,661      |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Principal payments under  capital and financing lease obligations                                                                                                             |       |                                                           | (3,163     | )                                                                                   |       |       | (856       | )                                                                 |       |                                              |       |   | (2,020 | ) |   |   | (2,574 | ) |   |
| Principal payments under  mortgage obligations                                                                                                                                |       |                                                           | (10        | )                                                                                   |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Deferred financing costs                                                                                                                                                      |       |                                                           | (24,895    | )                                                                                   |       |       | (19,733    | )                                                                 |       |                                              |       |   | — |   |   |   | (3,725 | ) |   |
| Change in construction  payables                                                                                                                                              |       |                                                           | 1,204      |                                                                                |       |       | 4,747      |                                                              |       |                                              |       |   | (2,234 | ) |   |   | (4,307 | ) |   |
| Cash portion of preferred  dividends                                                                                                                                          |       |                                                           | —     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | (9,349 | ) |   |   | — |   |   |
| Proceeds from exercise of  stock options                                                                                                                                      |       |                                                           | —     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | 52 |   |   |   | 3,894 |   |   |
| Treasury stock purchases  and other                                                                                                                                           |       |                                                           | —     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | (333 | ) |   |   | (445 | ) |   |
| Net cash provided by  (used in) financing activities                                                                                                                          |       |                                                           | 21,434     |                                                                                |       |       | 1,376,763  |                                                              |       |                                              |       |   | 611,034 |   |   |   | (5,274 | ) |   |
| Effect of exchange rate  changes on cash and equivalents                                                                                                                      |       |                                                           | 4,755      |                                                                                |       |       | 1,847      |                                                              |       |                                              |       |   | (615 | ) |   |   | (451 | ) |   |
| **Net increase in cash and  equivalents**                                                                                                                                     |       |                                                           | 159,421    |                                                                                |       |       | 72,945     |                                                              |       |                                              |       |   | 63,388 |   |   |   | 88,836 |   |   |
| **Cash and  equivalents at beginning of year**                                                                                                                                |       |                                                           | 72,945     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | 333,248 |   |   |   | 244,412 |   |   |
| **Cash and equivalents at end of  year**                                                                                                                                      |       |                                                           | $          | 232,366                                                                             |       |       |       | $                                                                 | 72,945     |                                              |       |   |   |   | $ | 396,636 |   |   |   | $ | 333,248 |   |   |
| **SUPPLEMENTAL DISCLOSURES OF CASH FLOW  INFORMATION:**                                                                                                                       |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| **Cash paid (refunded) during the period for:**                                                                                                                               |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| Interest (including  amounts capitalized of $2,239, $203, $658 and $2,658 during successor periods  2006 and 2005 and predecessor periods 2005 and fiscal 2004, respectively) |       |                                                           | $          | 115,753                                                                             |       |       |       | $                                                                 | 47,788     |                                              |       |   |   |   | $ | 42,629 |   |   |   | $ | 78,479 |   |   |
| Income taxes, net                                                                                                                                                             |       |                                                           | (4,488     | )                                                                                   |       |       | 838        |                                                              |       |                                              |       |   | 2,364 |   |   |   | 3,880 |   |   |
| **Schedule of non-cash investing and  financing activities:**                                                                                                                 |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| Assets capitalized under  EITF 97-10                                                                                                                                     |       |                                                           | $          | —                                                                              |       |       |       | $                                                                 | 4,941      |                                              |       |   |   |   | $ | — |   |   |   | $ | — |   |   |
| Preferred dividends                                                                                                                                                           |       |                                                           | —     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | 93,475 |   |   |   | 40,277 |   |   |

 

Refer to Note 2—Acquisitions for discussion ofnon-cash activities related to acquisitions.

*See Notes to Consolidated Financial Statements.*

41

----

**Marquee Holdings Inc.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**

| ** **                                                                             | ** ** | **Preferred Stock** | ** ** | **Common Stock7** | ** **                | **Class A-1 Voting  Common Stock** | ** ** | **Class A-2 Voting  Common Stock** | ** ** | **Class N Nonvoting  Common Stock**      | ** ** |
|----------------------------------------------------------------------------------------|------------|--------------------------|------------|------------------------|---------------------------|---------------------------------------------------|------------|---------------------------------------------------|------------|---------------------------------------------------------|------------|
| **(In thousands, except share and per share data)** | ** ** | **Shares**               | ** ** | **Amount**             | ** **                | **Shares**                                        | ** ** | **Amount**                                        | ** ** | **Shares**                                              | ** ** | **Amount** | ** ** | **Shares** | ** ** | **Amount** | ** ** | **Shares** | ** ** | **Amount** | ** ** |
| **Successor  from Inception on July 16, 2004 through March 30, 2006**        | ** ** | ** **               | ** ** |                   | ** **                | ** **                                        |       | ** **                                        | ** ** | ** **                                              | ** ** | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   |
| Balance, July 16, 2004                                                            |       | —                   |       |                   | $   — |                                              |       | —                                            |       | $        — |       | — |   |   | $ — | ** ** |   | — |   |   | $ — | ** ** |   | — |   |   | $ — | ** ** |   |
| Comprehensive loss:                                                                    |       |                     |       |                   |                      |                                              |       |                                              |       |                                                    |       |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Net loss                                                                               |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Foreign currency translation adjustment                                                |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Unrealized loss on marketable securities                                               |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Comprehensive loss                                                                     |       |                     |       |                   |                      |                                              |       |                                              |       |                                                    |       |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Stock-based compensation-options                                                       |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Issuance of Common Stock                                                               |       | —                   |       |                   | —                    |                                              |       | 769,350                                           |       | 8                                                       |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Balance,  March 31, 2005                                                          |       | —                   |       |                   | —                    |                                              |       | 769,350                                           |       | 8                                                       |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Comprehensive loss:                                                                    |       |                     |       |                   |                      |                                              |       |                                              |       |                                                    |       |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Net loss (restated)                                                                    |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   |
| Foreign currency translation adjustment                                                |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Additional minimum pension liability                                                   |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Unrealized gain on Cinemex swap agreements                                             |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Unrealized loss on marketable securities                                               |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Comprehensive loss  (restated)                                                         |       |                     |       |                   |                      |                                              |       |                                              |       |                                                    |       |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Stock-based compensation-options  (restated)                                           |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Issuance of Common Stock for Merger                                                    |       | —                   |       |                   | —                    |                                              |       | (769,350                                          | )          | (8                                                      | )          | 382,475.00000 |   |   | 4 | ** ** |   | 382,475.00000 |   |   | 4 | ** ** |   | 5,128.77496 |   |   |   | ** ** |   |
| Balance,  March 30, 2006 (restated)                                               |       | —                   |       |                   | $   — |                                              |       | —                                            |       | $        — |       | 382,475.00000 |   |   | $ 4 | ** ** |   | 382,475.00000 |   |   | $ 4 | ** ** |   | 5,128.77496 |   |   | $ — | ** ** |   |
| **Predecessor  from April 3, 2003 through December 23, 2004**                | ** ** | ** **               | ** ** |                   | ** **                | ** **                                        |       | ** **                                        | ** ** | ** **                                              | ** ** | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   |
| Balance, April 3, 2003                                                            |       | 280,107                  |       |                   | $ 187                |                                              |       | 33,286,173                                        |       | $ 22,191                                           |       | — |   |   | $ — | ** ** |   | — |   |   | $ — | ** ** |   | — |   |   | $ — | ** ** |   |
| Comprehensive loss:                                                                    |       |                     |       |                   |                      |                                              |       |                                              |       |                                                    |       |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Net loss                                                                               |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Foreign currency translation adjustment                                                |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Additional minimum pension liability                                                   |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Unrealized gain on marketable securities                                               |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Comprehensive loss                                                                     |       |                     |       |                   |                      |                                              |       |                                              |       |                                                    |       |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Preferred Stock for dividends                                                          |       | 19,370                   |       |                   | 13                        |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Preferred Stock dividends                                                              |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Preferred Stock accretion                                                              |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Stock awards, options exercised and other (net of tax  benefit of $664)                |       | —                   |       |                   | —                    |                                              |       | 603,580                                           |       | 402                                                     |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Deferred compensation—restricted stock awards                                     |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Unissued restricted stock awards                                                       |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Treasury stock purchase                                                                |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Balance,  April 1, 2004                                                           |       | 299,477                  |       |                   | 200                       |                                              |       | 33,889,753                                        |       | 22,593                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Comprehensive loss:                                                                    |       |                     |       |                   |                      |                                              |       |                                              |       |                                                    |       |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Net loss                                                                               |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   |
| Foreign currency translation adjustment                                                |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Unrealized gain on marketable securities                                               |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Comprehensive loss                                                                     |       |                     |       |                   |                      |                                              |       |                                              |       |                                                    |       |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Preferred Stock for dividends                                                          |       | 39,479                   |       |                   | 26                        |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Preferred Stock dividends                                                              |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Preferred Stock accretion                                                              |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Stock awards, options exercised and other (net of tax  benefit of $20)                 |       | —                   |       |                   | —                    |                                              |       | 82,565                                            |       | 51                                                      |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Deferred stock units and awards                                                        |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Stock issued in connection with acquisition of GC                                      |       | —                   |       |                   | —                    |                                              |       | 148,148                                           |       | 99                                                      |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Treasury stock purchase                                                                |       | —                   |       |                   | —                    |                                              |       | —                                            |       | —                                                  |       | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Elimination of Predecessor Company stockholders’  equity                          |       | (338,956                 | )          |                   | (226                      | )                                                 |       | (34,120,466                                       | )          | (22,743                                                 | )          | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Balance,  December 23, 2004                                                       |       | —                   |       |                   | $   — |                                              |       | —                                            |       | $        — |       | — |   |   | $ — | ** ** |   | — |   |   | $ — | ** ** |   | — |   |   | $ — | ** ** |   |

 

*See Notes to ConsolidatedFinancial Statements.*

42

----

 

|                                                                                      | ** ** | **Class L-1 Voting  Common Stock** | ** ** | **Class L-1 Voting  Common Stock** | ** **    | **Convertible  Class B Stock** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Accumulated  Other  Comprehensive** | ** **    | **Retained  Earnings  (Accumulated  Deficit)** | ** ** | **Common Stock  In Treasury** | ** ** | **Total  Stockholders’  Equity** | ** **                                  |
|--------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|---------------------------------------------------|---------------|------------------------------------------|------------|----------------------------------|------------|---------------------------------------|---------------|------------------------------------------------|------------|-----------------------------------------|------------|---------------------------------------|---------------------------------------------|
| ** **                                                                           | ** ** | **Shares**                                        | ** ** | **Amount**                                        | ** **    | **Shares**                               | ** ** | **Amount**                       | ** ** | **Shares**                            | ** **    | **Amount**                                     | ** ** | **(restated)**                          | ** ** | **Income (Loss)**                | ** **                                  | **(restated)** | ** ** | **Shares** | ** ** | **Amount** | ** ** | **(restated)** | ** ** |
| **Successor from Inception on  July 16, 2004 through March 30, 2006** |       |                                              |       |                                              |          | ** **                               |       |                             |       |                                  |          | ** **                                     |       |                                    |       |                                  |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, July 16, 2004                                                          |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | $ — | ** **                                     |       | —                                  |       |                                  | $      — |   |   |   | $           — |   |   |   | $        — |   |   |   | $          — |   |   | — |   |   | $      — |   |   |   | $           — |   |   |
| Comprehensive loss:                                                                  |       |                                              |       |                                              |          | ** **                               |       |                             |       |                                  |          | ** **                                     |       |                                    |       |                                  |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                             |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | — |   |   |   | (44,390 | ) |   | — |   |   | — |   |   |   | (44,390 | ) |   |
| Foreign currency translation adjustment                                              |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | 430 |   |   |   | — |   |   | — |   |   | — |   |   |   | 430 |   |   |
| Unrealized loss on marketable securities                                             |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | (45 | ) |   |   | — |   |   | — |   |   | — |   |   |   | (45 | ) |   |
| Comprehensive loss                                                                   |       |                                              |       |                                              |          | ** **                               |       |                             |       |                                  |          | ** **                                     |       |                                    |       |                                  |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (44,005 | ) |   |
| Stock-based compensation-options                                                     |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 443 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 443 |   |   |
| Issuance of Common Stock                                                             |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 765,592 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 765,600 |   |   |
| Balance, March 31, 2005                                                         |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 766,035 |   |   |   | 385 |   |   |   | (44,390 | ) |   | — |   |   | — |   |   |   | 722,038 |   |   |
| Comprehensive loss:                                                                  |       |                                              |       |                                              |          | ** **                               |       |                             |       |                                  |          | ** **                                     |       |                                    |       |                                  |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss (restated)                                                                  |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | — |   |   |   | (216,223 | ) |   | — |   |   | — |   |   |   | (216,223 | ) |   |
| Foreign currency translation adjustment                                              |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | (11,685 | ) |   |   | — |   |   | — |   |   | — |   |   |   | (11,685 | ) |   |
| Additional minimum pension liability                                                 |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | (172 | ) |   |   | — |   |   | — |   |   | — |   |   |   | (172 | ) |   |
| Unrealized gain on Cinemex swap  agreements                                          |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | 594 |   |   |   | — |   |   | — |   |   | — |   |   |   | 594 |   |   |
| Unrealized loss on marketable securities                                             |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | 220 |   |   |   | — |   |   | — |   |   | — |   |   |   | 220 |   |   |
| Comprehensive loss (restated)                                                        |       |                                              |       |                                              |          | ** **                               |       |                             |       |                                  |          | ** **                                     |       |                                    |       |                                  |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (227,266 | ) |   |
| Stock-based compensation-options  (restated)                                         |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 7,199 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 7,199 |   |   |
| Issuance of Common Stock for Merger                                                  |       | 256,085.61252                                     |       |                                              | 3             | ** **                               |       | 256,085.61252                    |       |                                  | 3             | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 540,665 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 540,671 |   |   |
| Balance, March 30, 2006 (restated)                                              |       | 256,085.61252                                     |       |                                              | $ 3      | ** **                               |       | 256,085.61252                    |       |                                  | $ 3      | ** **                                     |       | —                                  |       |                                  | $      — |   |   |   | $ 1,313,899 |   |   |   | $ (10,658 | ) |   |   | $ (260,613 | ) |   | — |   |   | $      — |   |   |   | $ 1,042,642 |   |   |
| **Predecessor from April 3,  2003 through December 23, 2004**              | ** ** | ** **                                        | ** ** |                                              | ** **    | ** **                               |       | ** **                       | ** ** |                                  | ** **    | ** **                                     |       | ** **                              | ** ** |                                  | ** **                                  | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Balance, April 3, 2003                                                          |       | —                                            |       |                                              | $ — | ** **                               |       | —                           |       |                                  | $ — | ** **                                     |       | 3,051,597                               |       |                                  | $ 2,035                                |   |   |   | $  464,663 |   |   |   | $ (8,773 | ) |   |   | $ (200,002 | ) |   | 35,387 |   |   | $  (582 | ) |   |   | $  279,719 |   |   |
| Comprehensive loss:                                                                  |       |                                              |       |                                              |          | ** **                               |       |                             |       |                                  |          | ** **                                     |       |                                    |       |                                  |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                             |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | — |   |   |   | (10,714 | ) |   | — |   |   | — |   |   |   | (10,714 | ) |   |
| Foreign currency translation adjustment                                              |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | 6,877 |   |   |   | — |   |   | — |   |   | — |   |   |   | 6,877 |   |   |
| Additional minimum pension liability                                                 |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | (622 | ) |   |   | — |   |   | — |   |   | — |   |   |   | (622 | ) |   |
| Unrealized gain on marketable securities                                             |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | 525 |   |   |   | — |   |   | — |   |   | — |   |   |   | 525 |   |   |
| Comprehensive loss                                                                   |       |                                              |       |                                              |          | ** **                               |       |                             |       |                                  |          | ** **                                     |       |                                    |       |                                  |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (3,934 | ) |   |
| Preferred Stock for dividends                                                        |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 38,237 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 38,250 |   |   |
| Preferred Stock dividends                                                            |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | (40,277 | ) |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | (40,277 | ) |   |
| Preferred Stock accretion                                                            |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 2,006 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 2,006 |   |   |
| Stock awards, options exercised and  other (net of tax benefit of $664)         |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 4,114 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 4,516 |   |   |
| Deferred compensation—restricted stock  awards                                  |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | (68 | ) |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | (68 | ) |   |
| Unissued restricted stock awards                                                     |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 823 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 823 |   |   |
| Treasury stock purchase                                                              |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | — |   |   |   | — |   |   | 42,610 |   |   | (431 | ) |   |   | (431 | ) |   |
| Balance, April 1, 2004                                                          |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  |          | ** **                                     |       | 3,051,597                               |       |                                  | 2,035                                       |   |   |   | 469,498 |   |   |   | (1,993 | ) |   |   | (210,716 | ) |   | 77,997 |   |   | (1,013 | ) |   |   | 280,604 |   |   |
| Comprehensive loss:                                                                  |       |                                              |       |                                              |          | ** **                               |       |                             |       |                                  |          | ** **                                     |       |                                    |       |                                  |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                             |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | — |   |   |   | (35,878 | ) |   | — |   |   | — |   |   |   | (35,878 | ) |   |
| Foreign currency translation adjustment                                              |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | 3,241 |   |   |   | — |   |   | — |   |   | — |   |   |   | 3,241 |   |   |
| Unrealized gain on marketable securities                                             |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | 147 |   |   |   | — |   |   | — |   |   | — |   |   |   | 147 |   |   |
| Comprehensive loss                                                                   |       |                                              |       |                                              |          | ** **                               |       |                             |       |                                  |          | ** **                                     |       |                                    |       |                                  |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (32,490 | ) |   |
| Preferred Stock for dividends                                                        |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 93,449 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 93,475 |   |   |
| Preferred Stock dividends                                                            |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | (104,300 | ) |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | (104,300 | ) |   |
| Preferred Stock accretion                                                            |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 1,476 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 1,476 |   |   |
| Stock awards, options exercised and  other (net of tax benefit of $20)          |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 12 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 63 |   |   |
| Deferred stock units and awards                                                      |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 7,949 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 7,949 |   |   |
| Stock issued in connection with  acquisition of GC                                   |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | 1,922 |   |   |   | — |   |   |   | — |   |   | — |   |   | — |   |   |   | 2,021 |   |   |
| Treasury stock purchase                                                              |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | —                                  |       |                                  | —                                      |   |   |   | — |   |   |   | — |   |   |   | — |   |   | 22,372 |   |   | (333 | ) |   |   | (333 | ) |   |
| Elimination of Predecessor Company  stockholders’ equity                        |       | —                                            |       |                                              | —        | ** **                               |       | —                           |       |                                  | —        | ** **                                     |       | (3,051,597                              | )          |                                  | (2,035                                      | ) |   |   | (470,006 | ) |   |   | (1,395 | ) |   |   | 246,594 |   |   | (100,369 | ) |   | 1,346 |   |   |   | (248,465 | ) |   |
| Balance, December 23, 2004                                                      |       | —                                            |       |                                              | $ — | ** **                               |       | —                           |       |                                  | $ — | ** **                                     |       | —                                  |       |                                  | $      — |   |   |   | $           — |   |   |   | $        — |   |   |   | $          — |   |   | — |   |   | $      — |   |   |   | $           — |   |   |

 

*See Notes to Consolidated Financial Statements.*

43

----

**Marquee Holdings Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended March 30, 2006, March 31, 2005 and April 1, 2004**

**NOTE 1—THECOMPANY AND SIGNIFICANT ACCOUNTING POLICIES**

Marquee Holdings Inc. (“Holdings”) is an investmentvehicle owned by J.P. Morgan Partners, LLC Apollo Management, L.P. andcertain related investment funds and affiliates of Bain Capital Partners, TheCarlyle Group and Spectrum Equity Investors. Holdings was formed for thepurpose of acquiring AMC Entertainment Inc. (“AMCE”) pursuant to a definitivemerger agreement approved by AMCE’s Board of Directors on July 22, 2004.Holdings is a holding company with no operations of its own and it has one directsubsidiary, AMCE.

AMCE, through its direct and indirect subsidiaries,including American Multi-Cinema, Inc. (“AMC”) and its subsidiaries’Grupo Cinemex, S.A. de C.V. (“Cinemex”) and AMC Entertainment International, Inc.(“AMCEI”) and its subsidiaries (collectively with Holdings and AMCE, unless thecontext otherwise requires, the “Company”), is principally involved in thetheatrical exhibition business and owns, operates or has interests in theatreslocated in the United States and Canada (“U.S. and Canada” formerly, NorthAmerican theatrical exhibition) and in Mexico, Argentina, Brazil, Chile,Uruguay, China (Hong Kong), France, Spain and the United Kingdom. The Companydiscontinued its operations in Japan during the first quarter of fiscal 2006.The Company’s U.S. and Canada theatrical exhibition business is conductedthrough AMC and AMCEI. The Company’s International theatrical exhibitionbusiness is conducted primarily through Cinemex and AMCEI. See Note 2 fora discussion of the Merger with Loews on January 26, 2006.

The Company completed a merger on December 23,2004 in which Holdings’ subsidiary, Marquee Inc. (“Marquee”) acquired theCompany. See Note 2—Acquisitions for additional information regarding thismerger. Holdings is a company formed on July 16, 2004. OnDecember 23, 2004, pursuant to a merger agreement, Marquee merged withAMCE (the “Predecessor”). Upon the consummation of the merger between Marqueeand AMCE on December 23, 2004, Marquee merged with and into AMCE, withAMCE and Holdings as the surviving reporting entities (collectively the“Successor”). The merger with Marquee was treated as a purchase with Marqueebeing the “accounting acquirer” in accordance with Statement of FinancialAccounting Standards No. 141 *BusinessCombinations*. As a result, the Successor applied the purchase methodof accounting to the separable assets, including goodwill, and liabilities ofthe accounting acquiree and Predecessor, AMCE, as of December 23, 2004,the merger date. The consolidated balance sheets presented herein are those ofthe Successor and the consolidated statements of operations and cash flowspresented herein are those of the Successor for the fifty-two weeks endedMarch 30, 2006 and the period from inception July 16, 2004 throughMarch 31, 2005 and those of its Predecessor, AMCE for the periodApril 2, 2004 through December 23, 2004 and the fifty-two weeks endedApril 1, 2004.

In association with the merger transaction discussedabove, two merger entities were formed on July 16, 2004, Marquee andHoldings. To finance the merger and related transactions, on August 18,2004, (i) Marquee issued $250,000,000 aggregate principal amount of 85¤8%senior unsecured fixed rate Notes due 2012 (“Fixed Notes due 2012”) and$205,000,000 aggregate principal amount of senior unsecured floating rate Notesdue 2010 (“Floating Notes due 2010”) and (ii) Holdings issued $304,000,000aggregate principal amount at maturity of its 12% senior discount Notes due2014 (“Discount Notes due 2014”) for gross proceeds of $169,917,760. The onlyoperations of Marquee and Holdings prior to the merger with Marquee wererelated to these financings. Because AMCE was the primary beneficiary of thetwo merger entities, which were considered variable interest entities asdefined in FIN 46 (R), *Consolidation of VariableInterest Entities, an Interpretation of ARB No. 51*, AMCE wasrequired to consolidate the merger entities’ operations and financial positioninto AMCE’s financial statements as of and through the period endedDecember 23, 2004. Upon consummation of the merger, Marquee was mergedwith and into AMCE 

44

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and the letters of creditwhich gave rise to consolidation of the entities under FIN 46 were cancelled.As such, Marquee’s operations and financial position are included within AMCE’sConsolidated Financial Statements and Holding’s results of operations are includedwithin the Predecessor Company’s Consolidated Financial Statements from itsinception on July 16, 2004 through December 23, 2004. Subsequent to December 23,2004 AMCE deconsolidated Holding’s assets and liabilities.

The results of operations of Holdings included withinthe Predecessor Company’s Consolidated Statements of Operations for the periodfrom April 2, 2004 through December 23, 2004 include interest expenseof $7,135,000 and interest income of $831,000.

Holdings has no ability toservice interest or principal on the Discount Notes due 2014 other than throughany dividends it may receive from the AMCE. AMCE is restricted, in certaincircumstances, from paying dividends to Holdings by the terms of the indenturesgoverning the Fixed Notes due 2012, the Floating Notes due 2010 and theExisting Subordinated Notes and the amended credit facility. AMCE has notguaranteed the indebtedness of Holdings nor pledged any of its assets ascollateral.

**Restatement**

In connection withan ongoing review of its quarterly mark-to-market accounting for its liabilityclassified shares and stock option awards, the Company determined that itsfinancial statements as of and for the year ended March 30, 2006 needed tobe restated to correct the following items:

1.                 *Management-purchased shares*

On December 23, 2004, certain members ofmanagement purchased common shares in the Company. Due to the existence ofcertain put options, at the time the shares were purchased, the Company determinedthat the management-purchased shares for two members of management shouldbe recorded as liabilities with changes in the estimated fair value of thoseshares recorded through a charge or credit to the statement of operations.

Additionally, under a Management Shareholders’Agreement, the Company has a call option allowing it to reacquire shares heldby management (including the management-purchased shares referred toabove) for a period of six months following a change in control or theemployee’s termination for any reason (including voluntary termination). Forall terminations except voluntary termination, the call price for the shares isfair value. For voluntary terminations, the call price for the shares is thelower of fair value on the call notice date or the price paid.

FAS 123R provides that if the Company has a calloption on shares held by employees and it is probable that the employer wouldprevent the employee from bearing those risks and rewards associated withequity share ownership for a reasonable period of time (six months or more)from the date the share is issued, then liability classification is required.

DuringFebruary 2007, the Company determined that the management-purchasedshares should have been recorded as a component of permanent equity (ratherthan as liabilities) because (i) the put options referred to above areconditional and do not contain any embedded redemption rights and (ii) theCompany has not exercised its call option on any of the management-purchasedshares and does not intend to do so. Accordingly, the Company has restated thefinancial statements as of and for the year-ended March 30, 2006 toreverse the previously recorded mark to market effects (income) related to thecommon shares purchased by the two members of management that had beenincorrectly classified as liabilities since December 23, 2004 and toreflect these shares within stockholders’ equity. There was no impact on netcash provided by operating activities as a result of the above mentioned items.

45

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2.                 *Stock Option Awards*

On December 23, 2004, certain members ofmanagement were granted options to purchase Company common stock. Due to theexistence of certain put options, at the time the stock options were granted,the Company determined that the stock options for two members of managementshould be recorded as liabilities with changes in the estimated fair value ofthose options recorded through a charge or credit to the statement ofoperations. The Company also has a call option relating to the options (and theunderlying shares) similar to the call option referred to above.

During February 2007, the Company determined thatthe options held by one member of management that were previously recorded as aliability should have been recorded as a component of permanent equity becausethe Company does not intend to exercise its call option on the vested options(or shares obtained upon exercise of the options) and since the put option onthe vested options (or shares obtained upon exercise of options) is not withinthe employee’s control. Accordingly, the Company has restated its financialstatements as of and for the year ended March 30, 2006 to reverse thepreviously recorded mark to market effects relating to the stock optionsawarded to this member of management that had been incorrectly classified asliabilities and to reflect these options as additional paid-in capital (ratherthan as liabilities). There was no impact on net cash provided by operatingactivities as a result of the above mentioned items.

TheCompany has restated its financial statements as of and for the year endedMarch 30, 2006 to record the net effect of the adjustments discussedabove. The impact of the adjustments for the fiscal year ended March 31,2005 is not material (and was recorded as part of the 2006 restatementadjustments). The net effects of the adjustments recorded to restate the 2006financial statements are summarized as follows (dollars in thousands):

| ** **                                  | ** ** | **Stock based  Compensation  Expense**(1) | ** ** | **Other Expense  (Income)** | ** ** | **Total** | ** ** |
|---------------------------------------------|------------|------------------------------------------------|------------|----------------------------------|------------|-----------|------------|
| Decrease in Other  Long-Term Liabilities(2) |       |                                           | $          | 283                              |       |      |       | $ | 1,856 |   |   | $ | 2,139 |   |
| Increase in  Additional Paid-in Capital(3)  |       |                                           | $          | 2,397                            |       |      |       | $ | 3,750 |   |   | $ | 6,147 |   |
| Increase in Net Loss                        |       |                                           | $          | 2,114                            |       |      |       | $ | 1,894 |   |   | $ | 4,008 |   |

----

(1)                Included withinOther G&A

(2)                Refer to discussionof the adjustment for the management-purchased shares and stock optionawards above

(3)                Refer todiscussion of the adjustment for stock option awards above

46

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Thefollowing table sets forth the previously reported amounts and the restatedamounts reflected in the accompanying Consolidated Financial Statements(dollars in thousands):

| ** **                                          | ** ** | **52 Weeks Ended March 30, 2006** | ** ** |
|-----------------------------------------------------|------------|------------------------------------------------------------|------------|
| ** **                                          | ** ** | **As previously reported**                       | ** ** | **As restated** | ** ** |
| Statement of  Operations data:                      |       |                                                       |       |   |   |   |   |
| General and administrative: Other                   |       |                                                       | $          | 38,308 |   |   | $ | 40,251 |   |
| Total costs and expenses                            |       |                                                       | 1,710,487  |   |   | 1,668,320 |   |
| Other expense (income)                              |       |                                                       | (11,712    | ) |   | (9,818 | ) |
| Total other expense                                 |       |                                                       | 137,669    |   |   | 137,690 |   |
| Loss from continuing operations before income taxes |       |                                                       | (117,706   | ) |   | (119,132 | ) |
| Income tax provision                                |       |                                                       | 72,100     |   |   | 71,800 |   |
| Net loss                                            |       |                                                       | (212,215   | ) |   | (216,223 | ) |
| Basic and diluted loss per share:                   |       |                                                       |       |   |   |   |   |
| Loss from continuing operations                     |       |                                                       | $          | (221.19 | ) |   | $ | (222.50 | ) |
| Net loss per share                                  |       |                                                       | (247.30    | ) |   | (251.97 | ) |
| Balance Sheet data (at period end):                 |       |                                                       |       |   |   |   |   |
| Other Long-Term Liabilities                         |       |                                                       | $          | 419,474 |   |   | $ | 417,335 |   |
| Total Liabilities                                   |       |                                                       | 3,366,848  |   |   | 3,364,709 |   |
| Additional Paid-in Capital                          |       |                                                       | 1,307,752  |   |   | 1,313,899 |   |
| Accumulated Deficit                                 |       |                                                       | (256,605   | ) |   | (260,613 | ) |
| Total  Stockholders’ Equity                    |       |                                                       | 1,040,503  |   |   | 1,042,642 |   |

 

All previously reported amounts affected by therestatement that appear elsewhere in these footnotes to the ConsolidatedFinancial Statements have also been restated.

47

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Thefollowing unaudited tables set forth the impact of the restatements on eachpreviously reported quarterly and year to date period for fiscal 2006:

| ** **                                                         | ** ** | **Thirteen Weeks Ended  June 30, 2005** | ** ** |
|--------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **As  Reported**                                            | ** ** | **Restatement**(1) | ** ** | **Discontinued  Operations**(2) | ** ** | **As Restated  and Adjusted** | ** ** |
| ** **                                                         | ** ** | **Unaudited**                                               | ** ** |
| Revenues                                                           |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                                                         |       | $                                                           | 276,406    |   |   | $ | — |   |   |   | $ | (6,452 | ) |   |   | $ | 269,954 |   |   |
| Concessions                                                        |       | 111,333                                                     |       |   | — |   |   |   | (2,195 | ) |   |   | 109,138 |   |   |
| Other revenue                                                      |       | 25,043                                                      |       |   | — |   |   |   | (333 | ) |   |   | 24,710 |   |   |
| Total revenues                                                     |       | 412,782                                                     |       |   | — |   |   |   | (8,980 | ) |   |   | 403,802 |   |   |
| Costs and  Expenses                                                |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Film exhibition  costs                                             |       | 151,717                                                     |       |   | — |   |   |   | (3,090 | ) |   |   | 148,627 |   |   |
| Concession costs                                                   |       | 11,729                                                      |       |   | — |   |   |   | (208 | ) |   |   | 11,521 |   |   |
| Operating expense                                                  |       | 106,521                                                     |       |   | — |   |   |   | (2,867 | ) |   |   | 103,654 |   |   |
| Rent                                                               |       | 78,686                                                      |       |   | — |   |   |   | (2,881 | ) |   |   | 75,805 |   |   |
| General and  administrative:                                       |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger and  acquisition costs                                      |       | 1,685                                                       |       |   | — |   |   |   | — |   |   |   | 1,685 |   |   |
| Management fee                                                     |       | 500                                                         |       |   | — |   |   |   | — |   |   |   | 500 |   |   |
| Other                                                              |       | 10,194                                                      |       |   | — |   |   |   | (90 | ) |   |   | 10,104 |   |   |
| Preopening  expense                                                |       | 8                                                           |       |   | — |   |   |   | — |   |   |   | 8 |   |   |
| Theatre and other  closure expense                                 |       | 634                                                         |       |   | — |   |   |   | — |   |   |   | 634 |   |   |
| Restructuring  charge                                              |       | 3,069                                                       |       |   | — |   |   |   | — |   |   |   | 3,069 |   |   |
| Depreciation and  amortization                                     |       | 37,511                                                      |       |   | — |   |   |   | (1,564 | ) |   |   | 35,947 |   |   |
| Disposition of  assets and other gains                             |       | (667                                                        | )          |   | — |   |   |   | — |   |   |   | (667 | ) |   |
| Total costs and  expenses                                          |       | 401,587                                                     |       |   | — |   |   |   | (10,700 | ) |   |   | 390,887 |   |   |
| Other expense  (income)                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income                                                       |       | (1,116                                                      | )          |   | — |   |   |   | — |   |   |   | (1,116 | ) |   |
| Interest expense                                                   |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate  borrowings                                              |       | 30,297                                                      |       |   | — |   |   |   | — |   |   |   | 30,297 |   |   |
| Capital and  financing lease obligations                           |       | 1,685                                                       |       |   | — |   |   |   | (486 | ) |   |   | 1,199 |   |   |
| Investment income                                                  |       | 496                                                         |       |   | — |   |   |   | — |   |   |   | 496 |   |   |
| Total other  expense                                               |       | 31,362                                                      |       |   | — |   |   |   | (486 | ) |   |   | 30,876 |   |   |
| Earnings (loss) from  continuing operations before income taxes    |       | (20,167                                                     | )          |   | — |   |   |   | 2,206 |   |   |   | (17,961 | ) |   |
| Income tax provision  (benefit)                                    |       | (8,300                                                      | )          |   | — |   |   |   | (100 | ) |   |   | (8,400 | ) |   |
| Earnings (loss)  from continuing operations                        |       | (11,867                                                     | )          |   | — |   |   |   | 2,306 |   |   |   | (9,561 | ) |   |
| Earnings (loss) from  discontinued operations, net of income taxes |       | (19,324                                                     | )          |   | — |   |   |   | (2,306 | ) |   |   | (21,630 | ) |   |
| Net earnings  (loss)                                               |       | $                                                           | (31,191    | ) |   | $ | — |   |   |   | $ | — |   |   |   | $ | (31,191 | ) |   |
| Basic and diluted  loss per share of common stock:                 |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from  continuing operations                                   |       | $                                                           | (15.43     | ) |   |   |   |   |   |   |   |   |   | $ | (12.43 | ) |   |
| Loss from  discontinued operations                                 |       | (25.11                                                      | )          |   |   |   |   |   |   |   |   |   | (28.11 | ) |   |
| Net loss per share                                                 |       | (40.54                                                      | )          |   |   |   |   |   |   |   |   |   | (40.54 | ) |   |
| Average shares  outstanding:                                       |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                  |       | 769.35                                                      |       |   |   |   |   |   |   |   |   |   | 769.35 |   |   |

 

48

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| ** **                                    | ** ** | **As of  June 30, 2005** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                    | ** ** | **As  Reported**                        | ** ** | **Restatement**(1) | ** ** | **As  Restated** | ** ** |
| ** **                                    | ** ** | **Unaudited**                           | ** ** |
| **Assets**                                    |       |                                    |       |   |   |   |   |   |   |
| Current assets:                               |       |                                    |       |   |   |   |   |   |   |
| Cash                                          |       | $                                       | 128,219    |   |   | $ | — |   |   | $ | 128,219 |   |
| Receivables                                   |       | 51,888                                  |       |   | — |   |   | 51,888 |   |
| Other current  assets                         |       | 64,549                                  |       |   | — |   |   | 64,549 |   |
| Current assets  held for sale                 |       | 1,544                                   |       |   | — |   |   | 1,544 |   |
| Total current assets                          |       | 246,200                                 |       |   | — |   |   | 246,200 |   |
| Property                                      |       | 823,020                                 |       |   | — |   |   | 823,020 |   |
| Intangible assets                             |       | 185,596                                 |       |   | — |   |   | 185,596 |   |
| Goodwill                                      |       | 1,309,624                               |       |   | — |   |   | 1,309,624 |   |
| Deferred income  taxes                        |       | 51,550                                  |       |   | — |   |   | 51,550 |   |
| Other long-term  assets                       |       | 114,429                                 |       |   | — |   |   | 114,429 |   |
| Non-current  assets held for sale             |       | 35,378                                  |       |   | — |   |   | 35,378 |   |
| Total assets                                  |       | $                                       | 2,765,797  |   |   | $ | — |   |   | $ | 2,765,797 |   |
| **Liabilities and Stockholders’ Equity** |       |                                    |       |   |   |   |   |   |   |
| Current  liabilities:                         |       |                                    |       |   |   |   |   |   |   |
| Accounts payable                              |       | $                                       | 133,114    |   |   | $ | — |   |   | $ | 133,114 |   |
| Accrued expenses  and other liabilities       |       | 131,378                                 |       |   | — |   |   | 131,378 |   |
| Deferred revenues  and income                 |       | 67,885                                  |       |   | — |   |   | 67,885 |   |
| Current  maturities                           |       | 4,258                                   |       |   | — |   |   | 4,258 |   |
| Current  liabilities held for sale            |       | 1,854                                   |       |   | — |   |   | 1,854 |   |
| Total current liabilities                     |       | 338,489                                 |       |   | — |   |   | 338,489 |   |
| Corporate  borrowings                         |       | 1,349,386                               |       |   | — |   |   | 1,349,386 |   |
| Capital and  financing lease obligations      |       | 58,683                                  |       |   | — |   |   | 58,683 |   |
| Other long-term  liabilities                  |       | 306,145                                 |       |   | — |   |   | 306,145 |   |
| Non-current  liabilities held for sale        |       | 24,281                                  |       |   | — |   |   | 24,281 |   |
| Total liabilities                             |       | 2,076,984                               |       |   | — |   |   | 2,076,984 |   |
| Stockholders’ equity:                    |       |                                    |       |   |   |   |   |   |   |
| Common stock                                  |       | 8                                       |       |   | — |   |   | 8 |   |
| Additional paid-in  capital                   |       | 766,445                                 |       |   | — |   |   | 766,445 |   |
| Accumulated other  comprehensive income       |       | (2,059                                  | )          |   | — |   |   | (2,059 | ) |
| Accumulated  deficit                          |       | (75,581                                 | )          |   | — |   |   | (75,581 | ) |
| Total stockholders’ equity               |       | 688,813                                 |       |   | — |   |   | 688,813 |   |
| Total liabilities  and equity                 |       | $                                       | 2,765,797  |   |   | $ | — |   |   | $ | 2,765,797 |   |

 

49

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| ** **                                                         | ** ** | **Thirteen Weeks Ended  September 29, 2005** | ** ** | **Twenty-Six Weeks Ended  September 29, 2005** | ** ** |
|--------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **As  Reported**                                                 | ** ** | **Restatement**(1)                                                 | ** ** | **Discontinued  Operations**(2) | ** ** | **As  Restated  and  Adjusted** | ** ** | **As  Reported** | ** ** | **Restatement**(1) | ** ** | **Discontinued  Operations**(2) | ** ** | **As  Restated  and  Adjusted** | ** ** |
| ** **                                                         | ** ** | **Unaudited**                                                    | ** ** |
| Revenues                                                           |       |                                                             |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                                                         |       | $                                                                | 270,414    |                                                               |       | $ | — |   |   |   | $ | (8,191 | ) |   | $ | 262,223 |   | $ | 546,820 |   |   | $ | — |   |   |   | $ | (14,643 | ) |   | $ | 532,177 |   |
| Concessions                                                        |       | 105,679                                                          |       |                                                               | —     |   |   |   | (2,918 | ) |   | 102,761 |   | 217,012 |   |   | — |   |   |   | (5,113 | ) |   | 211,899 |   |
| Other  revenue                                                     |       | 22,844                                                           |       |                                                               | —     |   |   |   | (409 | ) |   | 22,435 |   | 47,887 |   |   | — |   |   |   | (742 | ) |   | 47,145 |   |
| Total  revenues                                                    |       | 398,937                                                          |       |                                                               | —     |   |   |   | (11,518 | ) |   | 387,419 |   | 811,719 |   |   | — |   |   |   | (20,498 | ) |   | 791,221 |   |
| Costs and Expenses                                                 |       |                                                             |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Film  exhibition costs                                             |       | 143,545                                                          |       |                                                               | —     |   |   |   | (4,054 | ) |   | 139,491 |   | 295,262 |   |   | — |   |   |   | (7,144 | ) |   | 288,118 |   |
| Concession  costs                                                  |       | 12,039                                                           |       |                                                               | —     |   |   |   | (656 | ) |   | 11,383 |   | 23,768 |   |   | — |   |   |   | (864 | ) |   | 22,904 |   |
| Operating  expense                                                 |       | 107,822                                                          |       |                                                               | —     |   |   |   | (2,665 | ) |   | 105,157 |   | 214,343 |   |   | — |   |   |   | (5,532 | ) |   | 208,811 |   |
| Rent                                                               |       | 78,006                                                           |       |                                                               | —     |   |   |   | (2,827 | ) |   | 75,179 |   | 156,692 |   |   | — |   |   |   | (5,708 | ) |   | 150,984 |   |
| General  and administrative:                                       |       |                                                             |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger  and acquisition costs                                      |       | 960                                                              |       |                                                               | —     |   |   |   | — |   |   | 960 |   | 2,645 |   |   | — |   |   |   | — |   |   | 2,645 |   |
| Management  fee                                                    |       | 500                                                              |       |                                                               | —     |   |   |   | — |   |   | 500 |   | 1,000 |   |   | — |   |   |   | — |   |   | 1,000 |   |
| Other                                                              |       | 8,005                                                            |       |                                                               | 997        |   |   |   | (27 | ) |   | 8,975 |   | 18,199 |   |   | 997 |   |   |   | (117 | ) |   | 19,079 |   |
| Preopening  expense                                                |       | 728                                                              |       |                                                               | —     |   |   |   | — |   |   | 728 |   | 736 |   |   | — |   |   |   | — |   |   | 736 |   |
| Theatre  and other closure expense                                 |       | 346                                                              |       |                                                               | —     |   |   |   | — |   |   | 346 |   | 980 |   |   | — |   |   |   | — |   |   | 980 |   |
| Restructuring  charge                                              |       | 839                                                              |       |                                                               | —     |   |   |   | — |   |   | 839 |   | 3,908 |   |   | — |   |   |   | — |   |   | 3,908 |   |
| Depreciation  and amortization                                     |       | 37,956                                                           |       |                                                               | —     |   |   |   | (1,356 | ) |   | 36,600 |   | 75,467 |   |   | — |   |   |   | (2,920 | ) |   | 72,547 |   |
| Disposition  of assets and other gains                             |       | (103                                                             | )          |                                                               | —     |   |   |   | — |   |   | (103 | ) | (770 | ) |   | — |   |   |   | — |   |   | (770 | ) |
| Total  costs and expenses                                          |       | 390,643                                                          |       |                                                               | 997        |   |   |   | (11,585 | ) |   | 380,055 |   | 792,230 |   |   | 997 |   |   |   | (22,285 | ) |   | 770,942 |   |
| Other expense (income)                                             |       |                                                             |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other  income                                                      |       | (6,103                                                           | )          |                                                               | 1,172      |   |   |   | — |   |   | (4,931 | ) | (7,219 | ) |   | 1,172 |   |   |   | — |   |   | (6,047 | ) |
| Interest  expense                                                  |       |                                                             |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate  borrowings                                              |       | 30,035                                                           |       |                                                               | —     |   |   |   | — |   |   | 30,035 |   | 60,332 |   |   | — |   |   |   | — |   |   | 60,332 |   |
| Capital  and financing lease obligations                           |       | 1,695                                                            |       |                                                               | —     |   |   |   | (471 | ) |   | 1,224 |   | 3,380 |   |   | — |   |   |   | (957 | ) |   | 2,423 |   |
| Investment  income                                                 |       | (976                                                             | )          |                                                               | —     |   |   |   | 1 |   |   | (975 | ) | (480 | ) |   | — |   |   |   | 1 |   |   | (479 | ) |
| Total  other expense                                               |       | 24,651                                                           |       |                                                               | 1,172      |   |   |   | (470 | ) |   | 25,353 |   | 56,013 |   |   | 1,172 |   |   |   | (956 | ) |   | 56,229 |   |
| Earnings (loss) from  continuing operations before income taxes    |       | (16,357                                                          | )          |                                                               | (2,169     | ) |   |   | 537 |   |   | (17,989 | ) | (36,524 | ) |   | (2,169 | ) |   |   | 2,743 |   |   | (35,950 | ) |
| Income tax provision  (benefit)                                    |       | (5,900                                                           | )          |                                                               | (900       | ) |   |   | (100 | ) |   | (6,900 | ) | (14,200 | ) |   | (900 | ) |   |   | (200 | ) |   | (15,300 | ) |
| Earnings (loss) from  continuing operations                        |       | (10,457                                                          | )          |                                                               | (1,269     | ) |   |   | 637 |   |   | (11,089 | ) | (22,324 | ) |   | (1,269 | ) |   |   | 2,943 |   |   | (20,650 | ) |
| Earnings (loss) from  discontinued operations, net of income taxes |       | (2,770                                                           | )          |                                                               | —     |   |   |   | (637 | ) |   | (3,407 | ) | (22,094 | ) |   | — |   |   |   | (2,943 | ) |   | (25,037 | ) |
| Net earnings (loss)                                                |       | $                                                                | (13,227    | )                                                                  |       | $ | (1,269 | ) |   |   | $ | — |   |   | $ | (14,496 | ) | $ | (44,418 | ) |   | $ | (1,269 | ) |   |   | $ | — |   |   | $ | (45,687 | ) |
| Basic and diluted loss  per share from continuing operations:      |       |                                                             |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss  from continuing operations                                   |       | $                                                                | (13.59     | )                                                                  |       |   |   |   |   |   |   |   | $ | (14.41 | ) | $ | (29.02 | ) |   |   |   |   |   |   |   |   | $ | (26.84 | ) |
| Loss  from discontinued operations                                 |       | (3.60                                                            | )          |                                                               |       |   |   |   |   |   |   | (4.43 | ) | (28.72 | ) |   |   |   |   |   |   |   |   | (32.54 | ) |
| Net  loss per share                                                |       | $                                                                | (17.19     | )                                                                  |       |   |   |   |   |   |   |   | $ | (18.84 | ) | $ | (57.74 | ) |   |   |   |   |   |   |   |   | $ | (59.38 | ) |
| Average shares  outstanding:                                       |       |                                                             |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                  |       | 769.35                                                           |       |                                                               |       |   |   |   |   |   |   | 769.35 |   | 769.35 |   |   |   |   |   |   |   |   |   | 769.35 |   |

 

50

----

 

| ** **                                     | ** ** | **As of  September 29, 2005** | ** ** |
|------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                     | ** ** | **As  Reported**                             | ** ** | **Restatement**(1) | ** ** | **As  Restated** | ** ** |
| ** **                                     | ** ** | **Unaudited**                                | ** ** |
| **Assets**                                     |       |                                         |       |   |   |   |   |   |   |
| Current assets:                                |       |                                         |       |   |   |   |   |   |   |
| Cash                                           |       | $                                            | 73,923     |   |   | $ | — |   |   | $ | 73,923 |   |
| Receivables                                    |       | 51,224                                       |       |   | — |   |   | 51,224 |   |
| Other current assets                           |       | 39,541                                       |       |   | — |   |   | 39,541 |   |
| Total current  assets                          |       | 164,688                                      |       |   | — |   |   | 164,688 |   |
| Property                                       |       | 814,146                                      |       |   | — |   |   | 814,146 |   |
| Intangible assets                              |       | 181,129                                      |       |   | — |   |   | 181,129 |   |
| Goodwill                                       |       | 1,313,865                                    |       |   | — |   |   | 1,313,865 |   |
| Deferred income taxes                          |       | 55,925                                       |       |   | 900 |   |   | 56,825 |   |
| Other long-term  assets                        |       | 117,099                                      |       |   | — |   |   | 117,099 |   |
| Total assets                                   |       | $                                            | 2,646,852  |   |   | $ | 900 |   |   | $ | 2,647,752 |   |
| **Liabilities  and Stockholders’ Equity** |       |                                         |       |   |   |   |   |   |   |
| Current liabilities:                           |       |                                         |       |   |   |   |   |   |   |
| Accounts payable                               |       | $                                            | 86,217     |   |   | $ | — |   |   | $ | 86,217 |   |
| Accrued expenses and  other liabilities        |       | 108,824                                      |       |   | — |   |   | 108,824 |   |
| Deferred revenues and  income                  |       | 62,859                                       |       |   | — |   |   | 62,859 |   |
| Current maturities                             |       | 2,574                                        |       |   | — |   |   | 2,574 |   |
| Total current  liabilities                     |       | 260,474                                      |       |   | — |   |   | 260,474 |   |
| Corporate borrowings                           |       | 1,354,342                                    |       |   | — |   |   | 1,354,342 |   |
| Capital and financing  lease obligations       |       | 34,711                                       |       |   | — |   |   | 34,711 |   |
| Other long-term  liabilities                   |       | 321,213                                      |       |   | (3,034 | ) |   | 318,179 |   |
| Total liabilities                              |       | 1,970,740                                    |       |   | (3,034 | ) |   | 1,967,706 |   |
| Stockholders’  equity:                    |       |                                         |       |   |   |   |   |   |   |
| Common stock                                   |       | 8                                            |       |   | — |   |   | 8 |   |
| Additional paid-in  capital                    |       | 766,857                                      |       |   | 5,203 |   |   | 772,060 |   |
| Accumulated other comprehensive  income        |       | (1,945                                       | )          |   | — |   |   | (1,945 | ) |
| Accumulated deficit                            |       | (88,808                                      | )          |   | (1,269 | ) |   | (90,077 | ) |
| Total  stockholders’ equity               |       | 676,112                                      |       |   | 3,934 |   |   | 680,046 |   |
| Total liabilities and equity                   |       | $                                            | 2,646,852  |   |   | $ | 900 |   |   | $ | 2,647,752 |   |

 

51

----

| ** **                                                         | ** ** | **Thirteen Weeks Ended  December 29, 2005** | ** ** | **Thirty-Nine Weeks Ended  December 29, 2005** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **As  Reported**                                                | ** ** | **Restatement**(1)                                                 | ** ** | **As  Restated  and Adjusted** | ** ** | **As  Reported** | ** ** | **Restatement**(1) | ** ** | **As  Restated  and Adjusted** | ** ** |
| ** **                                                         | ** ** | **Unaudited**                                                   | ** ** |
| Revenues                                                           |       |                                                            |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                                                         |       |                                                            | $          | 267,683                                                            |       |   |   | $ | — |   |   |   | $ | 267,683 |   |   | $ | 799,860 |   |   | $ | — |   |   |   | $ | 799,860 |   |   |
| Concessions                                                        |       |                                                            | 105,553    |                                                               |       |   | — |   |   |   | 105,553 |   |   | 317,452 |   |   | — |   |   |   | 317,452 |   |   |
| Other  revenue                                                     |       |                                                            | 25,272     |                                                               |       |   | — |   |   |   | 25,272 |   |   | 72,417 |   |   | — |   |   |   | 72,417 |   |   |
| Total  revenues                                                    |       |                                                            | 398,508    |                                                               |       |   | — |   |   |   | 398,508 |   |   | 1,189,729 |   |   | — |   |   |   | 1,189,729 |   |   |
| Costs and Expenses                                                 |       |                                                            |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Film  exhibition costs                                             |       |                                                            | 140,334    |                                                               |       |   | — |   |   |   | 140,334 |   |   | 428,452 |   |   | — |   |   |   | 428,452 |   |   |
| Concession  costs                                                  |       |                                                            | 11,442     |                                                               |       |   | — |   |   |   | 11,442 |   |   | 34,346 |   |   | — |   |   |   | 34,346 |   |   |
| Operating  expense                                                 |       |                                                            | 103,382    |                                                               |       |   | — |   |   |   | 103,382 |   |   | 312,193 |   |   | — |   |   |   | 312,193 |   |   |
| Rent                                                               |       |                                                            | 78,053     |                                                               |       |   | — |   |   |   | 78,053 |   |   | 229,037 |   |   | — |   |   |   | 229,037 |   |   |
| General  and administrative:                                       |       |                                                            |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger  and acquisition costs                                      |       |                                                            | 281        |                                                               |       |   | — |   |   |   | 281 |   |   | 2,926 |   |   | — |   |   |   | 2,926 |   |   |
| Management  fee                                                    |       |                                                            | 500        |                                                               |       |   | — |   |   |   | 500 |   |   | 1,500 |   |   | — |   |   |   | 1,500 |   |   |
| Other                                                              |       |                                                            | 10,116     |                                                               |       |   | 316 |   |   |   | 10,432 |   |   | 28,198 |   |   | 1,313 |   |   |   | 29,511 |   |   |
| Preopening  expense                                                |       |                                                            | 3,515      |                                                               |       |   | — |   |   |   | 3,515 |   |   | 4,251 |   |   | — |   |   |   | 4,251 |   |   |
| Theatre  and other closure expense                                 |       |                                                            | 410        |                                                               |       |   | — |   |   |   | 410 |   |   | 1,390 |   |   | — |   |   |   | 1,390 |   |   |
| Restructuring  charge                                              |       |                                                            | 27         |                                                               |       |   | — |   |   |   | 27 |   |   | 3,935 |   |   | — |   |   |   | 3,935 |   |   |
| Depreciation  and amortization                                     |       |                                                            | 35,931     |                                                               |       |   | — |   |   |   | 35,931 |   |   | 108,478 |   |   | — |   |   |   | 108,478 |   |   |
| Disposition  of assets and other gains                             |       |                                                            | (297       | )                                                                  |       |   | — |   |   |   | (297 | ) |   | (1,067 | ) |   | — |   |   |   | (1,067 | ) |   |
| Total  costs and expenses                                          |       |                                                            | 383,694    |                                                               |       |   | 316 |   |   |   | 384,010 |   |   | 1,153,639 |   |   | 1,313 |   |   |   | 1,154,952 |   |   |
| Other expense (income)                                             |       |                                                            |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other  income                                                      |       |                                                            | (5,875     | )                                                                  |       |   | (44 | ) |   |   | (5,919 | ) |   | (13,094 | ) |   | 1,128 |   |   |   | (11,966 | ) |   |
| Interest  expense                                                  |       |                                                            |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate  borrowings                                              |       |                                                            | 30,503     |                                                               |       |   | — |   |   |   | 30,503 |   |   | 90,835 |   |   | — |   |   |   | 90,835 |   |   |
| Capital  and financing lease obligations                           |       |                                                            | 541        |                                                               |       |   | — |   |   |   | 541 |   |   | 2,964 |   |   | — |   |   |   | 2,964 |   |   |
| Investment  income                                                 |       |                                                            | 2,541      |                                                               |       |   | — |   |   |   | 2,541 |   |   | 2,062 |   |   | — |   |   |   | 2,062 |   |   |
| Total  other expense                                               |       |                                                            | 27,710     |                                                               |       |   | (44 | ) |   |   | 27,666 |   |   | 82,767 |   |   | 1,128 |   |   |   | 83,895 |   |   |
| Earnings (loss) from  continuing operations before income taxes    |       |                                                            | (12,896    | )                                                                  |       |   | (272 | ) |   |   | (13,168 | ) |   | (46,677 | ) |   | (2,441 | ) |   |   | (49,118 | ) |   |
| Income tax provision  (benefit)                                    |       |                                                            | (4,800     | )                                                                  |       |   | (100 | ) |   |   | (4,900 | ) |   | (19,200 | ) |   | (1,000 | ) |   |   | (20,200 | ) |   |
| Earnings (loss) from  continuing operations                        |       |                                                            | (8,096     | )                                                                  |       |   | (172 | ) |   |   | (8,268 | ) |   | (27,477 | ) |   | (1,441 | ) |   |   | (28,918 | ) |   |
| Earnings (loss) from  discontinued operations, net of income taxes |       |                                                            | 178        |                                                               |       |   | — |   |   |   | 178 |   |   | (24,859 | ) |   | — |   |   |   | (24,859 | ) |   |
| Net earnings (loss)                                                |       |                                                            | $          | (7,918                                                             | )          |   |   | $ | (172 | ) |   |   | $ | (8,090 | ) |   | $ | (52,336 | ) |   | $ | (1,441 | ) |   |   | $ | (53,777 | ) |   |
| Basic and diluted loss  per share of common stock:                 |       |                                                            |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss  from continuing operations                                   |       |                                                            | $          | (10.52                                                             | )          |   |   |   |   |   |   | $ | (10.75 | ) |   | $ | (35.72 | ) |   |   |   |   |   | $ | (37.59 | ) |   |
| Earnings  (loss) from discontinued operations                      |       |                                                            | 0.23       |                                                               |       |   |   |   |   |   | 0.23 |   |   | (32.31 | ) |   |   |   |   |   | (32.31 | ) |   |
| Net  loss per share                                                |       |                                                            | $          | (10.29                                                             | )          |   |   |   |   |   |   | $ | (10.52 | ) |   | $ | (68.03 | ) |   |   |   |   |   | $ | (69.90 | ) |   |
| Average shares  outstanding:                                       |       |                                                            |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                  |       |                                                            | 769.35     |                                                               |       |   |   |   |   |   | 769.35 |   |   | 769.35 |   |   |   |   |   |   | 769.35 |   |   |
|                                                                    |            |                                                                 |            |                                                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

52

----

 

| ** **                                     | ** ** | **As of  December 29, 2005** | ** ** |
|------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                     | ** ** | **As  Reported**                            | ** ** | **Restatement**(1) | ** ** | **As  Restated** | ** ** |
| ** **                                     | ** ** | **Unaudited**                               | ** ** |
| **Assets**                                     |       |                                        |       |   |   |   |   |   |   |
| Current assets:                                |       |                                        |       |   |   |   |   |   |   |
| Cash                                           |       | $                                           | 136,707    |   |   | $ | — |   |   | $ | 136,707 |   |
| Receivables                                    |       | 64,035                                      |       |   | — |   |   | 64,035 |   |
| Other current assets                           |       | 40,865                                      |       |   | — |   |   | 40,865 |   |
| Current assets held for  sale                  |       | 950                                         |       |   | — |   |   | 950 |   |
| Total current  assets                          |       | 242,557                                     |       |   | — |   |   | 242,557 |   |
| Property                                       |       | 783,121                                     |       |   | — |   |   | 783,121 |   |
| Intangible assets                              |       | 175,970                                     |       |   | — |   |   | 175,970 |   |
| Goodwill                                       |       | 1,303,976                                   |       |   | — |   |   | 1,303,976 |   |
| Deferred income taxes                          |       | 62,963                                      |       |   | 1,000 |   |   | 63,963 |   |
| Other long-term  assets                        |       | 112,713                                     |       |   | — |   |   | 112,713 |   |
| Non-current assets  held for sale              |       | 33,721                                      |       |   | — |   |   | 33,721 |   |
| Total assets                                   |       | $                                           | 2,715,021  |   |   | $ | 1,000 |   |   | $ | 2,716,021 |   |
| **Liabilities  and Stockholders’ Equity** |       |                                        |       |   |   |   |   |   |   |
| Current liabilities:                           |       |                                        |       |   |   |   |   |   |   |
| Accounts payable                               |       | $                                           | 119,958    |   |   | $ | — |   |   | $ | 119,958 |   |
| Accrued expenses and  other liabilities        |       | 129,914                                     |       |   | — |   |   | 129,914 |   |
| Deferred revenues and  income                  |       | 87,921                                      |       |   | — |   |   | 87,921 |   |
| Current maturities                             |       | 2,560                                       |       |   | — |   |   | 2,560 |   |
| Current liabilities held  for sale             |       | 4,001                                       |       |   | — |   |   | 4,001 |   |
| Total current  liabilities                     |       | 344,354                                     |       |   | — |   |   | 344,354 |   |
| Corporate borrowings                           |       | 1,359,463                                   |       |   | — |   |   | 1,359,463 |   |
| Capital and financing  lease obligations       |       | 33,792                                      |       |   | — |   |   | 33,792 |   |
| Other long-term  liabilities                   |       | 296,527                                     |       |   | (3,234 | ) |   | 293,293 |   |
| Non-current  liabilities held for sale         |       | 12,004                                      |       |   | — |   |   | 12,004 |   |
| Total liabilities                              |       | 2,046,140                                   |       |   | (3,234 | ) |   | 2,042,906 |   |
| Stockholders’  equity:                    |       |                                        |       |   |   |   |   |   |   |
| Common stock                                   |       | 8                                           |       |   | — |   |   | 8 |   |
| Additional paid-in  capital                    |       | 767,268                                     |       |   | 5,675 |   |   | 772,943 |   |
| Accumulated other  comprehensive income        |       | (1,669                                      | )          |   | — |   |   | (1,669 | ) |
| Accumulated deficit                            |       | (96,726                                     | )          |   | (1,441 | ) |   | (98,167 | ) |
| Total  stockholders’ equity               |       | 668,881                                     |       |   | 4,234 |   |   | 673,115 |   |
| Total liabilities and equity                   |       | $                                           | 2,715,021  |   |   | $ | 1,000 |   |   | $ | 2,716,021 |   |

 

53

----

 

| ** **                                                         | ** ** | **Thirteen Weeks Ended  March 30, 2006** | ** ** | **Fifty-Two Weeks Ended  March 30, 2006** | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **As  Reported**                                             | ** ** | **Restatement**(1)                                            | ** ** | **Discontinued  Operations**(2) | ** ** | **As  Restated  and  Adjusted** | ** ** | **As  Reported** | ** ** | **Restatement**(1) | ** ** | **Discontinued  Operations**(2) | ** ** | **As  Restated  and  Adjusted** | ** ** |
| ** **                                                         | ** ** | **Unaudited**                                                | ** ** |
| Revenues                                                           |       |                                                         |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                                                         |       | $                                                            | 345,875    |                                                          |       | $ | — |   |   |   | (7,701 | ) |   | $ | 338,174 |   | $ | 1,169,226 |   |   | $ | — |   |   |   | $ | (31,192 | ) |   | $ | 1,138,034 |   |
| Concessions                                                        |       | 141,102                                                      |       |                                                          | —     |   |   |   | (2,526 | ) |   | 138,576 |   | 466,679 |   |   | — |   |   |   | (10,651 | ) |   | 456,028 |   |
| Other  revenue                                                     |       | 20,934                                                       |       |                                                          | —     |   |   |   | (535 | ) |   | 20,399 |   | 94,545 |   |   | — |   |   |   | (1,729 | ) |   | 92,816 |   |
| Total  revenues                                                    |       | 507,911                                                      |       |                                                          | —     |   |   |   | (10,762 | ) |   | 497,149 |   | 1,730,450 |   |   | — |   |   |   | (43,572 | ) |   | 1,686,878 |   |
| Costs  and Expenses                                                |       |                                                         |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Film  exhibition costs                                             |       | 170,525                                                      |       |                                                          | —     |   |   |   | (3,624 | ) |   | 166,901 |   | 610,600 |   |   | — |   |   |   | (15,247 | ) |   | 595,353 |   |
| Concession  costs                                                  |       | 16,717                                                       |       |                                                          | —     |   |   |   | (482 | ) |   | 16,235 |   | 52,584 |   |   | — |   |   |   | (2,003 | ) |   | 50,581 |   |
| Operating  expense                                                 |       | 141,859                                                      |       |                                                          | —     |   |   |   | (2,530 | ) |   | 139,329 |   | 462,185 |   |   | — |   |   |   | (10,663 | ) |   | 451,522 |   |
| Rent                                                               |       | 103,797                                                      |       |                                                          | —     |   |   |   | (2,956 | ) |   | 100,841 |   | 341,301 |   |   | — |   |   |   | (11,423 | ) |   | 329,878 |   |
| General  and administrative:                                       |       |                                                         |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger  and acquisition costs                                      |       | 9,597                                                        |       |                                                          | —     |   |   |   | — |   |   | 9,597 |   | 12,523 |   |   | — |   |   |   | — |   |   | 12,523 |   |
| Management  fee                                                    |       | 500                                                          |       |                                                          | —     |   |   |   | — |   |   | 500 |   | 2,000 |   |   | — |   |   |   | — |   |   | 2,000 |   |
| Other                                                              |       | 9,978                                                        |       |                                                          | 801        |   |   |   | (39 | ) |   | 10,740 |   | 38,308 |   |   | 2,114 |   |   |   | (171 | ) |   | 40,251 |   |
| Preopening  expense                                                |       | 2,356                                                        |       |                                                          | —     |   |   |   | — |   |   | 2,356 |   | 6,607 |   |   | — |   |   |   | — |   |   | 6,607 |   |
| Theatre  and other closure expense                                 |       | (789                                                         | )          |                                                          | —     |   |   |   | — |   |   | (789 | ) | 601 |   |   | — |   |   |   | — |   |   | 601 |   |
| Restructuring  charge                                              |       | 45                                                           |       |                                                          | —     |   |   |   | — |   |   | 45 |   | 3,980 |   |   | — |   |   |   | — |   |   | 3,980 |   |
| Depreciation  and amortization                                     |       | 56,699                                                       |       |                                                          | —     |   |   |   | (1,130 | ) |   | 55,569 |   | 168,821 |   |   | — |   |   |   | (4,774 | ) |   | 164,047 |   |
| Impairment  of long-lived assets                                   |       | 11,974                                                       |       |                                                          | —     |   |   |   | — |   |   | 11,974 |   | 11,974 |   |   | — |   |   |   | — |   |   | 11,974 |   |
| Disposition  of assets and other gains                             |       | 70                                                           |       |                                                          | —     |   |   |   | — |   |   | 70 |   | (997 | ) |   | — |   |   |   | — |   |   | (997 | ) |
| Total  costs and expenses                                          |       | 523,328                                                      |       |                                                          | 801        |   |   |   | (10,761 | ) |   | 513,368 |   | 1,710,487 |   |   | 2,114 |   |   |   | (44,281 | ) |   | 1,668,320 |   |
| Other  expense (income)                                            |       |                                                         |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other  income                                                      |       | 1,382                                                        |       |                                                          | 766        |   |   |   | — |   |   | 2,148 |   | (11,712 | ) |   | 1,894 |   |   |   | — |   |   | (9,818 | ) |
| Interest  expense                                                  |       |                                                         |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate  borrowings                                              |       | 48,207                                                       |       |                                                          | —     |   |   |   | — |   |   | 48,207 |   | 139,042 |   |   | — |   |   |   | — |   |   | 139,042 |   |
| Capital  and financing lease obligations                           |       | 1,567                                                        |       |                                                          | —     |   |   |   | (463 | ) |   | 1,104 |   | 5,946 |   |   | — |   |   |   | (1,878 | ) |   | 4,068 |   |
| Investment  income                                                 |       | 2,334                                                        |       |                                                          | —     |   |   |   | 2 |   |   | 2,336 |   | 4,393 |   |   | — |   |   |   | 5 |   |   | 4,398 |   |
| Total  other expense                                               |       | 53,490                                                       |       |                                                          | 766        |   |   |   | (461 | ) |   | 53,795 |   | 137,669 |   |   | 1,894 |   |   |   | (1,873 | ) |   | 137,690 |   |
| Earnings  (loss) from continuing operations before income taxes    |       | (68,907                                                      | )          |                                                          | (1,567     | ) |   |   | 460 |   |   | (70,014 | ) | (117,706 | ) |   | (4,008 | ) |   |   | 2,582 |   |   | (119,132 | ) |
| Income  tax provision (benefit)                                    |       | 91,000                                                       |       |                                                          | 1,000      |   |   |   | — |   |   | 92,000 |   | 72,100 |   |   | — |   |   |   | (300 | ) |   | 71,800 |   |
| Earnings  (loss) from continuing operations                        |       | (159,907                                                     | )          |                                                          | (2,567     | ) |   |   | 460 |   |   | (162,014 | ) | (189,806 | ) |   | (4,008 | ) |   |   | 2,882 |   |   | (190,932 | ) |
| Earnings  (loss) from discontinued operations, net of income taxes |       | 28                                                           |       |                                                          | —     |   |   |   | (460 | ) |   | (432 | ) | (22,409 | ) |   | — |   |   |   | (2,882 | ) |   | (25,291 | ) |
| Net  earnings (loss)                                               |       | $                                                            | (159,879   | )                                                             |       | $ | (2,567 | ) |   |   | — |   |   | $ | (162,446 | ) | $ | (212,215 | ) |   | $ | (4,008 | ) |   |   | — |   |   | $ | (216,223 | ) |
| Basic  and diluted loss per share of common stock:                 |       |                                                         |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss  from continuing operations                                   |       | $                                                            | (141.50    | )                                                             |       |   |   |   |   |   |   |   | $ | (143.37 | ) | $ | (221.19 | ) |   |   |   |   |   |   |   |   | $ | (222.50 | ) |
| Earnings  (loss) from discontinued operations                      |       | 0.02                                                         |       |                                                          |       |   |   |   |   |   |   | (0.38 | ) | (26.11 | ) |   |   |   |   |   |   |   |   | (29.47 | ) |
| Net  loss per share                                                |       | $                                                            | (141.48    | )                                                             |       |   |   |   |   |   |   |   | $ | (143.75 | ) | $ | (247.30 | ) |   |   |   |   |   |   |   |   | $ | (251.97 | ) |
| Average  shares outstanding:                                       |       |                                                         |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                  |       | 1,130.07                                                     |       |                                                          |       |   |   |   |   |   |   | 1,130.07 |   | 858.12 |   |   |   |   |   |   |   |   |   | 858.12 |   |
|                                                                    |            |                                                              |            |                                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                                    | ** ** | **As of  March 30, 2006** | ** ** |
|-----------------------------------------------|------------|------------------------------------------|------------|
| ** **                                    | ** ** | **As  Reported**                         | ** ** | **Restatement**(1) | ** ** | **As  Restated** | ** ** |
| **Assets**                                    |       |                                     |       |   |   |   |   |   |   |
| Current assets:                               |       |                                     |       |   |   |   |   |   |   |
| Cash                                          |       | $                                        | 232,366    |   |   | $ | — |   |   | $ | 232,366 |   |
| Receivables                                   |       | 54,725                                   |       |   | — |   |   | 54,725 |   |
| Other current assets                          |       | 34,647                                   |       |   | — |   |   | 34,647 |   |
| Current assets held for sale                  |       | 4,726                                    |       |   | — |   |   | 4,726 |   |
| Total current assets                          |       | 326,464                                  |       |   | — |   |   | 326,464 |   |
| Property                                      |       | 1,501,048                                |       |   | — |   |   | 1,501,048 |   |
| Intangible assets                             |       | 273,308                                  |       |   | — |   |   | 273,308 |   |
| Goodwill                                      |       | 2,018,318                                |       |   | — |   |   | 2,018,318 |   |
| Deferred income taxes                         |       | 3,564                                    |       |   | — |   |   | 3,564 |   |
| Other long-term assets                        |       | 172,312                                  |       |   | — |   |   | 172,312 |   |
| Non-current assets held for sale              |       | 112,337                                  |       |   | — |   |   | 112,337 |   |
| Total assets                                  |       | $                                        | 4,407,351  |   |   | $ | — |   |   | $ | 4,407,351 |   |
| **Liabilities and Stockholders’ Equity** |       |                                     |       |   |   |   |   |   |   |
| Current liabilities:                          |       |                                     |       |   |   |   |   |   |   |
| Accounts payable                              |       | $                                        | 150,383    |   |   | $ | — |   |   | $ | 150,383 |   |
| Accrued expenses and other liabilities        |       | 157,227                                  |       |   | — |   |   | 157,227 |   |
| Deferred revenues and income                  |       | 95,812                                   |       |   | — |   |   | 95,812 |   |
| Current maturities                            |       | 30,804                                   |       |   | — |   |   | 30,804 |   |
| Current liabilities held for sale             |       | 8,233                                    |       |   | — |   |   | 8,233 |   |
| Total current liabilities                     |       | 442,459                                  |       |   | — |   |   | 442,459 |   |
| Corporate borrowings                          |       | 2,428,996                                |       |   | — |   |   | 2,428,996 |   |
| Capital and financing lease obligations       |       | 64,016                                   |       |   | — |   |   | 64,016 |   |
| Other long-term liabilities                   |       | 419,474                                  |       |   | (2,139 | ) |   | 417,335 |   |
| Non-current liabilities held for sale         |       | 11,903                                   |       |   | — |   |   | 11,903 |   |
| Total liabilities                             |       | 3,366,848                                |       |   | (2,139 | ) |   | 3,364,709 |   |
| Stockholders’ equity:                    |       |                                     |       |   |   |   |   |   |   |
| Common stock                                  |       | 14                                       |       |   | — |   |   | 14 |   |
| Additional paid-in capital                    |       | 1,307,752                                |       |   | 6,147 |   |   | 1,313,899 |   |
| Accumulated other comprehensive income        |       | (10,658                                  | )          |   | — |   |   | (10,658 | ) |
| Accumulated deficit                           |       | (256,605                                 | )          |   | (4,008 | ) |   | (260,613 | ) |
| Total stockholders’ equity               |       | 1,040,503                                |       |   | 2,139 |   |   | 1,042,642 |   |
| Total liabilities and equity                  |       | $                                        | 4,407,351  |   |   | $ | — |   |   | $ | 4,407,351 |   |

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(1)                As discussed inthis Note, the Company restated its financial statements for management-purchasedshares and stock option awards.

(2)                As discussed inNote 3—Discontinued Operations, the Company classified the results ofoperations of its Iberia theatres as discontinued operations during thethirteen weeks ended December 28, 2006. As a result, conformingclassifications are made for these periods. The reclassification fordiscontinued operations was not an error in the prior financial statements,rather it was performed to be consistent with the treatment in the annualfinancial statements.

***DiscontinuedOperations:***   The results of operations forthe Company’s discontinued operations have been eliminated from the Company’scontinuing operations and classified as discontinued operations for each periodpresented within the Company’s Consolidated Statements of Operations. SeeNote 3—Discontinued Operations.

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***Assets held forSale:***   In conjunction with the Merger (seeNote 2), the Company entered into a Final Judgment with the AntitrustDivision of the United States Department of Justice and judgments and consentdecrees with various States. These judgments and decrees require the Company tohold separate and divest itself of certain theatres. As a result, the Companyhas classified the assets and liabilities of these theatres as *held for sale.* The Company expects todivest certain of these theatres in the first fiscal quarter of 2007.

Additionally, the Company entered into an agreement tosell its consolidated operations in Spain and Portugal and as a result, theCompany has classified the assets and liabilities of these theatres as *held for sale.* These sales weresubsequently consummated on May 11, 2006.

***Use of Estimates:***   Thepreparation of financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

***Principles of Consolidation:***   Theconsolidated financial statements include the accounts of Holdings and allsubsidiaries and the Predecessor accounts include the results of operations ofHoldings and Marquee from their inception on July 16, 2004 throughDecember 23, 2004 due to consolidation under FIN 46(R), as discussedabove. All significant intercompany balances and transactions have been eliminated.

***Fiscal Year:***   TheCompany has a 52/53 week fiscal year ending on the Thursday closest to the lastday of March. Fiscal 2006, 2005 and 2004 reflect 52 week periods.

***Revenues:***   Revenuesare recognized when admissions and concessions sales are received at the theatres.The Company defers 100% of the revenue associated with the sales of storedvalue cards, discounted theatre tickets and gift certificates (no revenue orincome recognition for non-presentment) until such time as the items areredeemed or the gift certificate liabilities are extinguished or managementbelieves future redemption of stored value cards to be remote or the discountedtheatre tickets expire. The Company recognizes revenues related to on-screenadvertising over the period that the related advertising is delivered on-screenor in-theatre pursuant to the specific terms of its agreements withadvertisers. During the Successor periods ended March 30, 2006 andMarch 31, 2005, the Company recognized $8,699,000 and $6,745,000 of incomerelated to the derecognition of stored value card liabilities where managementbelieves future redemption to be remote which was recorded in other expense(income) in the Consolidated Statements of Operations.

***Film ExhibitionCosts:***   Film exhibition costs are accruedbased on the applicable box office receipts and estimates of the finalsettlement to the film licenses. As of March 30, 2006 and March 31,2005, the Company recorded film payables of $65,488,000 and $53,387,000,respectively. The Successor recorded film exhibition costs of $595,353,000 and$152,747,000 for the Successor periods ended March 30, 2006 andMarch 31, 2005, respectively, and the Predecessor reported film exhibitioncosts of $452,727,000 and $605,898,000 for the Predecessor periods endedDecember 23, 2004 and April 1, 2004, respectively.

***Concession Costs:***   Generally,the Company records payments from vendors as a reduction of concession costswhen earned. Revenue is recorded when it is determined that the payment was forthe fair value of services provided to the vendor where the benefit to thevendor is sufficiently separable from the Company’s purchase of the vendor’sproducts. If the consideration received is in excess of fair value, then theexcess is recorded as a reduction of concession costs. In addition, if thepayment from the vendor is for a reimbursement of expenses, then those expensesare offset.

***NCN and Other:***   TheCompany recognizes revenues related to on-screen advertising over the periodthe related advertising is delivered on-screen or in-theatre pursuant to thespecific terms of its agreements 

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with advertisers. Itson-screen advertising subsidiary (NCN) operates its advertising program throughagreements with other theatre circuits. These circuit agreements stipulate theamount of circuit payments a theatre will receive for running on-screen slides,on-film programs and other related in-theatre products and services. TheCompany’s circuit agreements have terms of 1 to 5 years, with an annualcancellation provision included in select agreements. Certain circuits haveagreements requiring an annual minimum exhibitor share payment. The Companyrecognizes the minimum exhibitor share payments as an expense on astraight-line basis over the terms of the agreements and any excess minimumexhibitor share payments are recognized when earned.

On March 29, 2005, the Company and RegalEntertainment Group combined their respective cinema screen advertisingbusinesses into a new joint venture company called National CineMedia, LLC(“NCM”). The company engages in the marketing and sale of cinema advertisingand promotions products; business communications and training services; and thedistribution of digital alternative content. The Company records its share ofon-screen advertising revenues generated by NCN and NCM in other theatrerevenues. The Company contributed fixed assets and exhibitor agreements of itscinema screen advertising subsidiary NCN to NCM. The Company also includedgoodwill (recorded in connection with the merger with Marquee) in the costassigned to its investment in NCM. Additionally, the Company paid terminationbenefits related to the displacement of certain NCN associates. Inconsideration of the NCN contributions described above, NCM, issued a 37%interest in its Class A units to NCN. Since that date, NCN’s interest inNCM has declined to 29% due to the entry of new investors.

***Loyalty Program:***   TheCompany records the estimated incremental cost of providing free concessionitems for awards under its *Moviewatcher*loyalty program when the awards are earned. Historically, the costs of theseawards have not been significant.

***Advertisting Costs:***   TheCompany expenses advertising costs as incurred and does not have any direct-responseadvertising recorded as assets. Advertising costs were $22.6 million,$5.2 million, $18.9 million and $24.5 million during the 52weeks ended March 30, 2006, the 14 weeks ended March 31, 2005, the38 weeks ended December 23, 2004 and the 52 weeks endedApril 1, 2004, respectively.

***Cash andEquivalents:***   Cash and equivalents consist ofcash on hand and temporary cash investments with original maturities of threemonths or less. The Company invests excess cash in deposits with major banksand in temporary cash investments. Such investments are made only ininstruments issued or enhanced by high quality financial institutions(investment grade or better). Amounts invested in a single institution arelimited to minimize risk.

Under the Company’s cash management system, checksissued but not presented to banks frequently result in overdraft balances foraccounting purposes and are classified within accounts payable in the balancesheet. The amount of these checks included in accounts payable as ofMarch 30, 2006 and March 31, 2005 was $13,829,000 and $35,320,000,respectively.

***Property:***   Propertyis recorded at cost or fair value, in the case of property resulting from theacquisitions. The Company uses the straight-line method in computingdepreciation and amortization for financial reporting purposes and acceleratedmethods, with respect to certain assets, for income tax purposes. The estimateduseful lives for leasehold improvements reflect the shorter of the base termsof the corresponding lease agreements or the useful lives of the assets. Theestimated useful lives are as follows:

| Buildings and improvements        |   | 5 to 40 years |
|-----------------------------------|--------|---------------|
| Leasehold improvements            |   | 1 to 20 years |
| Furniture, fixtures and equipment |   | 1 to 10 years |

 

Expenditures for additions (including interest duringconstruction), major renewals and betterments are capitalized, and expendituresfor maintenance and repairs are charged to expense as incurred. The cost 

57

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of assets retired orotherwise disposed of and the related accumulated depreciation and amortizationare eliminated from the accounts in the year of disposal. Gains or lossesresulting from property disposals are credited or charged to operations.

***Intangible Assets:***   Intangibleassets are recorded at cost or fair value, in the case of intangible assetsresulting from the acquisitions, and are comprised of lease rights, amountsassigned to theatre leases acquired under favorable terms, customerrelationship intangible assets, non-competition and consulting agreements andtrademarks, each of which are being amortized on a straight-line basis over theestimated remaining useful lives of the assets except for a customerrelationship intangible asset and the AMC and Cinemex Trademark intangibleassets associated with the merger with Marquee. The customer relationshipintangible asset is amortized over eight years based upon the pattern in whichthe economic benefits of the intangible asset are consumed or otherwise usedup. This pattern indicates that over 2/3rds of the cash flow generated from theasset is derived during the first five years. The AMC and Cinemex Trademarkintangible assets are considered indefinite lived intangible assets, andtherefore not amortized, but rather evaluated for impairment annually. Therewas no impairment of the Company’s intangible assets as of March 30, 2006.

***Investments:***   TheCompany accounts for its investments in non-consolidated entities using thecost and equity methods of accounting, has recorded the investments withinother long-term assets in its consolidated balance sheets and records equity inearnings or losses of these entities accounted for following the equity methodof accounting within investment income in its consolidated statements ofoperations. As of March 30, 2006, the Company holds a 50% interest inHoyts General Cinemas South America (“HGCSA”) a partnership that operates 18theatres in South America; a 29% interest in NCM, a joint venture that marketsand sells cinema advertising and promotions; a 27% interest inMovietickets.com, a joint venture that provides moviegoers with a convenientway to buy movie tickets online, access local showtime information, viewtrailers and read reviews; a 50% interest in Yelmo Cineplex, a joint venturethat operates 27 theatres in Spain; and a 50% interest in three theatres thatare accounted for following the equity method of accounting. The Company’srecorded investments exceed its proportional ownership of the underlying equityin these entities by approximately $33,806,000. These differences will beamortized to equity in earnings or losses over the estimated useful lives ofthe related assets (1-5 years) or evaluated for impairment. Therewas no impairment of the Company’s investments as of March 30, 2006. As ofMarch 30, 2006 the Company holds a 9% interest in Fandango, a jointventure that provides moviegoers with a convenient way to buy movie ticketsonline, access local showtime information, view trailers and read reviews thatis accounted for following the cost method of accounting.

***Acquisitions:***   TheCompany accounts for its acquisitions of theatrical exhibition businesses usingthe purchase method. The purchase method requires that the Company estimate thefair value of the individual assets and liabilities acquired as well as variousforms of consideration given including cash, common stock, senior subordinatednotes and bankruptcy related claims. The allocation of purchase price is basedon management’s judgment after evaluating several factors, including actuarialestimates for pension liabilities, market prices of its indebtedness andvaluation assessments prepared by a valuation specialist.

***Goodwill:***   Goodwillrepresents the excess of cost over fair value of net tangible and identifiableintangible assets related to acquisitions. The Company is not required toamortize goodwill as a charge to earnings; however, the Company is required toconduct an annual review of goodwill for impairment.

The Company’s recorded goodwill was $2,018,318,000 asof March 30, 2006 and $1,401,740,000 as of March 31, 2005. TheCompany evaluates goodwill for impairment as of the end of the fourth fiscalquarter and any time an event occurs or circumstances change that would reducethe fair value for a reporting unit below its carrying amount. The Company’sgoodwill is recorded in its U.S. and Canada theatrical exhibition operatingsegment, in Cinemex and in our Spain and Portugal theatres which are also thereporting units for purposes of evaluating recorded goodwill for impairment. Ifthe carrying value of the reporting 

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unit exceeds its fairvalue the Company is required to reallocate the fair value of the reportingunit as if the reporting unit had been acquired in a business combination andthe fair value of the reporting unit was the price paid to acquire thereporting unit. The Company determines fair value by considering multiples appliedto cash flow estimates less net indebtedness which it believes is anappropriate method to determine fair value. There is considerable managementjudgment with respect to cash flow estimates and appropriate multiples to beused in determining fair value. There was no goodwill impairment as ofMarch 30, 2006.

***Other Long-termAssets:***   Other long-term assets are comprisedprincipally of investments in partnerships and joint ventures, costs incurredin connection with the issuance of debt securities, which are being amortizedto interest expense over the respective lives of the issuances, and investmentsin real estate, which are recorded at the lower of historical cost or fairvalue.

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

***Theatre and OtherClosure Expense:***   Theatre and other closureexpense is primarily related to payments made or expected to be made tolandlords to terminate leases on certain of the Company’s closed theatres,other vacant space or theatres where development has been discontinued. Theatreand other closure expense is recognized at the time the theatre closes, spacebecomes vacant or development is discontinued. Expected payments to landlordsare based on actual or discounted contractual amounts. Accretion expenserelates to changes in the Company’s theatre closure liability due to thepassage of time where the Company has based its expected payments to landlordson discounted amounts. The accretion expense for exit activities initiated afterDecember 31, 2002 and all accretion expense subsequent to the merger withMarquee is included as a component of theatre and other closure expense. TheSuccessor recorded theatre and other closure expense of $601,000 and $1,267,000for the periods ended March 30, 2006 and March 31, 2005,respectively, and the Predecessor recorded theatre and other closure expense of$10,758,000 and $4,068,000 for the periods ended December 23, 2004 andApril 1, 2004, respectively. Accrued theatre and other closure expense isgenerally classified as current based upon management’s intention to negotiatetermination of the related lease obligations within one year.

***RestructuringCharge:***   The Company recognizes restructuringcharges based upon the nature of the costs incurred. Costs resulting fromone-time termination benefits where employees are not required to render futureservice to receive the benefits are recognized and a liability is recorded whenmanagement commits to a plan of termination which identifies the number of employeesto be terminated, their job classifications, locations, expected terminationdates and when the plan is communicated to the employees and establishes thedetailed terms of the benefits to be received by employees.

If employees are required to render service until theyare terminated in order to receive the termination benefits, the benefits aremeasured at the fair value of the costs and related liabilities at thecommunication date and are recognized ratably over the future service periodfrom the communication date.

On March 24, 2005, the Company commenced anorganizational restructuring related to functions at its Home Office and itsFilm Office. The Company’s new organizational structure flattens managementstructure and aligns systems, resources and areas of expertise to promotefaster communication. The primary goal of the restructuring is to create asimplified organizational structure.

The Company recorded $4,926,000 of expenses, primarilyat its home office and at its NCN and other operating segment, related to one-timetermination benefits and other costs for the displacement of approximately 200associates in connection with the organizational restructuring and thecontribution of assets by NCN to NCM during fiscal 2005. The Company incurredan additional $3,139,000 in one-time termination benefits and approximately$841,000 related to closure of offices during fiscal 2006. The Company’srestructuring activities were complete as of March 30, 2006.

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The Company recorded a liability of $27,090,000related to one-time termination benefits and other costs for the displacementof approximately 230 associates in connection with the Merger with Loews aspart of purchase accounting. The Company recorded an additional $4,845,000liability related to closures of Loews’ duplicate administrative facilities inconnection with the Merger with Loews as part of purchase accounting.

***Leases:***   Themajority of the Company’s operations are conducted in premises occupied underlease agreements with initial base terms ranging generally from 15 to20 years (see Note 18—Related Party Transactions), with certainleases containing options to extend the leases for up to an additional20 years. The Company does not believe that exercise of the renewaloptions in its leases are reasonably assured at the inception of the leaseagreements and therefore, considers the initial base term as the lease termunder Statement of Financial Accounting Standards No. 13, *Accounting for Leases* (“SFASNo. 13”). The leases provide for fixed and escalating rentals, contingentescalating rentals based on the Consumer Price Index not to exceed certainspecified amounts and contingent rentals based on revenues with a guaranteedminimum.

The Company has historically recorded rent expense forits operating leases with reasonably assured rent increases in accordance withFASB Technical Bulletin 85-3 *Accountingfor Operating Leases with Scheduled Rent Increases* on astraight-line basis from the “lease commencement date” (the theatre openingdate) as specified in the lease agreement until the end of the base lease term.The Company has historically viewed “rent holidays” as an inducement containedin the lease agreement that provides for a period of “free rent” during thelease term and believed that it did not have “rent holidays” in its leaseagreements.

During fiscal 2005, the Company determined that itslease terms commence at the time it obtains “control and access” to the leasedpremises which is generally a date prior to the “lease commencement date”contained in the lease agreements. The Company has evaluated the impact of achange in the commencement date of its lease terms based on when it has“control and access” to the leased premises and has determined that the impactwas immaterial to the prior periods.

The Company records rent expense for its operatingleases on a straight-line basis over the base term of the lease agreements commencingwith the date the Company has “control and access” to the leased premises. Rentexpense related to the “rent holiday” is recorded as a component of preopeningexpense until construction of the leased premises is complete and the premisesare ready for their intended use. Rent charges upon completion of the leasedpremises subsequent to the theatre opening date are expensed as a component ofrent expense. The estimated useful lives for leasehold improvements reflect theshorter of the base terms of the corresponding lease agreements or the economiclife of the leasehold improvements.

Occasionally the Company will receive amounts fromdevelopers in excess of the costs incurred related to the construction of theleased premises. The Company records the excess amounts received fromdevelopers as deferred rent and amortizes the balance as a reduction to rentexpense over the base term of the lease agreement.

The Company evaluates the classification of its leasesfollowing the guidance in SFAS No. 13. Leases that qualify as capitalleases are recorded at the present value of the future minimum rentals over thebase term of the lease using the Company’s incremental borrowing rate. Capitallease assets are assigned an estimated useful life at the inception of thelease that corresponds with the base term of the lease.

Occasionally, the Company is responsible for theconstruction of leased theatres and for paying project costs that are in excessof an agreed upon amount to be reimbursed from the developer. Emerging IssuesTask Force (EITF) Issue No. 97-10 *TheEffect of Lessee Involvement in Asset Construction* requires theCompany to be considered the owner (for accounting purposes) of these types ofprojects during the 

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construction period andtherefore is required to account for these projects as sale and leasebacktransactions. As a result, the Company has recorded $25,144,000 and $43,372,000as financing lease obligations for failed sale leaseback transactions on itsConsolidated Balance Sheets related to these types of projects as ofMarch 30, 2006 and March 31, 2005, respectively.

***Sale and LeasebackTransactions:***   The Company accounts for thesale and leaseback of real estate assets in accordance with Statement ofFinancial Accounting Standards No. 98 *AccountingFor Leases.* Losses on sale leaseback transactions are recognized atthe time of sale if the fair value of the property sold is less than theundepreciated cost of the property. Gains on sale and leaseback transactionsare deferred and amortized over the remaining lease term.

***Impairment ofLong-lived Assets:***   Management reviewslong-lived assets, including intangibles and investments in non-consolidatedentities, for impairment as part of the Company’s annual budgeting process andwhenever events or changes in circumstances indicate that the carrying amountof the assets may not be fully recoverable. Management reviews internalmanagement reports on a quarterly basis as well as monitors current andpotential future competition in the markets where the Company operates forindicators of triggering events or circumstances that indicate potentialimpairment of individual theatre assets. Management evaluates its theatresusing historical and projected data of theatre level cash flow as its primaryindicator of potential impairment and considers the seasonality of its businesswhen evaluating theatres for impairment. Because the Christmas and New Yearsholiday results comprise a significant portion of the Company’s operating cashflow, the actual results from this period, which are available during thefourth quarter of each fiscal year, are an integral part of the Company’simpairment analysis. As a result of these analyses, if the sum of the estimatedfuture cash flows, undiscounted and without interest charges, are less than thecarrying amount of the asset, an impairment loss is recognized in the amount bywhich the carrying value of the asset exceeds its estimated fair value. Assetsare evaluated for impairment on an individual theatre basis, which managementbelieves is the lowest level for which there are identifiable cash flows. Theimpairment evaluation is based on the estimated cash flows from continuing useuntil the expected disposal date or the fair value of furniture, fixtures andequipment. The expected disposal date does not exceed the remaining leaseperiod and is often less than the remaining lease period when management doesnot expect to operate the theatre to the end of its lease term. The fair valueof assets is determined as either the expected selling price less selling costs(where appropriate) or the present value of the estimated future cash flows.Fair value for furniture, fixtures and equipment has been determined usingfactors such as similar asset sales and in some instances third party valuationstudies. There is considerable management judgment necessary to determine thefuture 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 futurecash flows to realize the related carrying amount of theatre assets, but managementbelieves that it is not likely the theatre will be operated to the end of itslease term, the estimated economic life of the theatre assets are revised toreflect management’s best estimate of the economic life of the theatre assetsfor purposes of recording depreciation.

Impairmentlosses by operating segment are as follows:

| **Impairment of long-lived assets  (In thousands)** | ** ** | **52 weeks  Ended  March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **52 weeks Ended  April 1, 2004** | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                              | ** ** | **(Successor)**                                    | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**                                     | ** ** |
| U.S. and Canada  theatrical exhibition                                  |       |                                               | $          | 11,974                                                                              |       |       |       | $                                                                 | —     |                                                  |       |   |   |   | $ | — |   |   |   | $ | 12,747 |   |   |
| International  theatrical exhibition                                    |       |                                               | —     |                                                                                |       |       | —     |                                                              |       |                                                  |       |   | — |   |   |   | 3,525 |   |   |
| Total impairments of  long-lived assets                                 |       |                                               | $          | 11,974                                                                              |       |       |       | $                                                                 | —     |                                                  |       |   |   |   | $ | — |   |   |   | $ | 16,272 |   |   |

*** ***

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***Foreign CurrencyTranslation:***   Operations outside the UnitedStates are generally measured using the local currency as the functionalcurrency. Assets and liabilities are translated at the rates of exchange at thebalance sheet date. Income and expense items are translated at average rates ofexchange. The resultant translation adjustments are included in foreigncurrency translation adjustment, a separate component of accumulated othercomprehensive income (loss). Gains and losses from foreign currencytransactions, except those intercompany transactions of a long-term investmentnature, are included in net loss and have not been material.

***Loss per Share:  ******Basic loss per share is computedby dividing net loss by the weighted average number of common shares outstanding.The Company accounts for loss per share in accordance with EITF 03-6******ParticipatingSecurities and the Two Class Method under FAS 128******. EITF 03-6 requires use of thetwo class method for computing basic earnings per share when participatingconvertible securities exist. The dilutive effect of the Company’s Series AConvertible Preferred Stock is considered in the basic earnings per share inaccordance with EITF 03-6. If dividends are paid on the common stock in anyfiscal period, the holders of Series A Preferred shares are entitled to receivedividends on an “as converted” basis, to the extent such dividends are greaterthan the face amount of Series A Preferred dividends otherwise payable in suchfiscal period. Diluted loss per share includes the effects of outstanding stockoptions, stock awards and Series A Convertible Preferred Stock, if dilutive.***

***The following table sets forth thecomputation of basic and diluted loss from continuing operations per commonshare:***

| ** **                                                          | ** ** | ** **                   | ** ** | ** **                   | ** ** | ** **                      | ** ** | ** **                  | ** ** |
|---------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|---------------------------------|------------|-----------------------------|------------|
| ** **                                                          | ** ** | **52 weeks**            | ** ** | **From Inception**      | ** ** | ** **                      | ** ** | ** **                  | ** ** |
| ** **                                                          | ** ** | **Ended**                    | ** ** | **July 16, 2004**  | ** ** | **April 1, 2004**     | ** ** | **52 weeks**           | ** ** |
| ** **                                                          | ** ** | **March 30, 2006** | ** ** | **through**                  | ** ** | **through**                     | ** ** | **Ended**                   | ** ** |
| **(In thousands, except per share data)**  | ** ** | **(restated)**               | ** ** | **March 31, 2005** | ** ** | **December 23, 2004** | ** ** | **April 2, 2004** | ** ** |
| ** **                                                          | ** ** | **(Successor)**              | ** ** | **(Successor)**              | ** ** | **(Predecessor)**               | ** ** | **(Predecessor)**           | ** ** |
| Numerator:                                                          |       |                         |       |                         |       |                            |       |                        |       |   |   |   |   |   |   |   |   |
| Loss from continuing operations                                     |       |                         | $          | (190,932                     | )          |                            |       | $                           | (44,257    | ) |   |   | $ | (32,328 | ) |   |   | $ | (2,217 | ) |   |
| Dividends on Series A Preferred                                     |       |                         | —     |                         |       |                            | —     |                        |       |   | (104,300 | ) |   |   | (40,277 | ) |   |
| Loss for common shares from continuing operations                   |       |                         | $          | (190,932                     | )          |                            |       | $                           | (44,257    | ) |   |   | $ | (136,628 | ) |   |   | $ | (42,494 | ) |   |
| Denominator:                                                        |       |                         |       |                         |       |                            |       |                        |       |   |   |   |   |   |   |   |   |
| Average common shares outstanding                                   |       |                         | 858.12     |                         |       |                            | 300.41     |                        |       |   | 37,023 |   |   |   | 36,715 |   |   |
| Series A Preferred                                                  |       |                         | —     |                         |       |                            | —     |                        |       |   | — |   |   |   | — |   |   |
| Shares for basic earnings per common share                          |       |                         | 300.41     |                         |       |                            | 37,023     |                        |       |   | 36,715 |   |   |   |   |   |   |
| Stock options                                                       |       |                         | —     |                    |       |                            | —     |                   |       |   | — |     |   |   | — |   |   |
| Stock awards                                                        |       |                         | —     |                         |       |                            | —     |                        |       |   | — |   |   |   | — |   |   |
| Shares for diluted earnings per common share                        |       |                         | 858.12     |                         |       |                            | 300.41     |                        |       |   | 37,023 |   |   |   | 36,715 |   |   |
| Loss from continuing operations per common share                    |       |                         | $          | (222.50                      | )          |                            |       | $                           | (147.32    | ) |   |   | $ | (3.69 | ) |   |   | $ | (1.16 | ) |   |
| Further dilution from applying the “two class” method     |       |                         | —     |                         |       |                            | —     |                        |       |   | — |   |   |   | — |   |   |
| Basic and diluted  loss from continuing operations per common share |       |                         | $          | (222.50                      | )          |                            |       | $                           | (147.32    | ) |   |   | $ | (3.69 | ) |   |   | $ | (1.16 | ) |   |

*** ***

During thepredecessor period April 2, 2004 through December 23, 2004, 42,734 shares ofcommon stock and $104,300,000 of dividends from the assumed conversion ofSeries A Preferred were excluded from the computation of diluted loss percommon share because they were anti dilutive. During the predecessor periodended April 1, 2004, 40,812,000 shares of common stock and $40,227,000 ofdividends from the assumed conversion of Series A Preferred were excluded fromthe computation of diluted loss per common stock because they were antidilutive.

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Options to purchase 39,476.72872 shares of commonstock at $1,000.00 per share were outstanding during the successor period endedMarch 30, 2006, but were not included in the computation of diluted loss pershare since they were anti dilutive. Options to purchase 38,876.72872 shares ofcommon stock at $1,000.00 per share were outstanding during the successorperiod ended March 31, 2005, but were not included in the computation ofdiluted loss per share because the options’ exercise price exceeded theestimated average market price of common shares. During the predecessor periodApril 2, 2004 through December 23, 2004, incremental shares from stock optionsand awards of 930,398 were excluded from the computation of diluted earningsper share because they were anti dilutive. During the predecessor period endedApril 1, 2004, incremental shares from stock options and awards of 191,339 wereexcluded from the computation of diluted earnings per share because they wereanti dilutive.

***Stock-basedCompensation:***   Holdings granted options on39,476.72872 shares to certain employees during the Successor periods endedMarch 31, 2005 and March 30, 2006. The Successor has reflected thestock-based compensation expense associated with the options within itsconsolidated statements of operations. The options have a ten year term and theoptions granted during fiscal 2005 step-vest in equal amounts over five yearswith the final vesting occurring on December 23, 2009. The options grantedduring fiscal 2006 step vest in equal amounts over three years with finalvesting occurring on December 23, 2008, but vesting may accelerate forcertain participants if there is a change of control (as defined in the plan).The Successor has recorded $3,433,000 of stock-based compensation expenseduring its period ended March 30, 2006 and $1,201,000 of stock-basedcompensation expense during its period ended March 31, 2005 and thePredecessor has recorded no stock compensation expense for its period endedDecember 23, 2004.

The options have been accounted for using the fairvalue method of accounting for stock-based compensation arrangements asprescribed by Statement of Financial Accounting Standards No. 123 (R), *Share-Based Payment*(“SFAS 123(R)”) and Staff Accounting Bulletin (“SAB”) No. 107, *Share-Based Payment*, and the Companyhas valued the options using the Black-Scholes formula. There is no cashimpact related to the options included in the Successor’s ConsolidatedStatements of Cash Flows.

One of the holders of Holdings’ stock options haswritten put rights deemed to be in the holder’s control associated with hisoptions whereby he can require Holdings to repurchase his options. Theseliability-classified options are required to be remeasured during eachreporting period. A liability of $142,000 is recorded within other long termliabilities in the Consolidated Balance Sheets as of March 30, 2006 for theoptions containing written put rights deemed to be in the holder’s control (SeeNote 1—Restatements).

The Predecessor accounted for its stock options,restricted stock awards and deferred stock units under plans that it sponsoredfollowing the recognition and measurement provisions of APB OpinionNo. 25, *Accounting for Stock issued toEmployees* (APB No. 25) and related interpretations. Stock-basedemployee compensation expense related to restricted stock awards and deferredstock units of $8,727,000 was reflected in net loss for fiscal 2004. No stock-basedemployee compensation expense for stock options was reflected in net loss forfiscal 2004, as all stock options granted under those plans had an exerciseprice equal to the fair market value of the underlying common stock on the dateof grant.

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Thefollowing table reflects the weighted average fair value per option grantedduring each year, as well as the significant weighted average assumptions usedin determining fair value using the Black-Scholes option-pricingmodel:

| ** **                                 | ** ** | **March 30, 2006**(1) | ** ** | **March 31, 2005**(1) | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **April 1, 2004** | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                 | ** ** | **(Successor)**                 | ** ** | **(Successor)**                 | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**           | ** ** |
| Weighted average fair  value on grant date |       |                            | $          | 230.75                          |       |       |       | $                                                                 | 575.48     |                        |       |   |   |   | $ | — |   |   |   | $ | — |   |   |
| Risk-free interest  rate                   |       |                            | 4.5        | %                               |       |       | 3.6        | %                                                                 |       |                        |       |   | — |   |   |   | — |   |   |
| Expected life (years)                      |       |                            | 3          |                            |       |       | 5          |                                                              |       |                        |       |   | — |   |   |   | — |   |   |
| Expected volatility(2)                     |       |                            | 25.8       | %                               |       |       | 65.3       | %                                                                 |       |                        |       |   | — |   |   |   | — |   |   |
| Expected dividend yield                    |       |                            | —     |                            |       |       | —     |                                                              |       |                        |       |   | — |   |   |   | — |   |   |

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(1)                Representsassumptions for stock options granted to certain employees of the Company.

(2)                The Company uses acombination of historical AMC Entertainment Inc. share values for the periodswhen the Company was publicly traded as well as those of its competitor peergroup for purposes of calculating volatility. The options issued by the Companyduring the year ended March 31, 2005 had an expected life of 5 years whilethe options issued during the year ended March 30, 2006 had an expectedlife of 3 years. The volatility was calculated from the same source of pricesbut was for different expected terms thus providing different volatilityfactors.

Thefollowing table illustrates the effect on net loss as if the fair value methodhad been applied to all stock awards and outstanding and unvested options ineach period:

| **(In thousands)**                                                                           | ** ** | **April 2, 2004 through  December 23, 2004** | ** ** | **52 Weeks Ended  April 1, 2004** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                        | ** ** | **(Predecessor)**                                                     | ** ** | **(Predecessor)**                                     | ** ** |
| Net loss:                                                                                         |       |                                                                  |       |                                                  |       |   |   |   |   |
| As reported                                                                                       |       |                                                                  | $          | (35,878                                               | )          |   |   | $ | (10,714 | ) |   |
| Add: Stock based compensation expense included in  reported net loss, net of related tax effects  |       |                                                                  | —     |                                                  |       |   | 5,236 |   |   |
| Deduct: Total stock-based compensation expense  determined under fair value method for all awards |       |                                                                  | —     |                                                  |       |   | (5,930 | ) |   |
| Pro forma                                                                                         |       |                                                                  | $          | (35,878                                               | )          |   |   | $ | (11,408 | ) |   |
| Net loss per common share (basic and diluted):                                                    |       |                                                                  |       |                                                  |       |   |   |   |   |
| As  reported                                                                                      |       |                                                                  | $          | (3.79                                                 | )          |   |   | $ | (1.39 | ) |   |
| Pro  forma                                                                                        |       |                                                                  | $          | (3.79                                                 | )          |   |   | $ | (1.41 | ) |   |

 

***Income Taxes:***   AMCEjoins with Holdings in filing a consolidated U.S. Corporation Income Tax returnand, in certain states, consolidated state income tax returns. With respect tothe consolidated federal and state income tax returns, the Successor remitsincome taxes to the applicable taxing jurisdiction and records income taxespayable and receivable from other members of the group as if each member filedseparate federal and state income tax returns. Additionally, the Successor’sprovision for income taxes is computed as if it filed separate income taxreturns. The Company accounts for income taxes in accordance with Statement ofFinancial Accounting Standards No. 109 (“SFAS 109”) *Accounting for Income Taxes*. UnderSFAS 109, deferred income tax effects of transactions reported indifferent periods for financial reporting and income tax return purposes arerecorded by the liability method. This method gives consideration to the futuretax consequences of deferred income or expense items and immediately recognizeschanges in income tax laws upon enactment. The income statement effect isgenerally derived from changes in deferred income taxes on the balance sheet.

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AMCE entered into a tax sharing agreement withHoldings under which AMCE agreed to make cash payments to Holdings to enable itto pay any (i) federal, state or local income taxes to the extent thatsuch income taxes are directly attributable to AMCE or its subsidiaries’ incomeand (ii) franchise taxes and other fees required to maintain Holdings’legal existence.

***Casualty Insurance:***   TheCompany is self-insured for general liability up to $400,000 per occurrence andcarries a $400,000 deductible limit per occurrence for workers compensationclaims. The Company utilizes actuarial projections of its ultimate losses thatit will be responsible for paying. The actuarial method includes an allowancefor adverse developments on known claims and an allowance for claims which havebeen incurred but which have not yet been reported. As of March 30, 2006and March 31, 2005, the Company had recorded casualty insurance reservesof $26,373,000 and $22,080,000, respectively. The Successor recorded expensesrelated to general liability and workers compensation claims of $10,936,000 and$2,088,000 for the periods ended March 30, 2006 and March 31, 2005,respectively, and the Predecessor recorded $8,288,000 and $10,581,000 for theperiods ended December 23, 2004 and April 1, 2004, respectively.

***New AccountingPronouncements:***   In February 2006, theFASB agreed to issue FASB Staff Position (FSP) No. 123(R)-4, *Classification of Options and Similar Instruments Issued as EmployeeCompensation That Allow for Cash Settlement upon the Occurrence of a ContingentEvent*, which requires companies to consider the probability of theoccurrence of a contingent event that is outside the employees’ control (i.e.,change in control, or death or disability) in determining the classification ofan employee stock option or similar instrument under FASB StatementNo. 123(R), Share-Based Payment, where the award requires or permitscash settlement upon the contingent event. The FSP requires companies toclassify employee stock options and similar instruments with contingent cashsettlement features as equity awards provided the contingent event that permitsor requires cash settlement is not considered probable of occurring. As theCompany has already adopted SFAS 123(R), the Company would be required toapply the guidance in the first reporting period beginning after the date thefinal FSP is posted to the FASB website and would be required to apply theproposed guidance retrospectively to prior-period results to whichSFAS 123(R) was applied. The Company does not believe the adoption ofFSP 123 R-4 will have an impact on the consolidated financial position,results of operations, or cash flows.

In October 2005, the FASB issued FASB StaffPosition (FSP) 13-1, *Accounting forRental Costs Incurred during a Construction Period*. FSP 13-1clarifies there is no distinction between the right to use a leased assetduring the construction period and the right to use that asset after theconstruction period. Accordingly, the Company will no longer be able tocapitalize rental costs during the construction period and will begin expensingthem as preopening expense prior to the theatre opening date. This FSP was effectivefor the first reporting period beginning after December 15, 2005. TheCompany early adopted this FSP during the fourth quarter of fiscal 2006 whichresults in recognition of preopening expense during the “rent holiday”.

In May 2005, the FASB issued SFAS No. 154, *Accounting Changes and Error Corrections areplacement of APB Opinion No. 20 and FASB Statement No. 3*(SFAS 154), which requires retrospective application to prior periods’financial statements of changes in accounting principle, unless it isimpracticable to determine either the period-specific effects or thecumulative effect of the change. It also requires that a change indepreciation, amortization, or depletion method for long-lived, nonfinancialassets be accounted for as a change in accounting estimate affected by a changein accounting principle. The Company is not currently contemplating anaccounting change which would be impacted by SFAS 154.

In March 2004, the FASB issued Emerging IssuesTask Force Issue No. 03-1, *TheMeaning of Other Than Temporary Impairment and Its Application to CertainInvestments*(“EITF 03-1”). EITF 03-1 includesnew guidance for evaluating and recording impairment losses on debt and equityinvestments, as well as new disclosure requirements for investments that aredeemed to be temporarily impaired. In Septem

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ber 2004, the FASBissued Staff Position EITF Issue 03-1-1, which delays the effectivedate until additional guidance is issued for the application of the recognitionand measurement provisions of EITF 03-1 to investments in securitiesthat are impaired. The Company does not believe that the adoption of EITF 03-1will have a material impact on our financial condition or results ofoperations.

***Presentation:***   Certainamounts have been reclassified from prior period consolidated financial statementsto conform with the current year presentation. As a result of the merger withMarquee, the Successor applied the purchase method of accounting to theseparable assets, including goodwill, and liabilities of the accountingacquiree, Loews as of January 26, 2006 and AMCE, as of December 23,2004. The purchase method of accounting requires that the assets andliabilities be recorded at their fair values on the date of the purchase. Theconsolidated financial statements presented herein are those of the Successorfrom its inception on July 16, 2004 through March 30, 2006, and thoseof its Predecessor, AMCE, for all prior periods through the date of the mergerwith Marquee.

**NOTE 2—ACQUISITIONS**

**Merger with Loews**

On June 20, 2005, Holdings entered into a mergeragreement with LCE Holdings, Inc. (“LCE Holdings”), the parent of LoewsCineplex Entertainment Corporation (“Loews”), pursuant to which LCE Holdingsmerged with and into Holdings, with Holdings continuing as the holding companyfor the merged businesses, and Loews merged with and into AMCE, with AMCEcontinuing after the merger (the “Merger” and collectively, the “Mergers”). Thetransaction closed on January 26, 2006. Upon completion of the Mergers,the existing stockholders of Holdings, including affiliates of J.P. MorganPartners, LLC and Apollo Management, L.P., currently hold approximately 60% ofits outstanding capital stock, and the previous stockholders of LCE Holdings,including affiliates of Bain Capital Partners, LLC, The Carlyle Group andSpectrum Equity Investors  (collectivelywith J.P. Morgan Partners, LLC and Apollo Management, L.P., the “Sponsors”),hold approximately 40% of the outstanding capital stock of Holdings.

The purchase price paid by the Company in the Mergerresulted in the recognition of goodwill because it exceeded the fair value ofthe assets acquired. The Company paid a price in excess of fair value of theassets acquired because it anticipated that the Merger would enhance itsposition as one of the world’s leading theatrical exhibition companies based onrevenues and believed that it would be able to achieve corporate overheadsavings by eliminating duplicative facilities and services, enhance operatingefficiencies in areas such as advertising and field support and theatre-levelstaffing and realize economies of scale in several areas, most notably inpurchasing and contracting for services and supplies.

Marquee Holdings Inc. issued 256,085.61252 shares ofClass L-1 Common Stock and 256,085.61252 shares of Class L-2Common Stock to the Stockholders of LCE Holdings. The Company has accounted forthe Merger as a purchase in accordance with SFAS No. 141, *Business Combinations,* for an estimated purchaseprice of $540,671,000 for the Class L-1 and Class L-2Common Stock. The purchase price reflects the estimated fair value of sharesissued for the Mergers of $270,335,500 for the Class L-1 shares and$270,335,500 for the Class L-2 shares. The purchase price for theMerger was based on a valuation study perfomed by an independent third party.The acquisition included 112 theatres with 1,308 screens in the United States,40 theatres with 443 screens in Mexico (Cinemex), 4 managed/joint venturetheatres with 55 screens in the United States and a 50% interest in YelmoCineplex, S.L. operating 27 theatres with 311 screens in Spain that isaccounted for using the equity method. The financing of the Merger is describedin Note 7. The Merger did not constitute a change in control.

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Thefollowing is a summary of the preliminary allocation of the purchase price tothe assets and liabilities of LCE Holdings based on management’s judgment afterevaluating several factors, including actuarial estimates for pensionliabilities, estimates of fair value for issuance of common stock and avaluation assessment prepared by a valuation specialist:

| **(In thousands)**                  | ** ** | ** ** | ** ** |
|------------------------------------------|------------|------------|------------|
| Cash and equivalents                     |       | $          | 142,512    |   |
| Current assets                           |       | 46,879     |       |
| Property, net                            |       | 838,172    |       |
| Intangible assets, net                   |       | 107,561    |       |
| Goodwill                                 |       | 738,739    |       |
| Deferred income taxes                    |       | 6,740      |       |
| Other long-term  assets                  |       | 50,362     |       |
| Current liabilities                      |       | (196,389   | )          |
| Corporate borrowings                     |       | (1,054,192 | )          |
| Capital and financing  lease obligations |       | (32,524    | )          |
| Other long-term  liabilities             |       | (107,189   | )          |
| Total estimated purchase price           |       | $          | 540,671    |   |

 

Amounts recorded for goodwill were not subject toamortization, and were not considered deductible for income tax purposes.Goodwill in the amount of $609,578,000 and $129,161,000 was recorded at theCompany’s U.S. and Canada theatrical exhibition operating segment and at theCinemex reporting unit in the International operating segment, respectively.The preliminary allocation of purchase price and estimates of fair values maypotentially change in the future as additional information becomes available.

The Merger included theacquisition of intangible assets including; $43,145,000 related to favorableleases with remaining lease terms ranging from one to thirteen years,$9,595,000 related to Loews and Cinemex trademark and tradenames, $52,452,000related to advertising and management contracts with a weighted averageamortization period of 7.5 years, and $6,805,000 related to Cinemex non-competeagreement with less than one year remaining on the agreement. The Loews’tradename amortization period is 5 years. These fair values are based onmanagement’s best estimate using available evidence including a study performedby a valuation specialist. The Cinemex trademark and tradename are indefinite-livedintangible assets which are not subject to amortization, but do require impairmentevaluation during each reporting period to determine whether events andcircumstances continue to support an indefinite useful life. The weightedaverage amortization period for LCE and Cinemex favorable leases wasapproximately eight years. Acquired intangible assets are more fully discussedin Note 5.

**Merger with Marquee**

On December 23, 2004, the Company completed amerger in which Holdings acquired AMCE pursuant to an Agreement and Plan ofMerger, dated as of July 22, 2004, by and among AMCE, Holdings andMarquee. Marquee, a wholly owned subsidiary of Holdings, merged with and intoAMCE, with AMCE remaining as the surviving entity and becoming a wholly ownedsubsidiary of Holdings. The merger was voted on and approved by the Company’sshareholders on December 23, 2004.

Pursuant to the terms of the merger agreement, eachissued and outstanding share of AMCE’s Common Stock and ConvertibleClass B stock was converted into the right to receive $19.50 in cash andeach issued and outstanding share of the Company’s Series A ConvertiblePreferred Stock was converted into the right to receive $2,727.27 in cash. Thetotal amount of consideration paid in the merger with Marquee was approximately$1,665,200,000. AMCE made payments to holders of its Common Stock, ConvertibleClass B Stock and Series A Convertible Preferred Stock in theaggregate amount of $1,647,300,000 and 

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Holdings made payments of$17,900,000 to the holders of 1,451,525 vested in-the-money options and holdersof 520,350 deferred stock units that vested upon consummation of the merger.The Company has recorded $63,057,000 ($20,325,000 Successor and $42,732,000Predecessor) of general and administrative expenses related to the merger withMarquee all of which were paid as of March 31, 2005. Included in theseamounts are $20,000,000 of Successor transaction fees paid to J.P. MorganPartners (BHCA), L.P. and Apollo Investment Fund V, L.P. and certain relatedinvestment funds.

Marquee used the net proceeds from the sale of AMCE’snotes (as described in Note 7), together with existing cash balances ofAMCE and the proceeds from the equity contribution from Holdings (consisting ofequity contributed by the former sponsors, the co-investors and certain membersof management and the net proceeds of an offering of Holdings notes), tofinance the merger with Marquee.

The Company has accounted for the merger with Marqueeas a purchase in accordance with SFAS No. 141, *Business Combinations,* with Marquee being the accounting acquirorand AMCE being the acquired entity. As such the financial information presentedherein represents (i) the Consolidated Statements of Operations of theSuccessor for the period from inception on July 16, 2004 throughMarch 30, 2006, the Consolidated Statements of Operations of thePredecessor for the thirty-eight weeks ended December 23, 2004 andthe fifty-two weeks ended April 1, 2004, (ii) the ConsolidatedBalance Sheet of the Successor as of March 30, 2006 and March 31,2005, and (iii) the Consolidated Statements of Cash Flows of the Successorfor the fifty-two weeks ended March 30, 2006 and the period from inceptionon July 16, 2004 through March 31, 2005, and the ConsolidatedStatements of Cash Flows of the Predecessor for the thirty-eight weeksended December 23, 2004 and the fifty-two weeks ended April 1, 2004.

Thefollowing is a summary of the allocation of the purchase price to the estimatedfair values of assets and liabilities acquired in the merger with Marquee. Theallocation of purchase price is based on management’s judgment after evaluatingseveral factors, including actuarial estimates for pension liabilities, marketprices of our indebtedness and a valuation assessment prepared by a valuationspecialist (in thousands):

| Cash and equivalents                     |   | $         | 396,636   |   |
|------------------------------------------|--------|-----------|-----------|--------|
| Other current assets                     |   | 99,794    |      |
| Property, net                            |   | 894,293   |      |
| Intangible assets                        |   | 205,148   |      |
| Goodwill                                 |   | 1,377,196 |      |
| Deferred income taxes                    |   | 64,106    |      |
| Other long-term  assets                  |   | 61,006    |      |
| Current liabilities                      |   | (344,908  | )         |
| Corporate borrowings                     |   | (709,283  | )         |
| Capital and financing  lease obligations |   | (66,525   | )         |
| Other long-term  liabilities             |   | (312,263  | )         |
| Total estimated purchase price           |   | $         | 1,665,200 |   |

 

The merger with Marquee included the acquisition ofintangible assets including; $74,000,000 related to the AMC trademark andtradename, $54,993,000 related to favorable leases, and $46,000,000 related tothe Company’s Moviewatcher customer loyalty program (A customer relationshipintangible asset). These fair values are based on management’s best estimateusing available evidence including a study performed by a valuation specialist.The AMC trademark and tradename is an indefinite-lived intangible assetwhich is not subject to amortization, but does require impairment evaluationduring each reporting period to determine whether events and circumstancescontinue to support an indefinite useful life. The weighted averageamortization period for favorable leases was approximately fourteen years. Indetermining the useful life of the Moviewatcher customer relationship intangibleasset, the Company utilized information 

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tracking the behaviorpattern of the customers participating in this program. The data suggests thatthe Moviewatcher customers exhibit a higher frequency of trips to thetheatres and many of the members remain active within the program for extendedperiods. The membership data was utilized in developing an attrition/retentionrate used in the valuation analysis. The analysis indicates that an active baseof members contribute incremental cash flow to the business over a period of atleast 8 years. However, it should be noted that over two-thirds of thecash flow generated from this asset is derived in the first 5 years. The amortizationof the fair value of this asset reflects the pattern in which the economicbenefits of the intangible asset are consumed or otherwise used up. Accordinglythe Company has calculated the consumption pattern of this asset by comparingthe undiscounted cash flows for each year with the sum of the undiscounted cashflows generated by this asset to develop the ratio of the fair value of theasset that would be amortized during the period.

Amountsrecorded for goodwill are not subject to amortization, are not expected to bedeductible for tax purposes and have been allocated to the Company’s U.S. andCanada theatrical exhibition operating segment, Other operating segment, JapanAMC Theatres Inc., the Company’s Japan branch and the Company’sconsolidated Spain and Portugal operations conducted through AMC EntertainmentEspana S.A. and Actividades Multi-Cinemas E Espectaculos, LDA (thereporting units). The Company has performed it annual impairment test forgoodwill and recorded no impairment as of March 30, 2006. The goodwill of$29,973,000, allocated to the Other operating segment, and is included in theCompany’s investment in NCM together with certain of NCN’s other contributedassts. Goodwill of $44,774,000 was allocated to Japan AMC Theatres Inc.,which was disposed of in connection with the consummation of the sale of thatentity on June 30, 2005, and goodwill of $6,599,000 was allocated to theremaining Japan location, which was disposed of in connection with theconsummation of the sale of that entity on September 1, 2005. Goodwill of$11.7 million was allocated to the Spain and Portugal theatres and isincluded in non-current assets held for sale.

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**Pro Forma Effect ofMerger Transactions**

Theunaudited pro forma financial information presented below sets forth theCompany’s and LCE Holdings’ historical consolidated statements of operationsfor the periods indicated and give effect to the merger transactions with Loewsand Marquee, the contribution of NCN assets to NCM and the related debtissuances as adjusted for the respective purchase price allocations as if eachtransaction occurred on April 2, 2004 and April 1, 2005. Because thepro forma financial information gives effect to the transactions describedabove as of the beginning of fiscal 2005, all pro forma information is for theSuccessor. Such information is presented for comparative purposes only and doesnot purport to represent what the Company’s results of operations wouldactually have been had these transactions occurred on the date indicated or toproject its results of operations for any future period or date.

| ** **                                          | ** ** | **Fifty-two week periods**                                                       | ** ** |
|-----------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| **(In thousands)**                             | ** ** | **Pro Forma  April 1, 2005  through  March 30, 2006  (restated)** | ** ** | **Pro Forma  April 2, 2004  through  March 31, 2005** | ** ** |
| ** **                                          | ** ** | **(Successor)**                                                                            | ** ** | **(Successor)** | ** ** |
| Revenues                                            |       |                                                                                       | $          | 2,344,480 |   |   |   | $ | 2,483,854 |   |   |
| Cost of operations                                  |       |                                                                                       | 1,506,591  |   |   |   | 1,575,277 |   |   |
| Rent                                                |       |                                                                                       | 422,781    |   |   |   | 412,329 |   |   |
| General and  administrative:                        |       |                                                                                       |       |   |   |   |   |   |   |
| Merger and acquisition costs*                       |       |                                                                                       | 18,059     |   |   |   | 8,116 |   |   |
| Management fee                                      |       |                                                                                       | 5,000      |   |   |   | 5,000 |   |   |
| Other                                               |       |                                                                                       | 78,928     |   |   |   | 89,653 |   |   |
| Preopening expense                                  |       |                                                                                       | 10,635     |   |   |   | 2,553 |   |   |
| Theatre and other  closure expense                  |       |                                                                                       | 601        |   |   |   | 12,025 |   |   |
| Restructuring  charge                               |       |                                                                                       | 3,980      |   |   |   | 5,053 |   |   |
| Depreciation and  amortization                      |       |                                                                                       | 277,511    |   |   |   | 288,179 |   |   |
| Impairment of long-lived  assets                    |       |                                                                                       | 11,974     |   |   |   | — |   |   |
| Disposition of  assets and other gains              |       |                                                                                       | (1,300     | ) |   |   | (5,274 | ) |   |
| Total costs and expenses                            |       |                                                                                       | 2,334,760  |   |   |   | 2,392,911 |   |   |
| Other expense  (income)                             |       |                                                                                       | (9,818     | ) |   |   | (6,778 | ) |   |
| Interest expense                                    |       |                                                                                       | 226,640    |   |   |   | 220,159 |   |   |
| Investment expense  (income)                        |       |                                                                                       | 5,132      |   |   |   | (6,718 | ) |   |
| Total other expense                                 |       |                                                                                       | 221,954    |   |   |   | 206,663 |   |   |
| Loss from continuing operations before income taxes |       |                                                                                       | (212,234   | ) |   |   | (115,720 | ) |   |
| Income tax  provision                               |       |                                                                                       | 9,755      |   |   |   | 11,141 |   |   |
| Loss from continuing operations                     |       |                                                                                       | (221,989   | ) |   |   | (126,861 | ) |   |
| Loss from  discontinued operations                  |       |                                                                                       | (25,291    | ) |   |   | 157 |   |   |
| Net loss                                            |       |                                                                                       | $          | (247,280 | ) |   |   | $ | (126,704 | ) |   |
| Basic and diluted loss per share of common stock:   |       |                                                                                       |       |   |   |   |   |   |   |
| Loss from continuing operations                     |       |                                                                                       | $          | (173.13 | ) |   |   | $ | (98.94 | ) |   |
| Gain (loss) from discontinued operations            |       |                                                                                       | (19.72     | ) |   |   | 0.13 |   |   |
| Net loss                                            |       |                                                                                       | $          | (192.85 | ) |   |   | $ | (98.81 | ) |   |
| Average shares  outstanding:                        |       |                                                                                       |       |   |   |   |   |   |   |
| Basic and diluted                                   |       |                                                                                       | 1,282.25   |   |   |   | 1,282.25 |   |   |

----

*                    Primarily represents non recurring costsfor the Merger Transactions.

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**Acquisition ofMegaStar Cinemas, L.L.C.**

On December 19, 2003, the Company acquiredcertain of the operations and related assets of MegaStar Cinemas, L.L.C. (“MegaStar”)for an estimated cash purchase price of $15,037,000. In connection with theacquisition, the Company assumed leases on three theatres with 48 screens inMinneapolis and Atlanta. All three of the theatres feature stadium seating andhave been built since 2000. The results of operations are included in theConsolidated Statements of Operations from December 19, 2003. The Companybelieves the results of operations of the acquired theatres are not material tothe Company’s Consolidated Statements of Operations and pro forma informationfor fiscal 2004 is not included herein.

Thefollowing is a summary of the allocation of the purchase price to the estimatedfair values of assets acquired from MegaStar. The allocation of purchase priceis based on management’s judgment including a valuation assessment prepared bya valuation specialist.

| **(In thousands)**      | ** ** | ** ** | ** ** |
|------------------------------|------------|------------|------------|
| Cash and equivalents         |       | $          | 40         |   |
| Current assets               |       | 94         |       |
| Property                     |       | 6,762      |       |
| Other long-term  assets      |       | 84         |       |
| Other long-term  liabilities |       | (3,297     | )          |
| Goodwill                     |       | 11,354     |       |
| Total purchase price         |       | $          | 15,037     |   |

 

Amounts recorded forgoodwill are not subject to amortization, were recorded at the Company’s U.S.and Canada theatrical exhibition operating segment (the reporting unit) and areexpected to be deductible for tax purposes.

**NOTE 3—DISCONTINUEDOPERATIONS**

On May 11, 2006, the Company sold two of itswholly-owned subsidiaries, AMC Entertainment España S.A. and ActividadesMulti-Cinemeas E Espectáculos, LDA (collectively “Iberia”), which ownedand operated 4 theatres with 86 screens in Spain and 1 theatre with 20 screensin Portugal, for a cash sales price of $35,446,000. At the date of the salethese operations did not meet the criteria for discontinued operations becauseof continuing involvement in the region through an equity method investment inYelmo. In December 2006, the company disposed of its investment in Yelmo,which owned and operated 27 theatres with 310 screens in Spain, for proceeds of$52,137,000. There was no gain or loss recorded on the sale of Yelmo. Theinvestment in Yelmo was reported within other long-term assets atMarch 30, 2006. The Company no longer has continuing involvement in theregion as a result of the sale of Yelmo and the results of the operations inIberia have been classified as discontinued operations as the Company no longerhas operations or significant cash flows from the Iberia component.

Information presented for all periods reflects thediscontinued classification. All affected amounts within the consolidatedfinancial statements have been adjusted accordingly. The results of operationsof the Iberia theatres were previously reported in the Company’s Internationaltheatrical exhibition operating segment. The Company has recorded a gain onsale of Iberia of approximately $2,609,000 during fiscal 2007 which is includedin discontinued operations. Goodwill of $11.7 million was allocated to theIberia theatres in connection with the sale. The Iberia assets and liabilitieswere classified as held for sale at March 30, 2006.

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Componentsof amounts reflected as earnings (loss) from discontinued operations for Iberiain the Company’s Consolidated Statements of Operations are presented in thefollowing table:

**Statements of operations data:**

| ** **                                   | ** ** | **52 Weeks Ended  March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31,  2005** | ** ** | ** ** | ** ** | **From April 2, 2004  through  December 23,  2004** | ** ** | **52 Weeks Ended  April 1, 2004** | ** ** |
|----------------------------------------------|------------|--------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                   | ** ** | **(Successor)**                                        | ** ** | **(Successor)**                                                                 | ** ** | ** ** | ** ** | **(Predecessor)**                                                       | ** ** | **(Predecessor)**                                     | ** ** |
| Revenues                                     |       |                                                   |       |                                                                            |       |       |       |                                                                    |       |                                                  |       |   |   |   |   |   |   |   |   |
| Admissions                                   |       |                                                   | $          | 31,192                                                                          |       |       |       | $                                                                       | 9,632      |                                                  |       |   |   |   | $ | 24,723 |   |   |   | $ | 32,072 |   |   |
| Concessions                                  |       |                                                   | 10,651     |                                                                            |       |       | 3,300      |                                                                    |       |                                                  |       |   | 8,633 |   |   |   | 10,507 |   |   |
| Other revenue                                |       |                                                   | 1,729      |                                                                            |       |       | 508        |                                                                    |       |                                                  |       |   | 1,340 |   |   |   | 1,628 |   |   |
| Total revenues                               |       |                                                   | 43,572     |                                                                            |       |       | 13,440     |                                                                    |       |                                                  |       |   | 34,696 |   |   |   | 44,207 |   |   |
| Costs and  Expenses                          |       |                                                   |       |                                                                            |       |       |       |                                                                    |       |                                                  |       |   |   |   |   |   |   |   |   |
| Film exhibition costs                        |       |                                                   | 15,247     |                                                                            |       |       | 4,592      |                                                                    |       |                                                  |       |   | 12,359 |   |   |   | 15,950 |   |   |
| Concession costs                             |       |                                                   | 2,003      |                                                                            |       |       | 547        |                                                                    |       |                                                  |       |   | 1,845 |   |   |   | 2,344 |   |   |
| Operating expense                            |       |                                                   | 10,663     |                                                                            |       |       | 3,480      |                                                                    |       |                                                  |       |   | 8,852 |   |   |   | 11,216 |   |   |
| Rent                                         |       |                                                   | 11,423     |                                                                            |       |       | 3,128      |                                                                    |       |                                                  |       |   | 8,474 |   |   |   | 10,624 |   |   |
| General and  administrative—other       |       |                                                   | 171        |                                                                            |       |       | 116        |                                                                    |       |                                                  |       |   | 181 |   |   |   | (298 | ) |   |
| Preopening  expense                          |       |                                                   | —     |                                                                            |       |       | —     |                                                                    |       |                                                  |       |   | — |   |   |   | (7 | ) |   |
| Depreciation and  amortization               |       |                                                   | 4,774      |                                                                            |       |       | 1,332      |                                                                    |       |                                                  |       |   | 4,207 |   |   |   | 5,571 |   |   |
| Impairment of  long-lived assets             |       |                                                   | —     |                                                                            |       |       | —     |                                                                    |       |                                                  |       |   | — |   |   |   | — |   |   |
| Total costs and  expenses                    |       |                                                   | 44,281     |                                                                            |       |       | 13,195     |                                                                    |       |                                                  |       |   | 35,918 |   |   |   | 45,400 |   |   |
| Interest expense                             |       |                                                   | 1,878      |                                                                            |       |       | 598        |                                                                    |       |                                                  |       |   | 1,560 |   |   |   | 2,056 |   |   |
| Investment income                            |       |                                                   | (5         | )                                                                               |       |       | 1          |                                                                    |       |                                                  |       |   | (3 | ) |   |   | (24 | ) |   |
| Total other  expense                         |       |                                                   | 1,873      |                                                                            |       |       | 599        |                                                                    |       |                                                  |       |   | 1,557 |   |   |   | 2,032 |   |   |
| Earnings (loss)  before income taxes         |       |                                                   | (2,582     | )                                                                               |       |       | (354       | )                                                                       |       |                                                  |       |   | (2,779 | ) |   |   | (3,225 | ) |   |
| Income tax provision                         |       |                                                   | 300        |                                                                            |       |       | 80         |                                                                    |       |                                                  |       |   | 240 |   |   |   | 600 |   |   |
| Earnings (loss) from discontinued operations |       |                                                   | $          | (2,882                                                                          | )          |       |       | $                                                                       | (434       | )                                                     |       |   |   |   | $ | (3,019 | ) |   |   | $ | (3,825 | ) |   |

 

On June 30, 2005, the Company sold one of itswholly-owned subsidiaries Japan AMC Theatres Inc., including four ofits five theatres in Japan. The Company sold its remaining Japanese theatreduring the second fiscal quarter of 2006. The Company opened its first theatrein Japan during fiscal 1997 and since that time the Company has incurredcumulative pre-tax losses of $38,689,000, including a $4,999,000 impairmentcharge in fiscal 2003.

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The operations and cashflows of the Japan theatres have been eliminated from the Company’s ongoingoperations as a result of the disposal transactions. The Company will not haveany significant continuing involvement in the operations of the Japan theatresafter the disposal transactions. The results of operations of the Japantheatres have been classified as discontinued operations, and information presentedfor all periods reflects the new classification. The operations of the Japantheatres were previously reported in the Company’s International theatricalexhibition operating segment. Components of amounts reflected as loss fromdiscontinued operations in the Company’s Consolidated Statements of Operationsare presented in the following table:

**Statements of operations data:**

| **(In thousands)**                       | ** ** | **52 Weeks Ended  March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **From April 2, 2004  through  December 23, 2004** | ** ** | **52 Weeks Ended  April 1, 2004** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                    | ** ** | **(Successor)**                                        | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                           | ** ** | **(Predecessor)**                                     | ** ** |
| Revenues                                      |       |                                                   |       |                                                                                |       |       |       |                                                                        |       |                                                  |       |   |   |   |   |   |   |   |   |
| Admissions                                    |       |                                                   | $          | 11,293                                                                              |       |       |       | $                                                                           | 13,083     |                                                  |       |   |   |   | $ | 35,310 |   |   |   | $ | 48,213 |   |   |
| Concessions                                   |       |                                                   | 2,134      |                                                                                |       |       | 2,551      |                                                                        |       |                                                  |       |   | 7,082 |   |   |   | 9,746 |   |   |
| Other revenue                                 |       |                                                   | 363        |                                                                                |       |       | 268        |                                                                        |       |                                                  |       |   | 1,485 |   |   |   | 2,422 |   |   |
| Total revenues                                |       |                                                   | 13,790     |                                                                                |       |       | 15,902     |                                                                        |       |                                                  |       |   | 43,877 |   |   |   | 60,381 |   |   |
| Costs and  Expenses                           |       |                                                   |       |                                                                                |       |       |       |                                                                        |       |                                                  |       |   |   |   |   |   |   |   |   |
| Film exhibition  costs                        |       |                                                   | 6,076      |                                                                                |       |       | 7,534      |                                                                        |       |                                                  |       |   | 19,932 |   |   |   | 27,519 |   |   |
| Concession costs                              |       |                                                   | 323        |                                                                                |       |       | 352        |                                                                        |       |                                                  |       |   | 1,519 |   |   |   | 2,047 |   |   |
| Operating expense                             |       |                                                   | 3,243      |                                                                                |       |       | 2,944      |                                                                        |       |                                                  |       |   | 8,976 |   |   |   | 12,286 |   |   |
| Rent                                          |       |                                                   | 3,918      |                                                                                |       |       | 3,744      |                                                                        |       |                                                  |       |   | 11,503 |   |   |   | 15,079 |   |   |
| General and  administrative—other        |       |                                                   | 1,833      |                                                                                |       |       | 206        |                                                                        |       |                                                  |       |   | 646 |   |   |   | 588 |   |   |
| Depreciation and  amortization                |       |                                                   | 706        |                                                                                |       |       | 821        |                                                                        |       |                                                  |       |   | 1,832 |   |   |   | 3,705 |   |   |
| Impairment of long-lived  assets              |       |                                                   | —     |                                                                                |       |       | —     |                                                                        |       |                                                  |       |   | — |   |   |   | — |   |   |
| Total costs and  expenses                     |       |                                                   | 16,099     |                                                                                |       |       | 15,601     |                                                                        |       |                                                  |       |   | 44,408 |   |   |   | 61,224 |   |   |
| Investment income                             |       |                                                   | —     |                                                                                |       |       | —     |                                                                        |       |                                                  |       |   | — |   |   |   | 2 |   |   |
| Earnings (loss) before  income taxes          |       |                                                   | (2,309     | )                                                                                   |       |       | 301        |                                                                        |       |                                                  |       |   | (531 | ) |   |   | (841 | ) |   |
| Income tax provision                          |       |                                                   | 20,100     |                                                                                |       |       | —     |                                                                        |       |                                                  |       |   | — |   |   |   | — |   |   |
| Earnings (loss) from  discontinued operations |       |                                                   | $          | (22,409                                                                             | )          |       |       | $                                                                           | 301        |                                                  |       |   |   |   | $ | (531 | ) |   |   | $ | (841 | ) |   |

 

Goodwill of $44,774,000 was allocated to Japan AMCTheatres Inc. and goodwill of $6,599,000 was allocated to the Company’sJapan branch and disposed of in connection with the consummation of the sale ofthose entities and there was no gain or loss on the sales. The goodwill is notdeductible for tax purposes and is discussed in Note 9.

On December 4, 2003, the Company sold its onlytheatre in Sweden and incurred a loss on sale of $5,591,000 which included a$5,252,000 payment to the purchaser to release the Company from future leaseobligations related to the theatre. The Company opened its theatre in Swedenduring fiscal 2001 and since that time the Company has incurred cumulativepre-tax losses of $17,210,000, including a $4,668,000 impairment charge infiscal 2002 and a $5,591,000 loss on sale in fiscal 2004.

Theoperations and cash flows of the Sweden theatre have been eliminated from theCompany’s ongoing operations as a result of the disposal transaction and theCompany does not have any significant continuing involvement in the operationsof the Sweden theatre after the disposal transaction. The results 

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of operations of the Sweden theatre have beenclassified as discontinued operations, and information presented for allperiods reflects the new classification. The operations of the Sweden theatrewere previously reported in the Company’s International operating segment.Components of amounts reflected as loss from discontinued operations in theCompany’s Consolidated Statements of Operations are presented in the followingtable:

| **(In thousands)**                       | ** ** | **52 Weeks Ended  April 1, 2004** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                    | ** ** | **(Predecessor)**                                     | ** ** |
| Revenues                                      |       |                                                  |       |   |   |
| Admissions                                    |       |                                                  | $          | 3,378 |   |   |
| Concessions                                   |       |                                                  | 949        |   |   |
| Other revenue                                 |       |                                                  | 198        |   |   |
| Total revenues                                |       |                                                  | 4,525      |   |   |
| Expense                                       |       |                                                  |       |   |   |
| Film exhibition costs                         |       |                                                  | 1,698      |   |   |
| Concession costs                              |       |                                                  | 321        |   |   |
| Operating expense                             |       |                                                  | 1,572      |   |   |
| Rent                                          |       |                                                  | 1,678      |   |   |
| General and administrative expense—other |       |                                                  | 54         |   |   |
| Depreciation and amortization                 |       |                                                  | 42         |   |   |
| Disposition of assets and other gains         |       |                                                  | 5,591      |   |   |
| Total costs and expenses                      |       |                                                  | 10,956     |   |   |
| Investment income                             |       |                                                  | —     |   |   |
| Loss before income taxes                      |       |                                                  | (6,431     | ) |   |
| Income tax benefit                            |       |                                                  | (2,600     | ) |   |
| Loss  from discontinued operations            |       |                                                  | $          | (3,831 | ) |   |

 

**NOTE 4—PROPERTY**

Asummary of property is as follows:

| **(In thousands)**                        | ** ** | **March 30, 2006** | ** ** | **March 31, 2005** | ** ** |
|------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                     | ** ** | **(Successor)**              | ** ** | **(Successor)**              | ** ** |
| Property owned:                                |       |                         |       |                         |       |   |   |   |   |
| Land                                           |       |                         | $          | 38,361                       |       |   |   | $ | 8,804 |   |   |
| Buildings and improvements                     |       |                         | 252,640    |                         |       |   | 208,888 |   |   |
| Leasehold improvements                         |       |                         | 918,740    |                         |       |   | 482,308 |   |   |
| Furniture, fixtures and equipment              |       |                         | 1,116,763  |                         |       |   | 988,845 |   |   |
|                                           |       |                         | 2,326,504  |                         |       |   | 1,688,845 |   |   |
| Less-accumulated depreciation and amortization |       |                         | 828,574    |                         |       |   | 840,587 |   |   |
|                                           |       |                         | 1,497,930  |                         |       |   | 848,258 |   |   |
| Property leased under capital leases:          |       |                         |       |                         |       |   |   |   |   |
| Buildings and improvements                     |       |                         | 23,725     |                         |       |   | 28,459 |   |   |
| Less-accumulated amortization                  |       |                         | 20,607     |                         |       |   | 22,254 |   |   |
|                                           |       |                         | 3,118      |                         |       |   | 6,205 |   |   |
|                                           |       |                         | $          | 1,501,048                    |       |   |   | $ | 854,463 |   |   |

 

Included in property is $34,796,000 and $29,078,000 ofconstruction in progress as of March 30, 2006 and March 31, 2005,respectively.

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**NOTE 5—GOODWILL ANDOTHER INTANGIBLE ASSETS**

Activityof goodwill by operation segment is presented below.

| **(In thousands)**                                                  | ** ** | **U.S. and Canada** | ** ** | **International** | ** ** | **Other** | ** ** | **Total** | ** ** |
|--------------------------------------------------------------------------|------------|-------------------------------|------------|-------------------|------------|-----------|------------|-----------|------------|
| Merger on  December 23, 2004                                        |       |                          | $          | 1,401,740         |       |      |       | $         | —     |   |   | $ | 29,973 |   | $ | 1,431,713 |   |
| Goodwill included in the  cost assigned to the investment in NCM         |       |                          | —     |              |       |      | —     |      |       | (29,973 | ) | (29,973 | ) |
| Balance as of  March 31, 2005                                       |       |                          | 1,401,740  |              |       |      | —     |      |       | — |   | 1,401,740 |   |
| Goodwill allocated to  sale of Japan theatres                            |       |                          | (51,373    | )                 |       |      | 51,373     |      |       | — |   | — |   |
| Sale of Japan theatres                                                   |       |                          | —     |              |       |      | (51,373    | )         |       | — |   | (51,373 | ) |
| Merger with LCE                                                          |       |                          | 609,578    |              |       |      | 129,161    |      |       | — |   | 738,739 |   |
| Currency translation  adjustment                                         |       |                          | —     |              |       |      | (4,559     | )         |       | — |   | (4,559 | ) |
| Goodwill allocated to  pending sale of Spain and Portugal theatres       |       |                          | (11,712    | )                 |       |      | 11,712     |      |       | — |   | — |   |
| Reclassification of  Spain and Portugal theatres to assets held for sale |       |                          | —     |              |       |      | (11,712    | )         |       | — |   | (11,712 | ) |
| Fair value adjustments(1)                                                |       |                          | (54,517    | )                 |       |      | —     |      |       | — |   | (54,517 | ) |
| Balance as of March 30, 2006                                        |       |                          | $          | 1,893,716         |       |      |       | $         | 124,602    |   |   | $ | — |   | $ | 2,018,318 |   |

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(1)                TheCompany revised its preliminary allocations of fair value for certainunfavorable leases preliminarily recorded in Spain, Hong Kong and Japan basedon additional information it was awaiting with respect to estimated salesprices for these theatres during the preliminary allocation period. The Companyreduced its preliminary estimates of fair value for the unfavorable leases by$6.5 million in Spain, $5.3 million in Hong Kong and$23.2 million in Japan. Additionally, the Company utilized deferred tax assetsof $18.5 million that had been assigned a 100% valuation allowance inconnection with its Merger with Marquee on December 23, 2004. The Companysubsequently utilized these deferred tax assets during fiscal 2006 and releasedthe related valuation allowance as a reduction of goodwill as they wereestablished in connection with the merger with Marquee. These adjustments intotal reduced goodwill by $53.5 million. The Company recognized no gain orloss on the sale of the Japan or Hong Kong theatres and recorded an adjustmentto goodwill based on additional information it was awaiting with respect to theestimated sales price for these theatres during the preliminary allocationperiod.

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| ** **                                          | ** ** | ** **                      | ** ** | **March 30, 2006**    | ** ** | **March 31, 2005**  | ** ** |
|-----------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|-------------------------------|------------|
| **(In thousands)**                             | ** ** | **Remaining  Useful Life** | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** |
| Acquired Intangible Assets:                         |       |                            |       |                            |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortizable Intangible Assets:                      |       |                            |       |                            |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Favorable leases                                    |       | 1 to 13 years                   |       |                            | $          | 116,047                       |       |   |   | $ | (13,079 | ) |   |   | $ | 74,890 |   |   |   | $ | (7,371 | ) |   |
| Loyalty program                                     |       | 4 years                         |       |                            | 46,000     |                          |       |   | (14,950 | ) |   |   | 46,000 |   |   |   | (3,864 | ) |   |
| LCE trade name                                      |       | 5 years                         |       |                            | 2,300      |                          |       |   | (80 | ) |   |   | — |   |   |   | — |   |   |
| LCE/Cinemex  advertising and  management  contracts |       | 3 to 25 years                   |       |                            | 48,951     |                          |       |   | (2,841 | ) |   |   | — |   |   |   | — |   |   |
| Cinemex non-compete                                 |       | 2 years                         |       |                            | 6,462      |                          |       |   | (313 | ) |   |   | — |   |   |   | — |   |   |
| Other intangible assets                             |       | 1 to 16 years                   |       |                            | 30,701     |                          |       |   | (26,922 | ) |   |   | 31,399 |   |   |   | (25,510 | ) |   |
| Total, amortizable                                  |       |                            |       |                            | $          | 250,461                       |       |   |   | $ | (58,185 | ) |   |   | $ | 152,289 |   |   |   | $ | (36,745 | ) |   |
| Unamortized Intangible Assets:                      |       |                            |       |                            |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| AMC trademark                                       |       |                            |       |                            | $          | 74,000                        |       |   |   |   |   |   |   | $ | 74,000 |   |   |   |   |   |   |
| Cinemex trademark                                   |       |                            |       |                            | 7,032      |                          |       |   |   |   |   |   | — |   |   |   |   |   |   |
| Total,  unamortized                                 |       |                            |       |                            | $          | 81,032                        |       |   |   |   |   |   |   | $ | 74,000 |   |   |   |   |   |   |

Amortization expenseassociated with the intangible assets noted above is as follows:

| ** **            | ** ** | **52 Weeks Ended  March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **52 Weeks Ended  April 1, 2004** | ** ** |
|-----------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **            | ** ** | **(Successor)**                                        | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**                                     | ** ** |
| Recorded Amortization |       |                                                   | $          | 21,440                                                                              |       |       |       | $                                                                 | 6,273      |                                                  |       |   |   |   | $ | 2,936 |   |   |   | $ | 6,290 |   |   |
|                       |            |                                                        |            |                                                                                     |            |            |            |                                                                   |            |                                                       |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

Estimatedamortization expense for the next five fiscal years for intangible assets ownedas of March 30, 2006 is projected below:

| **(In thousands)**         | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Projected amortization  expense |       | $        | 39,034     |     | $          | 31,709   |       | $        | 25,574     |     | $          | 18,658 |   | $ | 12,878 |   |
|                                 |            |          |            |          |            |          |            |          |            |          |            |  |  |  |  |  |

 

 

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**NOTE 6—SUPPLEMENTALBALANCE SHEET INFORMATION**

Otherassets and liabilities consist of the following:

| **(In thousands)**                  | ** ** | **March 30, 2006  (restated)** | ** ** | **March 31, 2005** | ** ** |
|------------------------------------------|------------|------------------------------------------|------------|------------------------------|------------|
| ** **                               | ** ** | **(Successor)**                          | ** ** | **(Successor)**              | ** ** |
| Other current assets:                    |       |                                     |       |                         |       |   |   |   |   |
| Prepaid rent                             |       |                                     | $          | 3,166                        |       |   |   | $ | 27,955 |   |   |
| Deferred income  taxes                   |       |                                     | 5,416      |                         |       |   | 18,560 |   |   |
| Income taxes  receivable                 |       |                                     | 6,830      |                         |       |   | 6,345 |   |   |
| Prepaid Insurance                        |       |                                     | 5,089      |                         |       |   | 2,156 |   |   |
| Merchandise  Inventory                   |       |                                     | 8,204      |                         |       |   | 4,526 |   |   |
| Other                                    |       |                                     | 5,942      |                         |       |   | 6,430 |   |   |
|                                     |       |                                     | $          | 34,647                       |       |   |   | $ | 65,972 |   |   |
| Other long-term  assets:                 |       |                                     |       |                         |       |   |   |   |   |
| Investments in  real estate              |       |                                     | $          | 7,100                        |       |   |   | $ | 10,458 |   |   |
| Deferred  financing costs                |       |                                     | 42,245     |                         |       |   | 22,792 |   |   |
| Investments in  joint ventures           |       |                                     | 89,952     |                         |       |   | 57,862 |   |   |
| Other                                    |       |                                     | 33,015     |                         |       |   | 27,286 |   |   |
|                                     |       |                                     | $          | 172,312                      |       |   |   | $ | 118,398 |   |   |
| Accrued expenses and  other liabilities: |       |                                     |       |                         |       |   |   |   |   |
| Taxes other than  income                 |       |                                     | $          | 44,621                       |       |   |   | $ | 31,598 |   |   |
| Interest                                 |       |                                     | 19,970     |                         |       |   | 12,695 |   |   |
| Payroll and  vacation                    |       |                                     | 12,536     |                         |       |   | 10,375 |   |   |
| Casualty claims  and premiums            |       |                                     | 8,850      |                         |       |   | 8,930 |   |   |
| Accrued bonus                            |       |                                     | 4,192      |                         |       |   | 11,761 |   |   |
| Theatre and other  closure               |       |                                     | 16,193     |                         |       |   | 26,506 |   |   |
| Merger exit costs                        |       |                                     | 4,618      |                         |       |   | — |   |   |
| Rent                                     |       |                                     | 10,455     |                         |       |   | 2,285 |   |   |
| Merger severance  liability              |       |                                     | 10,571     |                         |       |   | — |   |   |
| Restructuring  reserve                   |       |                                     | —     |                         |       |   | 4,926 |   |   |
| Group Insurance                          |       |                                     | 3,046      |                         |       |   | 2,038 |   |   |
| Merger and  acquisition costs            |       |                                     | 4,300      |                         |       |   | 952 |   |   |
| Other                                    |       |                                     | 17,875     |                         |       |   | 7,736 |   |   |
|                                     |       |                                     | 157,227    |                         |       |   | $ | 119,802 |   |   |
| Other long-term  liabilities:            |       |                                     |       |                         |       |   |   |   |   |
| Unfavorable lease  obligations           |       |                                     | $          | 229,893                      |       |   |   | $ | 249,207 |   |   |
| Deferred rent                            |       |                                     | 23,921     |                         |       |   | 4,234 |   |   |
| Casualty claims  and premiums            |       |                                     | 17,523     |                         |       |   | 13,150 |   |   |
| Pension and other  benefits              |       |                                     | 71,784     |                         |       |   | 55,020 |   |   |
| Deferred income                          |       |                                     | 21,877     |                         |       |   | 12,414 |   |   |
| Deferred gain                            |       |                                     | 21,426     |                         |       |   | — |   |   |
| Advance sale  leaseback proceeds         |       |                                     | 6,178      |                         |       |   | 6,916 |   |   |
| Theatre and other  closure               |       |                                     | 5,523      |                         |       |   | 2,000 |   |   |
| Deferred  compensation liability         |       |                                     | 5,307      |                         |       |   | 5,517 |   |   |
| Deferred rebates                         |       |                                     | 9,269      |                         |       |   | — |   |   |
| Other (restated)                         |       |                                     | 4,634      |                         |       |   | 5,782 |   |   |
|                                     |       |                                     | $          | 417,335                      |       |   |   | $ | 354,240 |   |   |

 

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**NOTE 7—CORPORATEBORROWINGS AND CAPITAL AND FINANCING LEASE OBLIGATIONS**

Asummary of the carrying value of corporate borrowings and capital and financinglease obligations is as follows:

| **(In thousands)**                                               | ** ** | **March 30, 2006** | ** ** | **March 31, 2005** | ** ** |
|-----------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                                            | ** ** | **(Successor)**              | ** ** | **(Successor)**              | ** ** |
| New Senior Secured  Credit Facility (6.9% as of March 30, 2006)  |       |                         | $          | 650,000                      |       |   |   | $ | — |   |   |
| 85¤8%  Senior Fixed Rate Notes due 2012                          |       |                         | 250,000    |                         |       |   | 250,000 |   |   |
| Senior Floating Rate  Notes due 2010 (9.0% as of March 30, 2006) |       |                         | 205,000    |                         |       |   | 205,000 |   |   |
| 8% Senior Subordinated  Notes due 2014                                |       |                         | 298,648    |                         |       |   | 298,530 |   |   |
| 97¤8%  Senior Subordinated Notes due 2012                        |       |                         | 187,808    |                         |       |   | 189,455 |   |   |
| 91¤2%  Senior Subordinated Notes due 2011                        |       |                         | 218,138    |                         |       |   | 218,985 |   |   |
| 11% Senior Subordinated  Notes due 2016                               |       |                         | 325,000    |                         |       |   | — |   |   |
| 12% Senior Discount  Notes due 2014                                   |       |                         | 205,127    |                         |       |   | 182,561 |   |   |
| Capital and financing  lease obligations, 103¤4%                 |       |                         | 68,130     |                         |       |   | 65,470 |   |   |
| Cinemex Credit Facility                                               |       |                         | 113,665    |                         |       |   | — |   |   |
| Mortgage Payable                                                      |       |                         | 2,300      |                         |       |   | — |   |   |
|                                                                  |       |                         | 2,523,816  |                         |       |   | 1,410,001 |   |   |
| Less: current maturities                                              |       |                         | 30,804     |                         |       |   | 3,445 |   |   |
|                                                                  |       |                         | $          | 2,493,012                    |       |   |   | $ | 1,406,556 |   |   |

 

Minimumannual payments required under existing capital and financing lease obligations(net present value thereof) and maturities of corporate borrowings as ofMarch 30, 2006 are as follows:

| ** **              | ** ** | **Capital and Financing Lease Obligations** | ** ** | **Principal  Amount of** | ** ** | ** **    | ** ** |
|-------------------------|------------|-----------------------------------------------------------------|------------|-------------------------------|------------|---------------|------------|
| **(In thousands)** | ** ** | **Minimum Lease  Payments**                                | ** ** | **Less Interest**        | ** ** | **Principal** | ** ** | **Corporate  Borrowings** | ** ** | **Total** | ** ** |
| 2007                    |       |                                                            | $          | 11,056                        |       |          |       | $ | 6,942 |   |   | $ | 4,114 |   | $ | 26,690 |   | $ | 30,804 |   |
| 2008                    |       |                                                            | 10,333     |                          |       |          | 6,705      |   |   | 3,628 |   | 28,392 |   | 32,020 |   |
| 2009                    |       |                                                            | 9,969      |                          |       |          | 6,250      |   |   | 3,719 |   | 46,283 |   | 50,002 |   |
| 2010                    |       |                                                            | 9,925      |                          |       |          | 5,826      |   |   | 4,099 |   | 40,600 |   | 44,699 |   |
| 2011                    |       |                                                            | 9,975      |                          |       |          | 5,355      |   |   | 4,620 |   | 424,311 |   | 428,931 |   |
| Thereafter              |       |                                                            | 85,306     |                          |       |          | 37,356     |   |   | 47,950 |   | 1,988,283 |   | 2,036,233 |   |
| Total                   |       |                                                            | $          | 136,564                       |       |          |       | $ | 68,434 |   |   | $ | 68,130 |   | $ | 2,554,559 |   | $ | 2,622,689 |   |

 

**New Senior Secured Credit Facility**

Concurrently with theconsummation of the Mergers, the Company entered into a new credit facility.The new senior secured credit facility is with a syndicate of banks and otherfinancial institutions and provides financing of up to $850.0 million,consisting of a $650.0 million term loan facility with a maturity of sevenyears and a $200.0 million revolving credit facility with a maturity ofsix years. The revolving credit facility will include borrowing capacityavailable for Mexican peso-denominated revolving loans, for letters of creditand for swingline borrowings on same-day notice. The Company’s ability toborrow against the revolving credit facility is limited to approximately$90.0 million as of March 30, 2006 due to restrictions imposed by ourvarious debt agreements.

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Borrowings under the newsenior secured credit facility bear interest at a rate equal to an applicablemargin plus, at the Company’s option, either a base rate or LIBOR. The initialapplicable margin for borrowings under the revolving credit facility is 0.75%with respect to base rate borrowings and 1.75% with respect to LIBORborrowings, and the initial applicable margin for borrowings under the termloan facility is 1.50% with respect to base rate borrowings and 2.125% withrespect to LIBOR borrowings. The applicable margin for such borrowings may bereduced, subject to the Company attaining certain leverage ratios. As of March 30,2006 the annual interest rate on the term loan was 6.9%. In addition to payinginterest on outstanding principal under the new senior secured credit facility,the Company is required to pay a commitment fee to the lenders under therevolving credit facility in respect of the unutilized commitments thereunderat a rate equal to 0.375% (subject to reduction upon attainment of certainleverage ratios). The Company will also pay customary letter of credit fees.The Company may voluntarily repay outstanding loans under the new seniorsecured credit facility at any time without premium or penalty, other than customary“breakage” costs with respect to LIBOR loans. The Company is required to repay$1,625,000 of the term loan quarterly, beginning March 31, 2006 throughSeptember 30, 2012, with any remaining balance due on January 26,2013.

All obligations under thenew senior secured credit facility are guaranteed by each of the Company’s 100%owned domestic subsidiaries. All obligations under the new senior securedcredit facility, and the guarantees of those obligations (as well as cashmanagement obligations and any interest hedging or other swap agreements), aresecured by substantially all of the Company’s assets as well as those of eachsubsidiary guarantor.

The new senior securedcredit facility contains a number of covenants that, among other things, restrict,subject to certain exceptions, the Company’s ability, and the ability of theCompany’s subsidiaries, to sell assets; incur additional indebtedness; prepayother indebtedness (including the Notes); pay dividends and distributions orrepurchase its capital stock; create liens on assets; make investments; makecertain acquisitions; engage in mergers or consolidations; engage in certaintransactions with affiliates; amend certain charter documents and materialagreements governing subordinated indebtedness, including the Notes; change thebusiness conducted by it and its subsidiaries; and enter into agreements thatrestrict dividends from subsidiaries.

In addition, the newsenior secured credit facility requires the Company, commencing with the fiscalquarter ended September 30, 2006, to maintain a maximum net senior securedleverage ratio as long as the commitments under the revolving credit facilityremain outstanding. The new senior secured credit facility also containscertain customary affirmative covenants and events of default. Costs related tothe issuance of the New Senior Secured Credit Facility were capitalized and arecharged to interest expense following the interest method, over the lives ofthe facilities. Unamortized issuance costs were $14,408,000 as ofMarch 30, 2006.

**Cinemex Credit Facility**

In August 2004,Cadena Mexicana de Exhibición S.A. de C.V., a 100% owned subsidiary of Cinemexand an indirect 100% subsidiary of AMCE, entered into a senior secured creditfacility, which remains in place after the consummation of the Merger withLoews. The initial amount drawn under the Cinemex senior secured creditfacility was 1,026.4 million Mexican pesos (approximately$90.0 million as of August 16, 2004). Cinemex drew 106.4 millionMexican pesos (approximately $10 million in August 2005) under thedelayed draw feature of its senior secured credit facility. Approximately$103.9 million was outstanding under the senior secured credit facility as ofMarch 30, 2006. In December 2005, Cadena Mexicana entered into anamended and restated senior secured revolving credit facility which providesfor an available revolving credit line of the peso equivalent of$25.0 million with Banco Inbursa, S.A. and Scotiabank Inverlat, S.A. (therevolving credit facility is peso-denominated debt). During January andFebruary of 2006, Cinemex drew 105.4 million Mexican pesos under therevolving credit facility (approximately $9.8 million was outstanding asof March 30, 2006). All obligations of Cadena Mexicana under the 

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Cinemexsenior secured credit facility and revolving credit facility are guaranteed byCinemex and each existing and future operating subsidiary of Cadena Mexicana,except for specified excluded subsidiaries.

The Cinemex borrowings arenon-recourse to AMCE. Interest on the Cinemex term loan is payable in arrearson a monthly basis at the Interbank Equilibrium Interest Rate (Tasa de InteresInterbancaria de Equilibrio) for a period of 28 days (the TIIE rate), plusan applicable margin of 1.50% in years one and two, 1.75% in year three and2.00% in years four and five. The interest rate on the Cinemex term loan as ofMarch 30, 2006 was 9.31%. This rate was adjusted to 8.5% on approximately$68.8 million of the Cinemex borrowings by an interest rate swap enteredinto on July 28, 2003 and was redesignated as a hedge of the Cinemexsenior secured credit facility on August 16, 2004. The interest rate onthe remaining approximately $35.1 million of the Cinemex borrowings wasadjusted to 9.89% by an interest rate swap entered into on August 5, 2005.The Cinemex term loan matures on August 16, 2009 and will amortizebeginning on February 16, 2007 in installments ranging from 10% to 30% perannum over the five-year period.

The Cinemex senior securedcredit facilities contain customary affirmative and negative covenants withrespect to Cadena Mexicana and each of the guarantors and, in certaininstances, Cadena Mexicana’s subsidiaries that are not guarantors, as definedin the credit agreement. Affirmative covenants include the requirement tofurnish periodic financial statements and ensure that the obligations of CadenaMexicana and the guarantors under the Cinemex senior secured credit facilitiesrank at least *pari passu* with allexisting debt of such parties. Negative covenants include limitations ondisposition of assets, capital expenditures, dividends and additionalindebtedness and liens. The senior secured credit facilities also includecertain financial covenants, including, without limitation, a maximum totalleverage ratio, a maximum total net debt to equity ratio, a minimum interestcoverage ratio, a maximum true-lease adjusted leverage ratio and a minimumconsolidated net worth requirement.

**Notes Due 2011**

On January 27, 1999,the Company sold $225,000,000 aggregate principal amount of its 91¤2%Senior Subordinated Notes due 2011 (“Notes due 2011”) and on March 29,2002, the Company issued an additional $72,880,000 aggregate principal amountof Notes due 2011 in connection with the acquisition of GC Companies. The Notesdue 2011 bear interest at the rate of 91¤2% per annum,payable in February and August. The Notes due 2011 are redeemable at theoption of the Company, in whole or in part, at any time on or afterFebruary 1, 2004 at 104.75% of the principal amount thereof, decliningratably 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 changeof control (as defined in the indenture governing the Notes due 2011), theCompany will be required to make an offer to repurchase each holder’s notes ata price equal to 101% of the principal amount thereof, plus accrued and unpaidinterest to the date of repurchase. The Notes due 2011 are subordinated to allexisting and future senior indebtedness of the Company. The Notes due 2011 areunsecured senior subordinated indebtedness of the Company ranking equally withthe Company’s Notes due 2012, Notes due 2014 and Notes due 2016.

On March 25, 2004,the Company redeemed $83,406,000 of its Notes due 2011 for $87,367,000. A lossof $5,357,000 was recognized in connection with the redemption including a callpremium of $3,962,000, unamortized issue costs of $1,125,000 and unamortizeddiscount of $270,000. The loss is included within other expense in theConsolidated Statements of Operations for the year ended April 1, 2004.

The merger with Marqueeconstituted a “change of control” under the Notes due 2011 which allowed theholders of those notes to require the Company to repurchase their notes at 101%of their aggregate principal amount plus accrued and unpaid interest to thedate of purchase. Noteholders tendered $1,663,000 aggregate principal amount ofthe Notes due 2011, which were repurchased using existing cash.

The indenture governingthe Notes due 2011 contains certain covenants that, among other things, maylimit the ability of the Company and its subsidiaries to incur additionalindebtedness and pay dividends or 

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makedistributions in respect of their capital stock. If the Notes due 2011 attain“investment grade status”, the covenants in the indenture governing the Notesdue 2001 limiting the Company’s ability to incur additional indebtedness andpay dividends will cease to apply.

In connection with themerger with Marquee, the carrying value of the Notes due 2011 was adjusted tofair value. As a result, a premium of $7,073,000 was recorded and will beamortized to interest expense over the remaining term of the notes. Theunamortized premium as of March 30, 2006 is $5,327,000. Unamortizedissuance costs were $0 as of March 30, 2006.

**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 2012bear interest at the rate of 97¤8%per annum, payable in February and August. The Notes due 2012 areredeemable at the option of the Company, in whole or in part, at any time on orafter February 1, 2007 at 104.938% of the principal amount thereof,declining ratably to 100% of the principal amount thereof on or afterFebruary 1, 2010, plus in each case interest accrued to the redemptiondate. Upon a change of control (as defined in the indenture governing the Notesdue 2012), the Company will be required to make an offer to repurchase eachholder’s notes at a price equal to 101% of the principal amount thereof, plusaccrued and unpaid interest to the date of repurchase. The Notes due 2012 are subordinatedto all existing and future senior indebtedness of the Company. The Notes due2012 are unsecured senior subordinated indebtedness of the Company rankingequally with the Company’s Notes due 2011, Notes due 2014 and Notes due 2016.

The indenture governingthe Notes due 2012 contains certain covenants that, among other things, maylimit the ability of the Company and its subsidiaries to incur additionalindebtedness and pay dividends or make distributions in respect of theircapital stock.

In connection with themerger with Marquee, the carrying value of the Notes due 2012 was adjusted tofair value. As a result, a premium of $17,078,000 was recorded and will beamortized to interest expense over the remaining term of the notes. Theunamortized premium as of March 30, 2006 is $12,808,000. Unamortizedissuance costs were $0 as of March 30, 2006.

**Notes Due 2014**

On February 24, 2004,the Company sold $300,000,000 aggregate principal amount of 8% Senior SubordinatedNotes due 2014 (the “Notes due 2014”). The Company applied the net proceedsfrom the sale of Notes due 2014, plus cash on hand, to redeem all outstanding$200,000,000 aggregate principal amount of its 91¤2% SeniorSubordinated Notes due 2009 and $83,406,000 aggregate principal amount of itsNotes due 2011. The Notes due 2014 bear interest at the rate of 8% per annum,payable in March and September. The Notes due 2014 are redeemable at theoption of the Company, in whole or in part, at any time on or afterMarch 1, 2009 at 104.000% of the principal amount thereof, decliningratably to 100% of the principal amount thereof on or after March 1, 2012,plus in each case interest accrued to the redemption date. Upon a change ofcontrol (as defined in the indenture governing the Notes due 2014), the Companywill be required to make an offer to repurchase each holder’s notes at a priceequal to 101% of the principal amount thereof plus accrued and unpaid interestto the date of repurchase. The Notes due 2014 are subordinated to all existingand future senior indebtedness of the Company. The Notes due 2014 are unsecuredsenior subordinated indebtedness of the Company ranking equally with theCompany’s Notes due 2011, Notes due 2012 and Notes due 2016.

 

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The indenture governing the Notes due 2014 containscertain covenants that, among other things, may limit the ability of theCompany and its subsidiaries to incur additional indebtedness and pay dividendsor make distributions in respect of their capital stock.

In connection with themerger with Marquee the carrying value of the Notes due 2014 was adjusted tofair value. As a result, a discount of $1,500,000 was recorded and will beamortized to interest expense over the remaining term of the notes. The unamortizeddiscount as of March 30, 2006 is $1,352,000. Unamortized issuance costswere $0 as of March 30, 2006.

**Fixed Notes andFloating Notes.**

In connection with the merger with Marquee, theCompany became the obligor of $250,000,000 aggregate principal amount of 85¤8%Senior Notes due 2012 (the “Fixed Notes due 2012”) and $205,000,000 aggregateprincipal amount of Senior Floating Notes due 2010 (the “Floating Notes due2010” and, together with the Fixed Notes due 2012, the “Senior Notes”) thatwere each previously issued by Marquee on August 18, 2004. The SeniorNotes (i) rank senior in right of payment to any of the Company’s existingand future subordinated indebtedness, rank equally in right of payment with anyof the Company’s existing and future senior indebtedness and are effectivelysubordinated in right of payment to any of the Company’s secured seniorindebtedness, including the amended credit facility, and (ii) are fullyand unconditionally guaranteed on a joint and several, senior unsecured basis byeach of the Company’s existing and future 100% owned subsidiaries that is aguarantor or direct borrower under the Company’s other indebtedness. The SeniorNotes are structurally subordinated to all existing and future liabilities andpreferred stock of the Company’s subsidiaries that do not guarantee the notes.

The Fixed Notes due 2012 bear interest at the rate of85¤8%per annum, payable on February 15 and August 15 of each year,commencing February 15, 2005. The Fixed Notes due 2012 are redeemable at theCompany’s option, in whole or in part, at any time on or after August 15,2008 at 104.313% of the principal amount thereof, declining ratably to 100% ofthe principal amount thereof on or after August 15, 2010. Costs related tothe issuance of the Fixed Notes due 2012 were capitalized and are charged tointerest expense, following the interest method, over the life of the notes.Unamortized issuance costs of $7,080,000 as of March 30, 2006, areincluded in other long-term assets.

The Floating Notes due 2010bear interest at a rate per annum, reset quarterly, equal to 41¤4%plus the three-month LIBOR interest rate. Interest on the Floating Notesdue 2010 is payable quarterly on February 15, May 15, August 15,and November 15 of each year and interest payments commenced onNovember 15, 2004. The interest rate is currently 9.0% per annum for thequarterly period ending May 14, 2006 and the interest rate is 9.42% perannum for the quarterly period ending August 14, 2006. The Floating Notesdue 2010 are redeemable, in whole or in part, on or after August 15, 2006at 103.000% of the principal amount thereof, declining ratably to 100% of theprincipal amount thereof on or after August 15, 2009. Costs related to theissuance of the Fixed Notes due 2010 were capitalized and are charged to interestexpense, following the interest method, over the life of the notes. Unamortizedissuance costs were $5,534,000 as of March 30, 2006.

**11% SeniorSubordinated Notes Due 2016**

On January 26, 2006, the Company issued$325,000,000 aggregate principal amount of 11% Senior Subordinated Notes (the“Notes due 2016”) issued under an indenture (the “Indenture”), with HSBC BankUSA, National Association, as trustee. The Notes due 2016 will bear interest ata rate of 11% per annum, payable on February 1 and August 1 of eachyear (commencing on August 1, 2006), and have a maturity date ofFebruary 1, 2016.

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The Notes due 2016 are general unsecured seniorsubordinated obligations of the Company, fully and unconditionally guaranteed,jointly and severally, on a senior subordinated basis by each of the Company’sexisting and future domestic restricted subsidiaries that guarantee theCompany’s other indebtedness.

The Company may redeem some or all of the Notes due2016 at any time on or after February 1, 2011 at 105.5% of the principalamount thereof, declining ratably to 100% of the principal amount thereof on orafter February 1, 2014. In addition, the Company may redeem up to 35% ofthe aggregate principal amount of the notes using net proceeds from certainequity offerings completed on or prior to February 1, 2009. If the Companyexperiences a change of control (as defined in the indenture governing theNotes due 2016), the Company will be required to make an offer to repurchasethe Notes due 2016 at a price equal to 101% of the principal amount thereof,plus accrued and unpaid interest, if any, to the date of purchase.

The indenture governing the Notes due 2016 containscovenants limiting other indebtedness, dividends, purchases or redemptions ofstock, transactions with affiliates and mergers and sales of assets. It alsocontains provisions subordinating the Company’s obligations under the Notes due2016 to the Company’s obligations under its senior secured credit facility andother senior indebtedness. Costs related to the issuance of the Notes due 2016were capitalized and are charged to interest expense, following the interestmethod, over the life of the notes. Unamortized issuance costs were $8,766,000as of March 30, 2006.

As of March 30, 2006,the Company was in compliance with all financial covenants relating to the NewSenior Secured Credit Facility, the Cinemex Credit Facility, the 11% SeniorSubordinated Notes due 2016, the 91¤2% SeniorSubordinated Notes due 2011, the 97¤8%Senior Subordinated Notes due 2012, the 8% Senior Subordinated Notes due 2014,the Fixed Notes due 2012 and the Floating Notes due 2010.

**Holdings DiscountNotes Due 2014**

To help finance the merger with Marquee, Holdingsissued $304,000,000 aggregate principal amount at maturity of its 12% SeniorDiscount Notes due 2014 (“Discount Notes due 2014”) for gross proceeds of$169,917,760. The only operations of Holdings prior to the merger were relatedto this financing. Because AMCE was the primary beneficiary of Holdings, whichwas considered a variable interest entity as defined in FIN 46(R), *Consolidation of Variable Interest Entities, anInterpretation of ARB No. 51,* the Predecessor was required toconsolidate Holdings’ operations and financial position into AMCE’s financialstatements as of and through the period ended December 23, 2004.Subsequent to December 23, 2004, the Successor deconsolidated Holdings’assets and liabilities. The results of operations of Holdings included withinthe Predecessor’s Consolidated Statements of Operations for the period fromApril 2, 2004 through December 23, 2004 include interest expense of$7,135,000 and interest income of $831,000. Costs related to the issuance ofthe Discount Notes due 2014 were capitalized and are charged to interestexpense following the interest method over life of the notes. Unamortizedissuance costs were $4,396,000 as of March 30, 2006.

Holdings is a holding company with no operations ofits own and has no ability to service interest or principal on the DiscountNotes due 2014 other than through any dividends it may receive from AMCE. AMCEwill be restricted, in certain circumstances, from paying dividends to Holdingsby the terms of the indentures governing the Fixed Notes due 2012, the FloatingNotes due 2010, the Notes due 2011, the Notes due 2012, the Notes due 2014, theNotes due 2016 and the new senior secured credit facility. AMCE has notguaranteed the indebtedness of Holdings nor pledged any of its assets ascollateral.

Prior to August 15, 2009, unless Holdings electsto pay cash interest as described below, interest on the Discount Notes due2014 will accrete from the date of issuance of the notes until August 15,2009, compounded semiannually.

On any interest paymentdate prior to August 15, 2009, Holdings may elect to commence paying cashinterest (from and after such interest payment date) in which case(i) Holdings will be obligated to pay cash 

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intereston each subsequent interest payment date, (ii) the notes will cease toaccrete after such interest payment date and (iii) the outstandingprincipal amount at the maturity of each note will be equal to the accretedvalue of such notes as of such interest payment date.

**Derivatives**

On July 28, 2003, Cinemex entered into aninterest rate swap agreement with a maturity of December 26, 2007 tomanage its exposure to interest rate movements by effectively converting itsprevious long-term senior secured credit facility from a variable to a fixedrate. The notional amount of the interest rate swap reduces in accordance withthe repayment provisions of Cinemex’s previous long-term senior secured creditfacility. Although this senior secured facility was repaid on August 13,2004, the swap agreement remains outstanding and was redesignated as a hedge ofthe Cinemex term loan.

The face amount of the interest rate swap onMarch 30, 2006 was 750 million Mexican pesos ($68.8 million).The swap agreement provides for the exchange of variable rate payments forfixed rate payments without the effect of leverage and without the exchange ofthe underlying face amount. The variable rate is based on the 28-day TIIErate and the fixed rate is 8.5%. The fair market value of the interest rateswap was $444,000 as of March 30, 2006.

On August 5, 2005,Cinemex entered into a new interest rate swap with a face amount of382.8 million Mexican pesos ($35.1 million) as a complement to theJuly 28, 2003 interest rate swap noted above. The new interest rate swapwas entered into in order to hedge the outstanding debt balance not covered bythe July 28, 2003 interest rate swap. This new interest rate swap providesfor the exchange of variable rate payments for fixed rate payments. Thevariable rate is based on the 28-day TIIE rate and the fixed rate is9.89%. The fair market value of this interest rate swap was $2,257,000 as ofMarch 30, 2006.

**NOTE 8—STOCKHOLDERS’EQUITY**

**SUCCESSORDISCUSSION**

Pursuant to the terms of the Merger Agreement, onJanuary 26, 2006, in connection with the consummation of the Merger,Holdings issued 256,085.61252 voting shares of Class L-1 CommonStock, par value $0.01 per share (“Class L-1 Common Stock”),256,085.61252 voting shares of Class L-2 Common Stock, par value$0.01 per share (“Class L-2 Common Stock” and, together with theClass L-1 Common Stock, the “Class L Common Stock”), 382,475voting shares of Class A-1 Common Stock, par value $0.01 per share(the “Class A-1 Common Stock”), 382,475 voting shares ofClass A-2 Common Stock, par value $0.01 per share (the “Class A-2Common Stock” and, together with the Class A-1 Common Stock, the“Class A Common  Stock”), and5,128.77496 nonvoting shares of Class N Common Stock, par value $0.01 pershare (the Class N Common Stock”), such that (i) the former non-managementstockholders of LCE Holdings, including the Bain Investors, the CarlyleInvestors and the Spectrum Investors (collectively, the “Former LCE Sponsors”),hold all of the outstanding shares of Class L Common Stock, (ii) thepre-existing non-management stockholders of Holdings, including theJPMP Investors and the Apollo Investors (collectively, the “Pre-ExistingHoldings Sponsors” and, the Pre-Existing Holdings Sponsors together withthe Former LCE Sponsors, the “Sponsors”) and other co-investors (the“Coinvestors”), hold all of the outstanding shares of Class A CommonStock, and (iii) management stockholders of Holdings (the “ManagementStockholders” and, together with the Sponsors and Coinvestors, the“Stockholders”) hold all of the non-voting Class N Common Stock.

The Class L Common Stock, Class A Common Stockand Class N Common Stock will automatically convert on a one-for-onebasis into shares of residual voting common stock, par value $0.01 per share,upon (i) written consent of each of the Sponsors or (ii) thecompletion of an initial public offering of capital stock of Holdings or AMCE(an “IPO”).

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The issuance of the equity securities was exempt fromregistration under the Securities Act of 1933 and the rules promulgatedthereunder (the “Securities Act”) in reliance on Section 4(2) of theSecurities Act, as transactions by an issuer not involving a public offering.

The fair value of the shares issued by Holdings forLCE Holdings in connections with the Merger was estimated to be $540,671,000.

In connection with the merger with Marquee, eachissued and outstanding share of the Predecessor’s common stock and class Bstock was converted into the right to receive $19.50 in cash and each issuedand outstanding share of the Predecessor’s preferred stock was converted intothe right to receive $2,727.27 in cash.

See Note 2—Acquisitionsand the Consolidated Statements of Stockholders’ Equity for additional informationregarding the impact on stockholder’s equity of these mergers.

**Common Stock Rightsand Privileges**

Marquee HoldingsClass A-1 voting Common Stock, Class A-2 voting CommonStock, Class N nonvoting Common Stock, Class L-1 voting CommonStock and Class L-2 voting Common Stock entitle the holders thereofto the same rights and privileges, subject to the same qualifications,limitations and restrictions with respect to dividends. Additionally, eachshare of Class A Common Stock, Class L Common Stock and Class NCommon Stock shall automatically convert into one share of Residual CommonStock on a one-for-one basis immediately prior to the consummationof an Initial Public Offering.

**PREDECESSORDISCUSSION**

The Company had twoclasses of common stock outstanding, Common Stock and Class B Stock, whichdid not provide for different dividend rates or other preferences, other thanvoting rights, between the two classes of common stock.

**Voting Rights**

The holders of Common Stock were entitled to one voteper share and, except for the election of directors, voted together as a singleclass with the holders of the Company’s Class B Stock and holders of theCompany’s Series A Convertible Preferred Stock who were entitled to votetheir shares, on an as-converted basis, subject to the right to vote as aseparate class as required by law and on certain charter amendments affectingthe number of authorized shares of Common Stock or the par value or relativepowers, preferences or special rights thereof.

The holders of Class B Stock were entitled to tenvotes per share and, except for the election of directors, vote together as asingle class with the holders of Common Stock and holders of the Company’sSeries A Convertible Preferred Stock who were entitled to vote theirshares, on an as-converted basis, subject to the right to vote as a separateclass as required by law and on certain charter amendments affecting the numberof 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 theinitial purchasers of the Company’s Preferred Stock, the Company could not changethe size of the Board of Directors, which had eight members, without theapproval of the initial purchasers as long as they continued to own at least117,500 shares of Preferred Stock. Also, so long as the initial purchaserscontinued to hold this and other preferred stock approval rights, the initialpurchasers had the right to elect three directors to the Company’s Board of Directors.The remaining members of the board were elected by the holders of Common Stockand Class B stock. Under the Company’s restated and amended certificate ofincorporation, holders of Common Stock, voting separately as a class, had theright to elect two directors, and the holders of Common Stock and 

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Class B Stock, votingtogether as a single class, with each share of Common Stock having one vote pershare and each share of Class B Stock having ten votes per share, had theright to elect three directors. In the event that no shares of Class BStock remained outstanding, the holders of Common Stock could elect all of themembers of the Board of Directors to be elected by holders other than holdersof Preferred Stock, with each share having one vote for such purpose. Holdersof Common Stock and Class B Stock do not have cumulative voting rights inelections of directors.

Upon transfer of shares of Series A ConvertiblePreferred Stock to a transferee that is not an affiliate of the initialpurchasers, the transferee holder of Series A Convertible Preferred Stockwas entitled to vote on an as-converted basis with the holders of the Company’sCommon Stock and Class B Stock on all matters except the election ofdirectors and any matter reserved by law or the Company’s restated and amendedcertificate of incorporation for consideration exclusively by the holders ofCommon Stock or Class B Stock. Holders of the Series A ConvertiblePreferred Stock also had 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 optionof the holders thereof prior to April 19, 2011) and on any adverse changeto the preference, rights and powers of the Series A Convertible PreferredStock.

If an event of defaultwith respect to the Company’s Preferred Stock (as defined below) occurred andwas not cured or waived within 45 days, then the holders of PreferredStock would have had the right to elect that number of directors that, whenadded to those directors already elected by the holders of Series AConvertible Preferred Stock, constituted a majority of the Board of Directors.An “event of default” is defined as (i) an event of default under theCompany’s credit facility, the note indentures or any other indebtedness inexcess of $10 million, (ii) the Company’s failure to pay cashdividends on the Preferred Stock when required under the terms thereof or(iii) the Company’s violation of the provisions of the investmentagreement relating to the preferred stock approval rights.

**Equity Securities**

The authorized common stock of AMCE consisted of twoclasses 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 could have electedto convert at any time on a share-for-share basis into Common Stock.

The Company had authorized 10,000,000 shares ofPreferred Stock (662¤3¢par value), of which 2,000,000 shares had been designated under the Company’sCertificate of Designations as Series A Convertible Preferred Stock(“Series A Preferred”) and 2,000,000 shares had been designated asSeries B Exchangeable Preferred Stock (“Series B Preferred”, andcollectively with the Series A Preferred, the “Preferred Stock”). As ofApril 1, 2004, 299,477 Series A Preferred shares were issued andoutstanding.

On April 19, 2001, the Company issued 92,000shares of Series A Preferred and 158,000 shares of Series B Preferredat 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. OnSeptember 13, 2001, all shares of Series B Preferred were exchangedfor an equal number of shares of Series A Preferred. The Preferred Stockhas preference in liquidation equal to the greater of $1,000 per share plusaccrued and unpaid dividends, or the amount that would have been payable if thePreferred Stock were converted into Common Stock.

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The Series A Preferred was convertible at theoption of the holder into shares of Common Stock at a conversion price of $7.15per Common Stock share (as adjusted, the “Conversion Price”) resulting in acurrent conversion rate of 139.86 shares of Common Stock for each share ofSeries A Preferred.

Dividends on the Series A Preferred accumulatedat an annual rate of 6.75% and were payable when, as and if declared by the Company’sBoard of Directors. Dividends on the Series A Preferred must have beenpaid with additional Series A Preferred shares for the first three yearsfrom April 19, 2001. Between April 20, 2004 and April 19, 2008,dividends could have been paid in either additional Series A Preferredshares or cash, at the Company’s option, and must have been paid in cash afterApril 19, 2008, unless prohibited by the Indentures for the Notes due2011, in which case such dividends were payable in additional Series APreferred shares.

Preferred Stock dividends paid in shares of PreferredStock were recorded at their estimated fair value on the date of declaration.The carrying value of Series A Preferred was accreted to its redemptionprice (including any accrued and unpaid dividends) over ten years (the periodfrom initial issuance until redemption first becomes available to the holder ofthe security) using the interest method. Preferred stock dividends of1,023 shares of Preferred Stock valued at $2,362,000 for the period fromApril 1, 2004 to April 19, 2004, cash dividends of $9,349,000 for theperiod from April 19, 2004 through September 30, 2004, specialPreferred Stock dividends and 33,408 shares of Preferred Stock valued at$91,113,000 and accretion of $1,476,000 were recorded during the Predecessorperiod ended December 23, 2004. During fiscal 2004, the Company recordeddividends of 19,697 shares of Series A Preferred valued at $40,277,000.

The holders of Series A Preferred shares werealso entitled to a special dividend of additional Series A Preferredshares if a Change of Control (as defined in the Certificate of Designations)of the Company occurred prior to April 19, 2006 equal to the dividendsthat they would have received through April 19, 2006 if the Change ofControl had not occurred. If dividends were paid on the Common Stock in any fiscalperiod, the holders of Series A Preferred shares were entitled to receivedividends on an “as converted” basis to the extent such dividends were greaterthan the Series A Preferred dividends otherwise payable in such fiscalperiod.

The Preferred Stock may have been redeemed in wholeand not in part by the Company at the Company’s option at any time afterApril 19, 2006 for cash equal to the liquidation preference, provided thatthe average Common Stock closing price for the 20 trading days preceding thenotice of redemption exceeded 150% of the Conversion Price. The Series APreferred must have been redeemed by the Company at the option of a holder atany 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 had theright to approve the payment of dividends on the Company’s other capital stock.

In addition, duringthe period that they are entitled to elect three Directors, the initialpurchasers of the Company’s Preferred Stock must have approved certaincorporate actions before the Company could take them. These Preferred StockApproval Rights included but were not limited to, limitations on the Company’sability to:

·       amendthe Company’s restated and amended certificate of incorporation or bylaws;

·       create,authorize or issue any class, series or shares of capital stock;

·       merge,consolidate or consummate a similar transaction;

·       incurdebt or amend or alter the material terms of any existing or future materialsenior debt; and

·       acquire or dispose of anymaterial business or assets.

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**Stock-BasedCompensation**

Holdings, has adopted a stock-based compensationplan that permits grants of up to 49,107.44682 options on Holdings stock and hasgranted options on 600.00000 and 38,876.72872 of its shares to certainemployees during the Successor periods ended March 30, 2006 andMarch 31, 2005, respectively. As of March 30, 2006, there was $13,740,000of total estimated unrecognized compensation cost related to nonvested stock-basedcompensation arrangements under the Holdings plan.

Holdings is required to reflect the stock-basedcompensation expense associated with the options within its consolidatedstatements of operations. The options have a ten year term, the options grantedduring fiscal 2005 step-vest in equal amounts over five years with the finalvesting occurring on December 23, 2009, the options granted during fiscal2006 step vest in equal amounts over three years with final vesting occurringon December 23, 2008, but vesting may accelerate for certain participantsif there is a change of control (as defined in the plan). The Successor hasrecorded $3,433,000 and $1,201,000 of stock-based compensation expenserelated to these options and has recognized an income tax benefit ofapproximately $0 and $492,000 in its Consolidated Statements of Operationsduring the Successor periods ended March 30, 2006 and March 31, 2005,respectively. One of the holders of stock options has written put rights deemedto be in the holder’s control associated with his options whereby he canrequire Holdings to repurchase his options and as such $142,000 of the Stock-basedCompensation obligation is recorded in other long term liabilities in theConsolidated Balance Sheets at March 30, 2006. The Successor accounts forstock options using the fair value method of accounting as prescribed bySFAS 123 (R) and SAB 107 and has valued the options using theBlack-Scholes formula. See Note 1—The Company and SignificantAccounting Policies, Stock-based Compensation for more informationregarding Holdings stock option plan.

During the second quarter of fiscal 2004 thePredecessor’s shareholders approved and the Predecessor adopted the 2003 AMC Entertainment Inc.Long-Term Incentive Plan (the “2003 LTIP”). The 2003 LTIP provides for fivebasic types of awards: (i) grants of stock options which are eitherincentive or non-qualified stock options, (ii) grants of restricted stockawards, (iii) grants of deferred stock units, (iv) grants of deferredcash awards and (v) performance grants which may be settled in stockoptions, shares of common stock, restricted stock, deferred stock units,deferred cash awards, or cash, or any combination thereof. The number of sharesof Common Stock which could have been sold or granted under the plan was not toexceed 6,500,000 shares. The 2003 LTIP provided that the option exercise pricefor stock options was not to be less than the fair market value of stock at thedate of grant, options may not have been repriced and unexercised optionsexpired no later than ten years after date of grant.

On June 11, 2004, the Board of Directors madeperformance grants for fiscal 2005 with award opportunities having an aggregatevalue of $12,606,000. These grants were subject to the satisfaction ofperformance measures during fiscal 2005 and/or the exercise of discretion bythe Compensation Committee of the Board of Directors. The Company did not meetthe performance measures for fiscal 2005. Accordingly, the Company had noexpense or accrual recorded for the fiscal 2005 performance grants.

On June 11, 2004, the Compensation Committee ofthe Board of Directors awarded 527,398 deferred stock units with a fair valueof $7,917,000 and deferred cash award of $1,606,000, to employees, which representeda 100% award based on achievement of all target-based grants made onSeptember 18, 2003. Holdings made payments of $10,150,000 to the holdersof 520,350 deferred stock units that vested upon closing the merger with Marqueewhich was considered as a part of the purchase price in connection with thismerger.

The Predecessor accounted for the stock options,restricted stock awards and deferred stock units under plans that it sponsoredfollowing the recognition and measurement provisions of APB No. 25, *Accounting for Stock issued to Employees*and related interpretations. No stock-based employee compensation expenserelated to restricted stock awards and deferred stock units was recorded duringthe 

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Predecessor period endedDecember 23, 2004 and $8,727,000 was reflected in net earnings for thePredecessor period ended April 1, 2004. No stock-based employeecompensation expense for stock options was reflected in net earnings for theperiod, as all stock options granted under those plans had an exercise priceequal to the fair market value of the underlying common stock on the date ofgrant. Holdings made payments of $7,750,000 to the holders of 1,451,525 vestedin-the-money options that vested upon closing the merger with Marquee which wasconsidered as a part of the purchase price in connection with this merger.

There are currently no outstanding share-basedawards under the Company’s 2003 LTIP subsequent to the merger with Marquee.

Asummary of stock option activity under all plans is as follows:

| ** **                          | ** ** | **March 30, 2006** | ** ** | **From Inception July  16, 2004  through March 31, 2005** | ** ** | **April 2, 2004 through   December 23, 2004** | ** ** | **April 1, 2004**                            | ** **   |
|-------------------------------------|------------|------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|--------------------------------------------------------|--------------|
| ** **                          | ** ** | **Number of  Shares**   | ** ** | **Weighted  Average  Exercise  Price Per  Share**                                            | ** ** | **Number of  Shares**                                                  | ** ** | **Weighted  Average  Exercise  Price Per  Share** | ** **   | **Number of  Shares** | ** ** | **Weighted  Average  Exercise  Price Per  Share** | ** ** | **Number of  Shares** | ** ** | **Weighted  Average  Exercise  Price Per  Share** | ** ** |
| ** **                          | ** ** | **(Successor)**              | ** ** | **(Successor)**                                                                                   | ** ** | **(Predecessor)**                                                           | ** ** | **(Predecessor)**                                      | ** **   |
| Outstanding  at beginning of year   |       | 38,876.72872                 |       |                                                                                              | $          | 1,000                                                                       |       |                                                   | —       |   |   | $ | — |   |   | 1,500,640 |   |   | $ | 14.19 |   |   |   | 1,978,165 |   |   |   | $ | 12.98 |   |   |
| Granted(2)                          |       | 600.0000                     |       |                                                                                              | $          | 1,000                                                                       |       |                                                   | 38,876.72872 |   |   | 1,000 |   |   | — |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Canceled                            |       | —                       |       |                                                                                              | —     |                                                                        |       | —                                                 |         |   | — |   |   | (42,200 | ) |   | — |   |   |   | (20,940 | ) |   |   | 13.09 |   |   |
| Exercised(1)                        |       | —                       |       |                                                                                              | —     |                                                                        |       | —                                                 |         |   | — |   |   | (1,458,440 | ) |   | — |   |   |   | (456,585 | ) |   |   | 8.54 |   |   |
| Outstanding  at end of year(3)      |       | 39,476.72872                 |       |                                                                                              | $          | 1,000                                                                       |       |                                                   | 38,876.72872 |   |   | $ | 1,000 |   |   | — |   |   | $ | 14.19 |   |   |   | 1,500,640 |   |   |   | $ | 14.32 |   |   |
| Exercisable  at end of year         |       | 7,775.34574                  |       |                                                                                              | $          | —                                                                      |       |                                                   | —       |   |   | $ | — |   |   | — |   |   | $ | — |   |   |   | 1,292,650 |   |   |   | $ | 14.19 |   |   |
| Available for grant at  end of year |       | 9,630.71809                  |       |                                                                                              |       |                                                                        |       | 10,230.71809                                           |         |   |   |   |   | — |   |   |   |   |   |   | 5,969,497 |   |   |   |   |   |   |

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(1)                 The Predecessor period ended December 23, 2004,includes 1,451,525 options automatically vested and purchased as a result ofthe merger with Marquee, and 6,915 options exercised during the period.

(2)                 The weighted average fair value per option granted was$230.75 and $575.48 during fiscal 2006 and 2005, respectively.

(3)                 The weighted average remaining contractuallife for outstanding options was 8.7 years, 9.7 years and 6.2 years for fiscal2006, 2005 and 2004, respectively.

***Stock Appreciation Rights***

In November 2004, Loews entered into a StockAppreciation Rights Agreement (the “SAR Agreement”) with the Chief ExecutiveOfficer of Cinemex under which stock appreciation rights (“SARs”) based uponthe equity value of Cinemex were granted. The SARs granted allow for thereceipt of cash payments equivalent to the increase in value of 4,405 units(representing 4,405 shares of Cinemex Common Stock and 67,737 shares of CinemexPreferred Stock) from July 30, 2004. The SARs equity valuation is basedupon the equity of Cinemax.

No stock-based compensation expense related tothe SARs granted is reflected for the fifty-two weeks ended March 30,2006, as there has been no appreciation in the equity value (as defined in theSARs Agrement) of Cinemex from the date of the Merger.

89

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**NOTE 9—INCOME TAXES**

Incometax provision reflected in the Consolidated Statements of Operations for theperiods in the three years ended March 30, 2006 consists of the followingcomponents:

| **(In thousands)**                              | ** ** | **March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **April 1, 2004** | ** ** |
|------------------------------------------------------|------------|------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                           | ** ** | **(Successor)**              | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**           | ** ** |
| Current:                                             |       |                         |       |                                                                                |       |       |       |                                                              |       |                        |       |   |   |   |   |   |   |   |   |
| Federal                                              |       |                         | $          | (232                                                                                | )          |       |       | $                                                                 | (1,416     | )                           |       |   |   |   | $ | 851 |   |   |   | $ | (6,130 | ) |   |
| Foreign                                              |       |                         | 562        |                                                                                |       |       | —     |                                                              |       |                        |       |   | — |   |   |   | — |   |   |
| State                                                |       |                         | 1,230      |                                                                                |       |       | (202       | )                                                                 |       |                        |       |   | 3,571 |   |   |   | (17 | ) |   |
| Total current                                        |       |                         | 1,560      |                                                                                |       |       | (1,618     | )                                                                 |       |                        |       |   | 4,422 |   |   |   | (6,147 | ) |   |
| Deferred:                                            |       |                         |       |                                                                                |       |       |       |                                                              |       |                        |       |   |   |   |   |   |   |   |   |
| Federal                                              |       |                         | 79,212     |                                                                                |       |       | (7,826     | )                                                                 |       |                        |       |   | 9,046 |   |   |   | 11,635 |   |   |
| Foreign                                              |       |                         | 834        |                                                                                |       |       | 80         |                                                              |       |                        |       |   | 240 |   |   |   | 1,619 |   |   |
| State                                                |       |                         | 10,594     |                                                                                |       |       | 164        |                                                              |       |                        |       |   | 1,292 |   |   |   | 1,293 |   |   |
| Total deferred                                       |       |                         | 90,640     |                                                                                |       |       | (7,582     | )                                                                 |       |                        |       |   | 10,578 |   |   |   | 14,547 |   |   |
| Total provision                                      |       |                         | 92,200     |                                                                                |       |       | (9,200     | )                                                                 |       |                        |       |   | 15,000 |   |   |   | 8,400 |   |   |
| Tax benefit (provision) of discontinued operations   |       |                         | (20,400    | )                                                                                   |       |       | (80        | )                                                                 |       |                        |       |   | (240 | ) |   |   | 2,000 |   |   |
| Total provision (benefit) from continuing operations |       |                         | $          | 71,800                                                                              |       |       |       | $                                                                 | (9,280     | )                           |       |   |   |   | $ | 14,760 |   |   |   | $ | 10,400 |   |   |

 

Income from pre-taxlosses before income taxes consisted of the following:

| **(In thousands)** | ** ** | **March 30, 2006  (restated)** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **April 1, 2004** | ** ** |
|-------------------------|------------|------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **              | ** ** | **(Successor)**                          | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**           | ** ** |
| Domestic                |       |                                     | $          | (107,492                                                                            | )          |       |       | $                                                                 | (52,025    | )                           |       |   |   |   | $ | (3,689 | ) |   |   | $ | 18,586 |   |   |
| Foreign                 |       |                                     | (16,531    | )                                                                                   |       |       | (1,565     | )                                                                 |       |                        |       |   | (17,189 | ) |   |   | (20,900 | ) |   |
| Total                   |       |                                     | $          | (124,023                                                                            | )          |       |       | $                                                                 | (53,590    | )                           |       |   |   |   | $ | (20,878 | ) |   |   | $ | (2,314 | ) |   |

 

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Thedifference between the effective tax rate on earnings (loss) before incometaxes and the U.S. federal income tax statutory rate is as follows:

| ** **                                         | ** ** | **March 30, 2006  (restated)** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **April 4, 2003  through  April 1, 2004** | ** ** |
|----------------------------------------------------|------------|------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                         | ** ** | **(Successor)**                          | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**                                             | ** ** |
| Federal statutory rate                             |       |                                     | 35.0       | %                                                                                   |       |       | 35.0       | %                                                                 |       |                                                          |       |   | 35.0 | % |   |   | 35.0 | % |   |
| Merger costs                                       |       |                                     | —     |                                                                                |       |       | (13.1      | )                                                                 |       |                                                          |       |   | (68.8 | ) |   |   | — |   |   |
| State income taxes, net  of federal tax benefit    |       |                                     | 4.9        |                                                                                |       |       | —     |                                                              |       |                                                          |       |   | (7.0 | ) |   |   | (35.8 | ) |   |
| Valuation allowance                                |       |                                     | (96.5      | )                                                                                   |       |       | (1.0       | )                                                                 |       |                                                          |       |   | (28.8 | ) |   |   | (358.3 | ) |   |
| Non-deductible  goodwill and other permanent items |       |                                     | (17.1      | )                                                                                   |       |       | —     |                                                              |       |                                                          |       |   | — |   |   |   | — |   |   |
| Other, net                                         |       |                                     | (0.6       | )                                                                                   |       |       | (3.7       | )                                                                 |       |                                                          |       |   | (2.2 | ) |   |   | (3.9 | ) |   |
| Effective tax rate                                 |       |                                     | (74.3      | )%                                                                                  |       |       | 17.2       | %                                                                 |       |                                                          |       |   | (71.8 | )% |   |   | (363.0 | )% |   |

 

Non-deductible goodwill relates to the goodwilldisposed of in connection with the sale of the Japan theatres, which isdiscussed in Note 2.

Successor merger and acquisitions costs of $20,000,000during the period from inception July 16, 2004 through March 31, 2005and Predecessor merger and acquisitions costs of $41,032,000 during the periodApril 2, 2004 through December 23, 2004 are being treated asnon-deductible.

The significant componentsof deferred income tax assets and liabilities as of March 30, 2006 andMarch 31, 2005 are as follows:

| ** **                                | ** ** | **March 30, 2006**      | ** ** | **March 31, 2005**      | ** ** |
|-------------------------------------------|------------|-----------------------------------|------------|-----------------------------------|------------|
| ** **                                | ** ** | **Deferred Income Tax** | ** ** | **Deferred Income Tax** | ** ** |
| ** **                                | ** ** | **(Successor)**                   | ** ** | **(Successor)**                   | ** ** |
| **(In thousands)**                   | ** ** | **Assets**                        | ** ** | **Liabilities**                   | ** ** | **Assets** | ** ** | **Liabilities** | ** ** |
| Property                                  |       | $                                 | 62,037     |                              | $          | (135,030 | ) | $ | 50,416 |   | $ | (169,537 | ) |
| Capital lease  obligations                |       | 1,808                             |       | —                            |       | 5,176 |   | — |   |
| Accrued reserves and  liabilities         |       | 89,456                            |       | —                            |       | 67,496 |   | — |   |
| Deferred rents                            |       | 84,670                            |       | —                            |       | 97,877 |   | — |   |
| Alternative minimum tax  credit carryover |       | 11,581                            |       | —                            |       | 11,932 |   | — |   |
| Capital loss  carryforward                |       | 27,128                            |       | —                            |       | 38,698 |   | — |   |
| Net operating loss  carryforward          |       | 280,424                           |       | —                            |       | 40,547 |   | — |   |
| Other                                     |       | 55,247                            |       | (27,191                           | )          | 53,929 |   | (6,236 | ) |
| Total                                     |       | $                                 | 612,351    |                              | $          | (162,221 | ) | $ | 366,071 |   | $ | (175,773 | ) |
| Less: Valuation  allowance                |       | (441,150                          | )          | —                            |       | (118,719 | ) | — |   |
| Net                                       |       | 171,201                           |       | (162,221                          | )          | 247,352 |   | (175,773 | ) |
| Less: Current deferred  income taxes      |       | 5,416                             |       | —                            |       | 18,560 |   | — |   |
| Total noncurrent  deferred income taxes   |       | $                                 | 165,785    |                              | $          | (162,221 | ) | $ | 228,792 |   | $ | (175,773 | ) |
| Net noncurrent deferred  income taxes     |       | $                                 | 3,564      |                              |       |   | $ | 53,019 |   |   |   |

 

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The Company’s federal income tax loss carryforward of$648,000,000 will begin to expire in 2008 and will completely expire in 2026and will be limited to approximately $23,000,000 annually due to the sale ofPreferred Stock, the acquisition of GC and the acquisition of Loews. TheCompany’s state income tax loss carryforwards of $672,000,000 may be used overvarious periods ranging from 5 to 20 years.

As of March 30, 2006, management believed it wasmore likely than not that net deferred tax assets related to tax net operatingloss carryforwards and certain deferred tax assets of foreign subsidiarieswould not be realized due to uncertainties as to the timing and amounts offuture taxable income as a result of the Mergers. The Successor has recorded afull valuation allowance against its net deferred tax assets in U.S. andcertain foreign jurisdictions of $439,460,000 and a partial valuation allowanceof $1,690,000 related to deferred tax assets in the Mexico tax jurisdiction asof March 30, 2006.

Management believes it is more likely than not thatthe Company will generate future taxable income in the Mexico tax jurisdictionto realize its remaining recorded deferred tax assets. However, the amount ofthe deferred tax asset considered realizable could be reduced in the future ifestimates of future taxable income during the carryforward period are reduced.

The Company had avaluation allowance of $441,150,000, $118,719,200, $26,485,000, $20,592,000 and$10,254,000 as of March 30, 2006, March 31, 2005, April 1, 2004,April 3, 2003 and March 28, 2002, respectively. All changes in thevaluation allowance were recorded in the income tax provision except for$206,647,000 which was recorded during the Successor period endedMarch 30, 2006 as part of the purchase price allocation in connection withthe Merger and merger with Marquee, $40,062,000 which was recorded during theSuccessor period ended March 31, 2005 as part of the purchase price allocationin connection with the merger with Marquee and $2,600,000 which was recorded inloss from discontinued operations in the year ended March 28, 2002.

**NOTE 10—LEASES**

During fiscal 1998, the Company sold the real estateassets associated with 13 theatres to Entertainment Properties Trust (“EPT”)for an aggregate purchase price of $283,800,000 (the “Sale and Lease BackTransaction”). The Company leased the real estate assets associated with thetheatres from EPT pursuant to non-cancelable operating leases with termsranging from 13 to 15 years at an initial lease rate of 10.5% with optionsto extend for up to an additional 20 years. The leases are triple netleases that require the Company to pay substantially all expenses associatedwith the operation of the theatres, such as taxes and other governmentalcharges, insurance, utilities, service, maintenance and any ground leasepayments. The Company has accounted for this transaction as a sale andleaseback in accordance with Statement of Financial Accounting StandardsNo. 98 *Accounting for Leases*.The land and building improvements have been removed from the ConsolidatedBalance Sheets. During fiscal 2000, the Company sold the building andimprovements associated with one of the Company’s theatres to EPT for proceedsof $17,600,000 under terms similar to the above Sale and Leaseback Transaction.During fiscal 2002, the Company sold the land at this theatre to EPT forproceeds of $7,500,000 under terms similar to the above Sale and LeasebackTransaction and at an initial lease rate of 10.75%. During fiscal 2003, theCompany sold the real estate assets associated with 2 theatres to EPT forproceeds of $43,665,000 and then leased the real estate assets associated withthese theatres pursuant to non-cancelable operating leases with terms of20 years at an initial lease rate of 11% with options to extend for up toan additional 15 years. On March 30, 2004, the Company sold the realestate assets associated with 3 theatres to EPT for proceeds of $63,911,000 andthen leased the real estate assets associated with these theatres pursuant tonon-cancelable operating leases with terms of 20 years at an initial leaserate of 9.5% with options to extend for up to 15 additional years. OnMarch 31, 2005, the Company sold the real estate assets associated withone theatre and adjoining retail space to EPT for proceeds of $50,910,000 andthen leased the real estate assets associated with this theatre pursuant tonon-cancelable operating lease with a term of 20 years at an initial leaserate of 9.2% with options to extend for up to 14 additional years. OnMarch 30, 2006, the Company sold the real estate assets 

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associated with 2 theatresto EPT for proceeds of $35,010,000 and then leased the real estate assets associatedwith these theatres pursuant to non-cancelable operating leases with terms of15 and 18 years at an initial lease rate of 9.25% with options to extendfor up to 20 additional years.

Following is a schedule,by year, of future minimum rental payments required under existing operatingleases that have initial or remaining non-cancelable terms in excess of oneyear as of March 30, 2006 (Cinemex operating lease totals include aninflationary factor in the annual minimum lease commitments for all applicableleases):

| **(In thousands)**         | ** ** | **Minimum operating  lease payments** | ** ** |
|---------------------------------|------------|-------------------------------------------------|------------|
| 2007                            |       |                                            | $          | 408,007 |   |   |
| 2008                            |       |                                            | 422,674    |   |   |
| 2009                            |       |                                            | 419,634    |   |   |
| 2010                            |       |                                            | 416,863    |   |   |
| 2011                            |       |                                            | 408,945    |   |   |
| Thereafter                      |       |                                            | 3,341,769  |   |   |
| Total minimum payments required |       |                                            | $          | 5,417,892 |   |   |

 

The Company has also entered into agreements to leasespace for the operation of 13 theatres with 206 screens not yet fullyconstructed. The future minimum rental payments required under the terms ofthese leases included above total approximately $438,000,000. The Companyrecords rent expense on a straight-line basis over the base term of the leasecommencing with the date the Company has “control and access” to the leasedpremises.

Included in long-term liabilities as of March 30,2006 and March 31, 2005 is $253,814,000 and $253,441,000, respectively, ofdeferred rent representing future minimum rental payments for leases withscheduled rent increases and unfavorable lease liabilities including thoserelated to the Merger transaction.

Rent expense is summarizedas follows:

| **(In thousands)**                    | ** ** | **March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **From April 2, 2004  through  December 23, 2004** | ** ** | **52 Weeks  April 1, 2004** | ** ** |
|--------------------------------------------|------------|------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                 | ** ** | **(Successor)**              | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                           | ** ** | **(Predecessor)**                          | ** ** |
| Minimum rentals                            |       |                         | $          | 292,732                                                                             |       |       |       | $                                                                           | 71,189     |                                       |       |   |   |   | $ | 195,932 |   |   |   | $ | 252,047 |   |   |
| Common area expenses                       |       |                         | 32,711     |                                                                                |       |       | 8,007      |                                                                        |       |                                       |       |   | 21,207 |   |   |   | 26,317 |   |   |
| Percentage rentals based  on revenues      |       |                         | 4,435      |                                                                                |       |       | 1,130      |                                                                        |       |                                       |       |   | 3,827 |   |   |   | 4,373 |   |   |
| Furniture, fixtures and  equipment rentals |       |                         | —     |                                                                                |       |       | 450        |                                                                        |       |                                       |       |   | 2,768 |   |   |   | 5,584 |   |   |
| Theatre Rent                               |       |                         | 329,878    |                                                                                |       |       | 80,776     |                                                                        |       |                                       |       |   | 223,734 |   |   |   | 288,321 |   |   |
| NCN and other                              |       |                         | —     |                                                                                |       |       | 38         |                                                                        |       |                                       |       |   | 587 |   |   |   | 1,021 |   |   |
| G & A and other                   |       |                         | 1,559      |                                                                                |       |       | 443        |                                                                        |       |                                       |       |   | 954 |   |   |   | 3,084 |   |   |
| Total                                      |       |                         | $          | 331,437                                                                             |       |       |       | $                                                                           | 81,257     |                                       |       |   |   |   | 225,275 |   |   |   | $ | 292,426 |   |   |

 

**NOTE 11—EMPLOYEEBENEFIT PLANS**

The Company sponsors a non-contributory qualifieddefined benefit pension plan generally covering all employees age 21 or olderwho have completed at least 1,000 hours of service in their first twelve 

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months of employment, orin a calendar year ending thereafter, and who are not covered by a collectivebargaining agreement.

Under the plan, benefits are integrated with SocialSecurity and paid to participants at retirement based primarily upon years ofcredited service with the Company (not exceeding thirty-five) and the employee’shighest five year average compensation. Contributions to the plan reflectbenefits attributed to employee’s services to date, as well as servicesexpected to be earned in the future. The Company expects to contribute$1,400,000 to the defined benefit pension plan during fiscal 2007. Plan assetsare invested in pooled separate accounts with an insurance company pursuant towhich the plan’s benefits are paid to retired and terminated employees and thebeneficiaries of deceased employees. The Company also sponsors two non-contributorynonqualified deferred compensation plans which provide additional pensionbenefits to certain eligible employees.

As a result of the Merger, the Company acquired twopension plans in the U.S and one in Mexico. One of the U.S. plans is a frozencash balance plan and neither of the U.S. plans have admitted new participantspost-merger. The future existence of the U.S. plans will serve to pay benefitsto the current participants under the requirements of the plan. In Mexico, aSeniority Premium and Termination Indemnity for Retirement Plan (the “MexicoPlan”) is provided to all eligible employees of Servicios CinematograficosEspecializados, S.A. de C.V. (“SCE”) and a Termination Indemnity RetirementPlan to all eligible employees of Servino, S.A. de C.V. (“Servino”). Both SCEand Servino are wholly owned subsidiaries of Cinemex. The Mexico Planestablishes compensation upon retirement (pension and seniority premium) basedon years of service rendered and the employee’s age and salary at the date ofretirement. This plan has not been funded as of March 30, 2006.

The Company currently offers eligible retirees theopportunity to participate in a health plan (medical, dental, vision andprescription) and a life insurance plan. Employees may become eligible forthese benefits at retirement provided the employee is at least age 55 andhas at least 15 years of credited service after age 40 and isparticipating in the American Multi-Cinema, Inc. Employee BenefitsWelfare Plan as of the date of termination. The health plan is contributory,with retiree contributions adjusted annually; the life insurance plan isnoncontributory. The accounting for the health plan currently anticipatesfuture modifications to the cost-sharing provisions to provide for retireepremium contributions of approximately 20% of total premiums, increases indeductibles and co-insurance at the medical inflation rate and coordinationwith Medicare. The retiree health plan is not funded.

The Company’s reorganization activities commencingduring fiscal 2005 resulted in a partial curtailment of the Company’spostretirement and one of its non-contributory nonqualified deferredcompensation plans. The Company defers curtailment gains until they arerealized and, as such, curtailment gains of $2,251,000 were recognized for theyear ended March 30, 2006.

The reorganization activities also prompted anamendment to the non-contributory nonqualified deferred compensation planwhereby participants who are terminated as a result of reorganization activitiesand who have at least 15 years of service are eligible to receive benefitsunder the plan. Prior to this amendment, participants were required to havereached age 55 and have 15 years of service to be eligible forbenefits.

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Themeasurement date used to determine pension and other postretirement benefits isJanuary 1 of the fiscal year for which measurements are made. Theassumptions to determine benefit obligations and net periodic benefit cost areas follows:

| ** **                                                              | ** ** | **LCE**                  | ** ** | **AMCE**                  | ** ** | ** **               | ** ** | **LCE**               | ** ** | **AMCE**                | ** ** |
|-------------------------------------------------------------------------|------------|--------------------------|------------|---------------------------|------------|--------------------------|------------|-----------------------|------------|-------------------------|------------|
| ** **                                                              | ** ** | **Pension  Benefits**    | ** ** | **Pension Benefits** | ** ** | ** **               | ** ** | **Post-  retirement** | ** ** | **Other Benefits** | ** ** |
| ** **                                                              | ** ** | **March 30,  2006** | ** ** | **March 30,  2006**  | ** ** | **March 31,  2005** | ** ** | ** **            | ** ** | **April 1,  2004** | ** ** | ** ** | ** ** | **March 30,  2006** | ** ** | **March 30,  2006** | ** ** | **March 31,  2005** | ** ** | ** ** | ** ** | **April 1,  2004** | ** ** |
| ** **                                                              | ** ** | **(Successor)**          | ** ** | **(Successor)**           | ** ** | **(Successor)**          | ** ** | ** **            | ** ** | **(Predecessor)**       | ** ** | ** ** | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** | ** ** | ** ** | **(Predecessor)** | ** ** |
| Weighted-average  assumptions used to determine benefit obligations at: |       |                     |       |                      |       |                     |       |                  |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount rate                                                           |       |                     | 5.50       | %                         |       |                     | 5.75       | %                     |       |                    | 5.75       | % |   |   |   |   | 6.25 | % |   |   |   |   | 5.50 | % |   |   | 5.75 | % |   |   | 5.75 | % |   |   |   |   | 6.25 | % |   |
| Rate of  compensation increase                                          |       |                     | 4.79       | %                         |       |                     | 3.5%-6.0   | %                     |       |                    | 5.50       | % |   |   |   |   | 5.97 | % |   |   |   |   | N/A |   |   |   | 5.00 | % |   |   | 5.00 | % |   |   |   |   | 5.00 | % |   |

 

| ** ** | ** ** | **LCE**                                            | ** ** | **AMCE**                                       | ** ** | ** **                                                              | ** ** | **LCE**             | ** ** | **AMCE**                                              | ** ** |
|------------|------------|----------------------------------------------------|------------|------------------------------------------------|------------|-------------------------------------------------------------------------|------------|---------------------|------------|-------------------------------------------------------|------------|
| ** ** | ** ** | **Pension  Benefits**                              | ** ** | **Pension Benefits**                      | ** ** | ** **                                                              | ** ** | **Other  Benefits** | ** ** | **Other Benefits**                               | ** ** |
| ** ** | ** ** | **January 26  through  March 30,  2006** | ** ** | **52 Weeks  ended  March 30,  2006** | ** ** | **From  Inception  July 16,  2004  through  March 31,  2005** | ** ** | ** **          | ** ** | **April 2,  2004  through  Dec. 23,  2004** | ** ** | **52 Weeks  ended  April 1,  2004** | ** ** | ** ** | ** ** | **January 26  through  March 30,  2006** | ** ** | **52 Weeks  ended  March 30,  2006** | ** ** | **From  Inception  July 16,  2004  through  March 31,  2005** | ** ** | ** ** | ** ** | **April 2,  2004  through  Dec. 23,  2004** | ** ** | **52 Weeks  ended  April 1,  2004** | ** ** |
| ** ** | ** ** | **(Successor)**                                    | ** ** | **(Successor)**                                | ** ** | **(Successor)**                                                         | ** ** | ** **          | ** ** | **(Predecessor)**                                     | ** ** | **(Predecessor)** | ** ** | ** ** | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** | ** ** | ** ** | **(Predecessor)** | ** ** | **(Predecessor)** | ** ** |

| Weighted-average assumptions used to determine  net periodic benefit cost: |   |   |      |   |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|----------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|----------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Discount rate                                                              |   |   | 5.50      | %      |   |   | 5.75     | %      |   |   | 6.25   | %      |   |   |   |   | 6.25   | %      |   |   | 6.75   | %      |   |   |   |   | 5.50   | %      |   |   | 5.75   | %      |   |   | 6.25   | %      |   |   |   |   | 6.25   | %      |   |   | 6.25   | %      |   |
| Expected long-term return  on plan assets                                  |   |   | 5.00-8.25 | %      |   |   | 8.25     | %      |   |   | 8.25   | %      |   |   |   |   | 8.25   | %      |   |   | 8.50   | %      |   |   |   |   | n/a    |   |   |   | n/a    |   |   |   | n/a    |   |   |   |   |   | n/a    |   |   |   | n/a    |   |   |
| Rate of  compensation increase                                             |   |   | 4.79      | %      |   |   | 3.5%-6.0 | %      |   |   | 5.50   | %      |   |   |   |   | 5.50   | %      |   |   | 5.97   | %      |   |   |   |   | n/a    |   |   |   | 5.00   | %      |   |   | 5.00   | %      |   |   |   |   | 5.00   | %      |   |   | 5.00   | %      |   |

 

Netperiodic benefit cost for the four plans consists of the following:

|                                          | ** ** | **Pension Benefits**                      | ** ** | ** **                                                              | ** ** | **Other Benefits** | ** ** |
|------------------------------------------|------------|------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-------------------------|------------|
| **(In thousands)**                  | ** ** | **52 Weeks  ended  March 30,  2006** | ** ** | **From  Inception  July 16,  2004  through  March 31,  2005** | ** ** | ** **              | ** ** | **April 2,  2004  through  December 23,  2004** | ** ** | **52 Weeks  Ended  April 1,  2004** | ** ** | ** ** | ** ** | **52 Weeks  ended  March 30,  2006** | ** ** | **From  Inception  July 16,  2004  through  March 31,  2005** | ** ** | ** ** | ** ** | **April 2,  2004  through  December 23,  2004** | ** ** | **52 Weeks  Ended  April 1,  2004** | ** ** |
| ** **                               | ** ** | **(Successor)**                                | ** ** | **(Successor)**                                                         | ** ** | ** **              | ** ** | **(Predecessor)** | ** ** | **(Predecessor)** | ** ** | ** ** | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** | ** ** | ** ** | **(Predecessor)** | ** ** | **(Predecessor)** | ** ** |
| Components of net periodic benefit cost: |       |                                           |       |                                                                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                          |            |                                                |            |                                                                         |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

| Service cost                                       |   |   | $      | 3,918  |   |   |   | $      | 941    |   |   |   |   |   | $      | 2,318  |   |   |   | $      | 2,574  |   |   |   |   |   | $      | 514    |   |   |   | $      | 185    |   |   |   |   |   | $      | 444   |   |   |   | $ | 605   |   |   |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-------|--------|--------|--------|---|-------|--------|--------|
| Interest cost                                      |   |   | 4,703  |   |   |   | 1,256  |   |   |   |   |   | 3,063  |   |   |   | 3,641  |   |   |   |   |   | 1,054  |   |   |   | 325    |   |   |   |   |   | 772    |   |   |   | 1,042  |   |   |
| Expected return on plan assets                     |   |   | (3,737 | )      |   |   | (892   | )      |   |   |   |   | (2,426 | )      |   |   | (2,985 | )      |   |   |   |   | — |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |
| Recognized net actuarial loss                      |   |   | 50     |   |   |   | — |   |   |   |   |   | 760    |   |   |   | 691    |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | 87     |   |   |   | 111    |   |   |
| Amortization of unrecognized transition obligation |   |   | — |   |   |   | — |   |   |   |   |   | 129    |   |   |   | 176    |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | 36     |   |   |   | 50     |   |   |
| Amortization of prior service cost                 |   |   | — |   |   |   | — |   |   |   |   |   | 70     |   |   |   | 95     |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | 20     |   |   |   | 29     |   |   |
| Plan amendment                                     |   |   | 455    |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |
| Curtailment                                        |   |   | (1,141 | )      |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | (1,110 | )      |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |
| Net periodic  benefit cost                         |   |   | $      | 4,248  |   |   |   | $      | 1,305  |   |   |   |   |   | $      | 3,914  |   |   |   | $      | 4,192  |   |   |   |   |   | $      | 458    |   |   |   | $      | 510    |   |   |   |   |   | $      | 1,359 |   |   |   | $ | 1,837 |   |   |

 

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Thefollowing tables set forth the plan’s change in benefit obligations and planassets and the accrued liability for benefit costs included in the ConsolidatedBalance Sheets for the years ended March 30, 2006 and March 31, 2005:

| ** **                     | ** ** | **Pension Benefits**                      | ** ** | ** **                                                              | ** ** | **Other Benefits** | ** ** |
|--------------------------------|------------|------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-------------------------|------------|
| **(In thousands)**        | ** ** | **52 Weeks  Ended  March 30,  2006** | ** ** | **From  Inception  July 16,  2004  through  March 31,  2005** | ** ** | ** **              | ** ** | **April 2,  2004  through  December 23,  2004** | ** ** | ** ** | ** ** | **52 Weeks  Ended  March 30,  2006** | ** ** | **From  Inception  July 16,  2004  through  March 31,  2005** | ** ** | ** ** | ** ** | **April 2,  2004  through  December 23,  2004** | ** ** |
| ** **                     | ** ** | **(Successor)**                                | ** ** | **(Successor)**                                                         | ** ** | ** **              | ** ** | **(Predecessor)** | ** ** | ** ** | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** | ** ** | ** ** | **(Predecessor)** | ** ** |
| Change in benefit  obligation: |       |                                           |       |                                                                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |            |                                                |            |                                                                         |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

| Benefit obligation at beginning of period        |   |   | $      | 80,446 |   |   |   | $       — |   |   |   |   |   | $      | 67,477 |   |   |   |   |   | $      | 18,563 |   |   |   | $       — |   |   |   |   |   | $ | 17,144 |   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------------------------------------------------|--------|--------|--------|--------|--------|---|--------|--------|--------|
| Benefit obligation related to acquisition of LCE |   |   | 12,345 |   |   |   | — |                                              |   |   |   |   | — |   |   |   |   |   | 9,704  |   |   |   | — |   |   |                                              |   |   | — |   |   |
| Transferred balance from Predecessor             |   |   | — |   |   |   | 78,270 |                                              |   |   |   |   | — |   |   |   |   |   | — |   |   |   | 17,740 |   |   |                                              |   |   | — |   |   |
| Service cost                                     |   |   | 3,918  |   |   |   | 941    |                                              |   |   |   |   | 2,318  |   |   |   |   |   | 514    |   |   |   | 185    |   |   |                                              |   |   | 444    |   |   |
| Interest cost                                    |   |   | 4,703  |   |   |   | 1,256  |                                              |   |   |   |   | 3,063  |   |   |   |   |   | 1,054  |   |   |   | 325    |   |   |                                              |   |   | 772    |   |   |
| Plan participant’s contributions            |   |   | — |   |   |   | — |                                              |   |   |   |   | — |   |   |   |   |   | 204    |   |   |   | — |   |   |                                              |   |   | 165    |   |   |
| Actuarial (gain) loss                            |   |   | (5,864 | )      |   |   | (9     | )                                                 |   |   |   |   | 7,445  |   |   |   |   |   | 266    |   |   |   | 313    |   |   |                                              |   |   | 35     |   |   |
| Benefits paid                                    |   |   | (2,458 | )      |   |   | (12    | )                                                 |   |   |   |   | (2,033 | )      |   |   |   |   | (905   | )      |   |   | — |   |   |                                              |   |   | (820   | )      |   |
| Plan amendment                                   |   |   | 455    |   |   |   | — |                                              |   |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |                                              |   |   | — |   |   |
| Curtailment                                      |   |   | (1,141 | )      |   |   | — |                                              |   |   |   |   | — |   |   |   |   |   | (1,423 | )      |   |   | — |   |   |                                              |   |   | — |   |   |
| Currency translation adjustment                  |   |   | 48     |   |   |   | — |                                              |   |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |                                              |   |   | — |   |   |

| Benefit obligation at  end of period |   |   | $ | 92,452 |   |   |   | $ | 80,446 |   |   |   |   |   | $ | 78,270 |   |   |   |   |   | $ | 27,977 |   |   |   | $ | 18,563 |   |   |   |   |   | $ | 17,740 |   |   |
|--------------------------------------|--------|--------|---|--------|--------|--------|--------|---|--------|--------|--------|--------|--------|--------|---|--------|--------|--------|--------|--------|--------|---|--------|--------|--------|--------|---|--------|--------|--------|--------|--------|--------|---|--------|--------|--------|

 

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| ** **                                       | ** ** | **Pension Benefits**                      | ** ** | ** **                                                              | ** ** | **Other Benefits** | ** ** |
|--------------------------------------------------|------------|------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-------------------------|------------|
| **(In thousands)**                          | ** ** | **52 Weeks  Ended  March 30,  2006** | ** ** | **From  Inception  July 16,  2004  through  March 31,  2005** | ** ** | ** **              | ** ** | **April 2,  2004  through  December 23,  2004** | ** ** | ** ** | ** ** | **52 Weeks  Ended  March 30,  2006** | ** ** | **From  Inception  July 16,  2004  through  March 31,  2005** | ** ** | ** ** | ** ** | **April 2,  2004  through  December 23,  2004** | ** ** |
| ** **                                       | ** ** | **(Successor)**                                | ** ** | **(Successor)**                                                         | ** ** | ** **              | ** ** | **(Predecessor)** | ** ** | ** ** | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** | ** ** | ** ** | **(Predecessor)** | ** ** |
| Change in plan assets:                           |       |                                           |       |                                                                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair value of plan assets at beginning of period |       |                                           | $          | 43,789                                                                  |       |                    |       | $         — |   |   |   |   |   | $ | 39,833 |   |   |   |   |   | $         — |   |   |   | $         — |   |   |   |   |   | $         — |   |   |
| Transferred balance from Predecessor             |       |                                           | —     |                                                                    |       |                    | 43,642     |   |   |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | — |   |   |
| Plan assets related to acquisition of LCE        |       |                                           | 7,893      |                                                                    |       |                    | —     |   |   |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | — |   |   |
| Actual return on plan assets                     |       |                                           | 3,171      |                                                                    |       |                    | 159        |   |   |   |   |   | 4,006 |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | — |   |   |
| Employer contribution                            |       |                                           | 1,615      |                                                                    |       |                    | —     |   |   |   |   |   | 1,836 |   |   |   |   |   | 700 |   |   |   | — |   |   |   |   |   | 655 |   |   |
| Plan participant’s contributions            |       |                                           | —     |                                                                    |       |                    | —     |   |   |   |   |   | — |   |   |   |   |   | 205 |   |   |   | — |   |   |   |   |   | 165 |   |   |
| Benefits paid                                    |       |                                           | (2,458     | )                                                                       |       |                    | (12        | ) |   |   |   |   | (2,033 | ) |   |   |   |   | (905 | ) |   |   | — |   |   |   |   |   | (820 | ) |   |
| Fair value of plan assets at end of period       |       |                                           | $          | 54,010                                                                  |       |                    |       | $ | 43,789 |   |   |   |   |   | $ | 43,642 |   |   |   |   |   | $         — |   |   |   | $         — |   |   |   |   |   | $         — |   |   |
| Net liability for  benefit cost:                 |       |                                           |       |                                                                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Funded status                                    |       |                                           | $          | (38,442                                                                 | )          |                    |       | $ | (36,657 | ) |   |   |   |   | $ | (34,628 | ) |   |   |   |   | $ | (27,977 | ) |   |   | $ | (18,563 | ) |   |   |   |   | $ | (17,740 | ) |   |
| Unrecognized net actuarial (gain) loss           |       |                                           | (5,459     | )                                                                       |       |                    | (113       | ) |   |   |   |   | 20,125 |   |   |   |   |   | 266 |   |   |   | 313 |   |   |   |   |   | 289 |   |   |
| Unrecognized transition obligation               |       |                                           | —     |                                                                    |       |                    | —     |   |   |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | 197 |   |   |
| Unrecognized prior service cost                  |       |                                           | —     |                                                                    |       |                    | —     |   |   |   |   |   | 685 |   |   |   |   |   | — |   |   |   | — |   |   |   |   |   | 2,252 |   |   |
| Net liability recognized                         |       |                                           | $          | (43,901                                                                 | )          |                    |       | $ | (36,770 | ) |   |   |   |   | $ | (13,818 | ) |   |   |   |   | $ | (27,711 | ) |   |   | $ | (18,250 | ) |   |   |   |   | $ | (15,002 | ) |   |

 

| ** **                                | ** ** | **Pension Benefits**    | ** ** | **Other Benefits**      | ** ** |
|-------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| **(In thousands)**                   | ** ** | **March 30, 2006** | ** ** | **March 31, 2005** | ** ** | **March 30, 2006** | ** ** | **March 31, 2005** | ** ** |
| ** **                                | ** ** | **(Successor)**              | ** ** | **(Successor)**              | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** |
| Amounts recognized in  the balance sheet: |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Accrued benefit liability                 |       |                         | $          | (44,073                      | )          |   |   | $ | (36,770 | ) |   |   | $ | (27,711 | ) |   |   | $ | (18,250 | ) |   |
| Accumulated other comprehensive income    |       |                         | 172        |                         |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Net liability recognized                  |       |                         | $          | (43,901                      | )          |   |   | $ | (36,770 | ) |   |   | $ | (27,711 | ) |   |   | $ | (18,250 | ) |   |

 

The projected benefit obligation, accumulated benefitobligation and fair value of plan assets were $92,452,000, $77,407,000 and$54,010,000 respectively, as of March 30, 2006; and, $80,446,000,$61,288,000 and $43,789,000 respectively, as of March 31, 2005 for thethree qualified and three nonqualified pension plans with accumulated benefitobligations in excess of plan assets.

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Forits Defined Benefit Pension Plan investments, the Company employs a long-termrisk-controlled approach using diversified investment options with minimalexposure to volatile investment options like derivatives. The Company uses adiversified allocation of equity, debt, short-term and real estate exposuresthat are customized to the Plan’s cash flow benefit needs. The percentage ofplan assets by category for fiscal 2006 and 2005 are as follows:

| ** **                                | ** ** | **March 30,  2006** | ** ** | **March 31,  2005** | ** ** |
|-------------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| ** **                                | ** ** | **(Successor)**          | ** ** | **(Successor)**          | ** ** |
| Equity Securities                         |       |                     | 61         | %                        |       |   | 60 | % |   |
| Debt Securities                           |       |                     | 31         | %                        |       |   | 32 | % |   |
| Real Estate  Investments & Other |       |                     | 8          | %                        |       |   | 8 | % |   |
|                                      |       |                     | 100        | %                        |       |   | 100 | % |   |

 

The expected rate of return on plan assets was 8.25%for fiscal 2006 and 2005 and 8.5% for fiscal 2004. The rate used is based uponanalysis of actual returns on plan assets in prior years including analysisprovided by the Plan Administrator.

For measurement purposes, the annual rate of increasein the per capita cost of covered health care benefits assumed for 2006 was 8.0%-10.0%for medical, 3.5% for dental and vision, and 10.5% for prescription drug. Therates were assumed to decrease gradually to 5.0% for medical in 2009, remain at3.5% for dental, and gradually decrease to 5.0% for prescription drug in 2013.The health care cost trend rate assumption has a significant effect on theamounts reported. Increasing the assumed health care cost trend rates by one percentagepoint in each year would increase the accumulated postretirement benefit obligationas of March 30, 2006 by $4,302,000 and the aggregate of the service andinterest cost components of postretirement expense for fiscal 2006 by $352,000.Decreasing the assumed health care cost trend rates by one percentage point ineach year would decrease the accumulated postretirement obligation for fiscal2006 by $3,549,000 and the aggregate service and interest cost components ofpostretirement expense for fiscal 2006 by $286,000.

Thefollowing table provides the benefits expected to be paid (inclusive ofbenefits attributable to estimated future employee service) in each of the nextfive fiscal years, and in the aggregate for the five fiscal years thereafter:

| **(in thousands)** | ** ** | **Pension  Benefits** | ** ** | **Other  Benefits** | ** ** |
|-------------------------|------------|-----------------------|------------|---------------------|------------|
| 2007                    |       | $                     | 2,155      |                |       | $ | 1,270 |   |   |
| 2008                    |       | 2,105                 |       |                | 1,363      |   |   |
| 2009                    |       | 2,216                 |       |                | 1,478      |   |   |
| 2010                    |       | 2,299                 |       |                | 1,535      |   |   |
| 2011                    |       | 2,955                 |       |                | 1,608      |   |   |
| Years 2012-2016         |       | 22,732                |       |                | 8,461      |   |   |
|                         |            |                       |            |                     |            |  |  |  |  |

 

The Company’s retiree health plan provides a benefitto its retirees that is at least actuarially equivalent to the benefit providedby the *Medicare Prescription Drug,Improvement and Modernization Act of 2003* (“Medicare Part D”).Since the Company’s plan is more generous than Medicare Part D, it isconsidered at least actuarially equivalent to Medicare Part D and thegovernment provides a federal subsidy to the plan. The Company made noadjustment to its participation rates due to Medicare Part D and estimateda $400 per year subsidy at age 75 for the initial year of 2006, with the amountof the subsidy moving in direct relation to the participant’s age.

The Plan’s accumulated plan benefit obligation as ofJanuary 1, 2006 was reduced by $1,934,000 for the subsidy related tobenefits attributed to past service. The Company recognized a reduction of$140,000 

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in net periodicpostretirement benefit cost during the period ended March 30, 2006 and thesubsidy will in the future also continue to reduce net periodic postretirementbenefit cost by adjusting the interest cost, service cost and actuarial gain orloss to reflect the effects of the subsidy. The Company estimates that it willreceive annual subsidies of $50,000 during fiscal 2007 increasing to $80,000during fiscal 2011 and an additional $500,000 through fiscal 2016.

The Company sponsors a voluntary 401(k) savingsplan covering employees age 21 or older who have completed at least1,000 hours of service in their first twelve months of employment, or in acalendar year thereafter, and who are not covered by a collective bargainingagreement. The Company matches 100% of each eligible employee’s electivecontributions up to 3% of the employee’s compensation and 50% of each eligibleemployee’s elective contributions on the next 2% of the employee’s pay. TheSuccessor’s expense under the 401(k) savings plan was $1,919,000 and$633,000 for the periods ended March 30, 2006 and March 31, 2005,respectively, and the Predecessor’s expense under the plan was $1,490,000 and$2,175,000 for the periods ended December 23, 2004 and April 1, 2004,respectively. The Company acquired the LCE defined contribution Profit Sharingand Savings Plan which was frozen as of the Merger date.

Certain theatre employeesare covered by union-sponsored pension and health and welfare plans.Company contributions into these plans are determined in accordance withprovisions of negotiated labor contracts. Contributions aggregated $358,000 and$82,000, for the Successor periods ended March 30, 2006 and March 31,2005, respectively, and $242,000 and $380,000 for the Predecessor periods endedDecember 23, 2004 and April 1, 2004, respectively. As ofMarch 30, 2006, the Company estimates potential complete withdrawalliabilities for certain of these plans of approximately $4.1 million. Asof March 30, 2006, no demand has been received by the Company related tothese plans asserting either a complete or partial withdrawal liability.

**NOTE 12—COMMITMENTSAND CONTINGENCIES**

The Company, in the normal course of business, isparty to various legal actions. Except as described below, management believesthat the potential exposure, if any, from such matters would not have a materialadverse effect on the financial condition, cash flows or results of operationsof the Company.

*JoseVargas and Maria Victoria Vargas v. R.K. Butler and EPT DOWNREIT II andAmerican Multi-Cinema, Inc. d/b/a AMC Theatres Studio 30 and HoustonPolice Department* (No. 2003-61045filed in the District Court of Harris County, Texas). On November 3, 2003,Jose Vargas and Maria Victoria Vargas as beneficiaries of Jose Vargas, Jr.filed a wrongful death action seeking damages related to the death of theirminor son. The case arises from a shooting death that occurred approximatelyone and a half blocks away from the premises of the AMC Studio 30 in Houston,Texas on October 31, 2003. The Vargas youth was shot by a Houston Policeofficer who was working as an off-duty security officer at the AMC Studio 30.The Vargas youth had been driving around the AMC parking lot with friends in anautomobile prior to the shooting. The plaintiffs are seeking unspecifieddamages on a variety of legal theories. Liability arising from this incident isan insured risk subject to our regular retention.

*UnitedStates of America v. AMC Entertainment Inc. and American Multi-Cinema, Inc.*(No. 99-01034 FMC (SHx), filed in the U.S. District Court for theCentral District of California). On January 29, 1999, the Department ofJustice (the “Department”) filed suit alleging that AMCE’s stadium-styletheatres violate the ADA and related regulations. The Department alleged thatAMCE had failed to provide persons in wheelchairs seating arrangements withlines of sight comparable to the general public. The Department alleged variousnon-line of sight violations as well. The Department sought declaratory andinjunctive relief regarding existing and future theatres with stadium-styleseating, compensatory damages in the approximate amount of $75,000 and a civilpenalty of $110,000.

On November 20, 2002 the trial court enteredsummary judgment in favor of the Justice Department on the line of sightaspects of this case. The trial court ruled that wheelchair spaces locatedsolely on the 

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sloped floor portion ofthe stadium-style auditoriums fail to provide lines of sight comparableto the general public. The trial court did not address specific changes thatmight be required of AMCE’s existing stadium-style auditoriums, holdingthat *per se* rules are simplynot possible because the requirements of comparable lines of sight will varybased on theatre layout.

On January 10, 2006, the trial court ruled infavor of the Department regarding the appropriate remedy in the line of sightaspects of this case. In its decision, the court issued a comprehensive orderregarding line of sight and other related remedies, which covers the remainingline of sight issues at the majority of the Company’s existing and all of itsfuture construction stadium-style theatres nationwide, as well as otherrelated forms of relief sought by the United States in this action.

AMCE estimates that the cost of the bettermentsrelated to the remedies for line of sight violations of the ADA will be$20 million, which is expected to be incurred over a 4-5 yearterm. Additionally, the order calls for payments of $300,000 to the UnitedStates and individual complainants. AMCE has appealed the court’s order.

AMCE previously recorded a liability related toestimated losses for the Department of Justice line of sight aspect of the casein the amount of $179,350 (comprised primarily of compensatory damages and thecivil penalty) and had estimated the range of loss to be between $179,350 and$273,938. As a result of the new order the loss is estimated to be between$349,350 and $443,938. Accordingly, AMCE has increased the related liability to$349,350.

On January 21, 2003, the trial court enteredsummary judgment in favor of the Department on non-line of sight aspects of thecase, which involve such matters as parking areas, signage, ramps, location oftoilets, counter heights, ramp slopes, companion seating and the location andsize of handrails. In its non-line of sight decision, the trial court concludedthat AMCE has violated numerous sections of the ADA and engaged in a patternand practice of violating the ADA.

On December 5, 2003, the trial court entered aconsent order and final judgment on non-line of sight issues under which AMCEagreed to remedy certain violations at twelve of its stadium-styletheatres and to survey and make required betterments for its patrons withdisabilities at its stadium-style theatres and at certain theatres it mayopen in the future. Currently AMCE estimates that these betterments will be requiredat approximately 140 stadium-style theatres. AMC estimates that the totalcost of these betterments will be $47.5 million, which is expected to beincurred over the remaining term of the consent order of 2.7 years. ThroughMarch 30, 2006 AMCE has incurred approximately $7.1 million of thesecosts. The estimate is based on actual costs incurred on remediation work completedto date. The actual costs of betterments may vary based on the results ofsurveys of the remaining theatres.

*AmericanMulti-Cinema, Inc. v. Midwest Drywall Company, Inc., HaskellConstructors, Ltd. etal.* (CaseNo. 00CV84908, Circuit Court of Platte County, Missouri) and American Multi-Cinema, Inc. v.Bovis Construction Corp. et al. (Civil Action No. 0207139, Court ofCommon Pleas of Bucks County, Pennsylvania). AMCE is the plaintiff in these andrelated suits in which it seeks to recover damages from the constructionmanager, certain fireproofing applicators and other parties to correct thedefective application of certain fireproofing materials at 21 theatres. AMCEcurrently estimates its claim for repair costs at these theatres will aggregateapproximately $33.6 million of which it has expended approximately$27.4 million through March 30, 2006. The remainder is for projectedcosts of repairs yet to be performed. AMCE also is seeking additional damagesfor lost profits, interest and legal and other expenses incurred.

AMCE has received settlement payments from variousparties in connection with this matter of $935,000, $2,610,000 and $925,000during fiscal 2006, 2005 and 2004, respectively. AMCE received additionalsettlement payments of $1,350,000 from various parties in connection with thismatter subsequent to March 30, 2006 and has entered into settlementagreements with various parties providing for additional 

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settlement payments toAMCE aggregating $3,850,000. Gain contingencies are recognized upon receipt andrecorded in disposition of assets and other gains in the ConsolidatedStatements of Operations.

*MetreonArbitration.**  *InMay 1997, Loews entered into a 21-year lease with Metreon, Inc.(“Metreon”) to operate a megaplex theatre in an entertainment/retail centerdeveloped by Metreon in San Francisco. Since that theatre opened inJune 1999, Loews has had a dispute with Metreon with respect to(1) construction costs that Metreon claims are Loews’ responsibility underthe lease and (2) the percentage of the center occupied by the theatre andthe nature, magnitude and allocation of the costs that Metreon is seeking toinclude as operating expenses under the lease. The amount of operating expensesclaimed by Metreon to be allocable to this theatre is based upon the landlord’sassertion that Loews occupies at least 48.5% of the center. Loews asserted thatit occupied substantially less of the center and that various expenses includedin operating expenses charged to Loews were improper. Loews arbitrated thisdispute in June 2003 and prevailed but the award was later vacated by theCalifornia Court of Appeals. Westfield Group purchased the property inApril 2006 and renewed settlement discussions with AMCE.

We are a party to various other legal proceedings inthe ordinary course of business, none of which is expected to have a material adverseeffect on us.

In November 2003, the Cineplex Galaxy Income Fund(the “Fund”), a Canadian income trust, was established to indirectly holdsubstantially all the assets of Cineplex Odeon Corporation (“COC”), a formerwholly-owned subsidiary of Loews, and all of the capital stock of GalaxyEntertainment, Inc., another Canadian film exhibitor controlled by Onex,one of Loews’ former Stockholders. On November 26, 2003, the Fundcompleted an initial public offering of Fund Units in Canada. As a result ofthese transactions, Loews, through COC, indirectly owned 44.4% of the Fund andagreed to indemnify the Fund, the holders of Fund Units and the underwriters,among others, for liabilities resulting from misrepresentations in theprospectus used in the offering of Fund Units and breaches of therepresentations and warranties made by COC in the various agreements enteredinto in connection with the sale of COC’s assets and the offering. Loew’s totalmaximum liability under this indemnity was limited to the net cash proceeds ofthe offering plus amounts drawn under the Cineplex Galaxy Term Loan facilitythat was put in place in connection with the offering ($164.5 million). Inconnection with the sale of COC to affiliates of Onex and OCM Cinema, theseaffiliates agreed to indemnify Loews for any and all liabilities resulting fromLoew’s indemnification obligations.

In January 2004, Loew’s issued a corporateguaranty on behalf of Neue Filmpalast, its former German partnership, forcertain acquisition related costs that the partnership was required to pay. InApril 2004, Loews made an additional contribution of $1.2 million toNeue Filmpalast, its German partnership, which the Company believes satisfied asignificant portion of the guaranty. Additionally, a subsidiary of Loews wasguarantor of several of the theatre leases of Neue Filmpalast. In connectionwith the sale of Loews interest in the German operations to affiliates of Onexand OCM Cinema, these affiliates have agreed to indemnify the Company for anyand all liabilities resulting from Loew’s indemnification obligations.

Based upon the Company’shistorical experience and information known as of March 30, 2006, theCompany believes its potential liability related to its guarantees andindemnities is not material.

**NOTE 13—THEATRE ANDOTHER CLOSURE AND DISPOSITION OF ASSETS**

The Company has providedreserves for estimated losses from theatres which have been closed, vacatedoffice space, and from terminating the operation of fast food and otherrestaurants operated adjacent to certain of the Company’s theatres. As ofMarch 30, 2006, the Company has reserved $26,334,000 for leaseterminations which have either not been consummated or paid, related primarilyto 10 U.S. and Canada theatres with 73 screens and vacant restaurant and officespace. In connection with the Merger, the Company accrued $4,845,000 for futurelease obligations at facilities that had been closed or were duplicatefacilities that were planned to be closed following the Merger. The accrual wasprimarily 

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related to theplanned closing of the New York City home office. The Company is obligatedunder long-term lease commitments with remaining terms of up to 14 yearsfor theatres which have been closed. As of March 30, 2006, base rentsaggregated approximately $7,651,000 annually and $27,435,000 over the remainingterms of the leases. The estimated future lease obligation of the Loews’properties were discounted at the estimated borrowing rate at the date of theMerger of 8.82%. In connection with the merger with Marquee, the carrying valueof the theatre closure liability was remeasured by using the Company’sestimated borrowing rate on the date of the Merger of 7.55%.

Arollforward of reserves for theatre and other closure is as follows (inthousands):

| ** **                                               | ** ** | **Fifty-two Week Period** | ** ** | **From Inception  July 16, 2004** | ** ** | ** **      | ** ** | **April 2, 2004** | ** ** | **52 weeks** | ** ** |
|----------------------------------------------------------|------------|-------------------------------------|------------|--------------------------------------------------|------------|-----------------|------------|-----------------------------|------------|-------------------|------------|
| ** **                                               | ** ** | **March 30, 2006**        | ** ** | **through**                                      | ** ** | ** **      | ** ** | **through**                 | ** ** | **Ended**         | ** ** |
| ** **                                               | ** ** | **Theatre  and Other**         | ** ** | **Merger  Exit costs**(1)                   | ** ** | **Total**       | ** ** | **March 31,  2005**    | ** ** | ** **        | ** ** | **December 23,  2004** | ** ** | **April 1,  2004** | ** ** |
| ** **                                               | ** ** | **(Successor)**                     | ** ** | **(Successor)**                                  | ** ** | **(Successor)** | ** ** | **(Successor)**             | ** ** | ** **        | ** ** | **(Predecessor)** | ** ** | **(Predecessor)** | ** ** |
| Beginning Balance                                        |       |                                | $          | 28,506                                           |       |            |       | $                           | —     |              |       |   | $ | 28,506 |   |   |   | $ | — |   |   |   |   |   | $ | 17,870 |   |   |   | $ | 22,499 |   |   |
| Transferred balance from Predecessor                     |       |                                | —     |                                             |       |            | —     |                        |       |              | —     |   |   |   | 25,909 |   |   |   |   |   | — |   |   |   | — |   |   |
| Merger adjustment                                        |       |                                | —     |                                             |       |            | 4,845      |                        |       |              | 4,845      |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |
| Theatre and other closure expense                        |       |                                | 557        |                                             |       |            | 44         |                        |       |              | 601        |   |   |   | 1,267 |   |   |   |   |   | 10,758 |   |   |   | 4,068 |   |   |
| Restructuring charge                                     |       |                                | 841        |                                             |       |            | —     |                        |       |              | 841        |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |
| Interest expense                                         |       |                                | —     |                                             |       |            | —     |                        |       |              | —     |   |   |   | — |   |   |   |   |   | 1,585 |   |   |   | 2,736 |   |   |
| General and administrative expense                       |       |                                | —     |                                             |       |            | —     |                        |       |              | —     |   |   |   | — |   |   |   |   |   | 73 |   |   |   | 50 |   |   |
| Transfer of deferred rent and capital lease  obligations |       |                                | 677        |                                             |       |            | —     |                        |       |              | 677        |   |   |   | 2,112 |   |   |   |   |   | 1,610 |   |   |   | 6,014 |   |   |
| Acquisition remeasurement                                |       |                                | —     |                                             |       |            | —     |                        |       |              | —     |   |   |   | 2,806 |   |   |   |   |   | — |   |   |   | — |   |   |
| Payments                                                 |       |                                | (8,865     | )                                                |       |            | (271       | )                           |       |              | (9,136     | ) |   |   | (3,588 | ) |   |   |   |   | (5,987 | ) |   |   | (17,497 | ) |   |
| Ending balance                                           |       |                                | $          | 21,716                                           |       |            |       | $                           | 4,618      |              |       |   | $ | 26,334 |   |   |   | $ | 28,506 |   |   |   |   |   | $ | 25,909 |   |   |   | $ | 17,870 |   |   |

----

(1)                There were nomerger exit costs recorded during the Successor period ended March 31,2005 or the Predecessor periods ended December 23, 2004 or April 1,2004.

Theatreand other closure reserves for leases that have not been terminated arerecorded at the present value of the future contractual commitments for thebase rents, taxes and maintenance. Theatre closure reserves at March 30,2006 and March 31, 2005 by operating segment are as follows (inthousands):

| ** **                             | ** ** | **March 30,  2006** | ** ** | **March 31,  2005** | ** ** |
|----------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| ** **                             | ** ** | **(Successor)**          | ** ** | **(Successor)**          | ** ** |
| U.S. and Canada  Theatrical Exhibition |       |                     | $          | 20,811                   |       |   |   | $ | 26,507 |   |   |
| International Theatrical  Exhibition   |       |                     | 471        |                     |       |   | 1,384 |   |   |
| Other                                  |       |                     | 315        |                     |       |   | 295 |   |   |
| Total segment  reserves                |       |                     | 21,597     |                     |       |   | 28,186 |   |   |
| Corporate                              |       |                     | 4,737      |                     |       |   | 320 |   |   |
|                                   |       |                     | $          | 26,334                   |       |   |   | $ | 28,506 |   |   |

 

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**NOTE 14—RESTRUCTURING**

TheCompany’s restructuring activities are described in Note 1 of the Notes tothe Consolidated Financial Statements. A summary of restructuring and Mergerseverance payable activity during the fifty-two weeks ending March 30,2006 and March 31, 2005, is set forth below (in thousands):

| ** **              | ** ** | **Fifty-two Week Period  March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** |
|-------------------------|------------|---------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| **(In thousands)** | ** ** | **Restructuring  Severance  Benefits**                        | ** ** | **Merger  Severance  Benefits**                                                     | ** ** | **Total** | ** ** | **Restructuring  Severance  Benefits** | ** ** |
| ** **              | ** ** | **(Successor)**                                               | ** ** | **(Successor)**                                                                     | ** ** | **(Successor)** | ** ** | **(Successor)** | ** ** |
| Beginning Balance       |       |                                                          | $          | 4,926                                                                               |       |   |   | $ | — |   |   |   | $ | 4,926 |   |   |   | $ | — |   |   |
| Restructuring  charge   |       |                                                          | 3,139      |                                                                                |       |   | — |   |   |   | 3,139 |   |   |   | 4,926 |   |   |
| Merger adjustment       |       |                                                          | —     |                                                                                |       |   | 27,090 |   |   |   | 27,090 |   |   |   | — |   |   |
| Payments                |       |                                                          | (8,065     | )                                                                                   |       |   | (16,519 | ) |   |   | (24,584 | ) |   |   | — |   |   |
| Ending balance          |       |                                                          | $          | —                                                                              |       |   |   | $ | 10,571 |   |   |   | $ | 10,571 |   |   |   | $ | 4,926 |   |   |

 

Restructuringand merger severance reserves at March 30, 2006 and March 31, 2005 byoperating segment are as follows (in thousands):

| ** **                             | ** ** | **March 30,  2006** | ** ** | **March 31,  2005** | ** ** |
|----------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| ** **                             | ** ** | **(Successor)**          | ** ** | **(Successor)**          | ** ** |
| U.S. and Canada  Theatrical Exhibition |       |                     | $          | —                   |       |   |   | $ | — |   |   |
| International Theatrical  Exhibition   |       |                     | —     |                     |       |   | — |   |   |
| Other                                  |       |                     | —     |                     |       |   | 817 |   |   |
| Total segment reserves                 |       |                     | —     |                     |       |   | 817 |   |   |
| Corporate                              |       |                     | 10,571     |                     |       |   | 4,109 |   |   |
|                                   |       |                     | $          | 10,571                   |       |   |   | $ | 4,926 |   |   |

 

**NOTE 15—FAIR VALUEOF FINANCIAL INSTRUMENTS**

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

The carrying value of cash and equivalentsapproximates fair value because of the short duration of those instruments. Thefair value of publicly held corporate borrowings was based upon quoted marketprices.

Theestimated fair values of the Company’s financial instruments are as follows:

| ** **              | ** ** | **March 30, 2006** | ** ** | **March 31, 2005** | ** ** |
|-------------------------|------------|------------------------------|------------|------------------------------|------------|
| **(In thousands)** | ** ** | **Carrying  Amount**         | ** ** | **Fair  Value**              | ** ** | **Carrying  Amount** | ** ** | **Fair  Value** | ** ** |
| ** **              | ** ** | **(Successor)**              | ** ** | **(Successor)**              | ** ** |
| Financial assets:       |       |                         |       |                         |       |   |   |   |   |
| Cash and  equivalents   |       | $                            | 230,115    |                         | $          | 230,115 |   | $ | 72,945 |   | $ | 72,945 |   |
| Financial liabilities:  |       |                         |       |                         |       |   |   |   |   |
| Cash overdrafts         |       | $                            | 13,829     |                         | $          | 13,829 |   | $ | 35,320 |   | $ | 35,320 |   |
| Corporate  borrowings   |       | 2,455,686                    |       | 2,427,095                    |       | 1,344,531 |   | 1,370,991 |   |
| Interest rate swaps     |       | 2,701                        |       | 2,701                        |       | — |   | — |   |

 

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**NOTE 16—OPERATINGSEGMENTS**

The Company has identified three reportable segmentsaround differences in products and services and geographical areas. UnitedStates, Canada and International theatrical exhibition operations are identifiedas separate segments based on dissimilarities in international markets fromUnited States and Canada. Other is identified as a separate segment due todifferences in products and services offered.

The Company evaluates the performance of its segmentsand allocates resources based on several factors, of which the primary measureis Adjusted EBITDA. The Company defines Adjusted EBITDA as earnings (loss) fromcontinuing operations before interest expense, income taxes and depreciationand amortization and adjusted for preopening expense, theatre and other closureexpense, disposition of assets and other gains, investment income, otherexpense, stock-based compensation expense, merger and acquisition costs,management fees, impairment of long-lived assets and special compensation expense.The Company evaluates Adjusted EBITDA generated by its segments in a number ofmanners, of which the primary measure is a comparison of segment AdjustedEBITDA to segment property, intangibles and goodwill.

The Company’s segments follow the same accountingpolicies as discussed in Note 1 to the Consolidated Financial Statements.

Informationabout the Company’s operations by operating segment is as follows:

| **Revenues (In thousands)**   | ** ** | **52 Weeks  Ended  March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **52 Weeks  Ended  April 1, 2004** | ** ** |
|-----------------------------------------|------------|----------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                              | ** ** | **(Successor)**                                    | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**                                 | ** ** |
| U. S. and Canada  theatrical exhibition |       |                                               | $          | 1,630,529                                                                           |       |       |       | $                                                                 | 422,563    |                                              |       |   |   |   | $ | 1,205,646 |   |   |   | $ | 1,609,187 |   |   |
| International theatrical  exhibition    |       |                                               | 43,442     |                                                                                |       |       | 6,430      |                                                              |       |                                              |       |   | 14,815 |   |   |   | 16,591 |   |   |
| Other                                   |       |                                               | 31,962     |                                                                                |       |       | 16,108     |                                                              |       |                                              |       |   | 57,711 |   |   |   | 71,476 |   |   |
| Intersegment elimination                |       |                                               | (19,055    | )                                                                                   |       |       | (5,641     | )                                                                 |       |                                              |       |   | (18,900 | ) |   |   | (19,022 | ) |   |
| Total revenues                          |       |                                               | $          | 1,686,878                                                                           |       |       |       | $                                                                 | 439,460    |                                              |       |   |   |   | $ | 1,259,272 |   |   |   | $ | 1,678,232 |   |   |

 

| **Segment Adjusted EBITDA (In thousands)** | ** ** | **52 Weeks  Ended  March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **52 Weeks  Ended  April 1, 2004** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                     | ** ** | **(Successor)**                                    | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**                                 | ** ** |
| U.S. and Canada  theatrical exhibition                         |       |                                               | $          | 270,802                                                                             |       |       |       | $                                                                 | 84,794     |                                              |       |   |   |   | $ | 219,440 |   |   |   | $ | 296,001 |   |   |
| International theatrical  exhibition                           |       |                                               | 1,471      |                                                                                |       |       | (509       | )                                                                 |       |                                              |       |   | (6,307 | ) |   |   | (7,437 | ) |   |
| Other(1)                                                       |       |                                               | (2,062     | )                                                                                   |       |       | 6          |                                                              |       |                                              |       |   | 7,371 |   |   |   | 5,607 |   |   |
| Total segment Adjusted EBITDA                                  |       |                                               | $          | 270,211                                                                             |       |       |       | $                                                                 | 84,291     |                                              |       |   |   |   | $ | 220,504 |   |   |   | $ | 294,171 |   |   |

 

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Areconciliation of earnings (loss) from continuing operations before incometaxes to segment Adjusted EBITDA is as follows:

| **(In thousands)**                                         | ** ** | **52 Weeks  Ended  March 30, 2006  (restated)** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **52 Weeks  Ended  April 1, 2004** | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                      | ** ** | **(Successor)**                                                | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**                                 | ** ** |
| Earnings (loss) from  continuing operations before income taxes |       |                                                           | $          | (119,132                                                                            | )          |       |       | $                                                                 | (53,537    | )                                                 |       |   |   |   | $ | (17,568 | ) |   |   | $ | 8,183 |   |   |
| Plus:                                                           |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| Interest expense                                                |       |                                                           | 143,110    |                                                                                |       |       | 53,951     |                                                              |       |                                              |       |   | 72,699 |   |   |   | 75,661 |   |   |
| Depreciation and  amortization                                  |       |                                                           | 164,047    |                                                                                |       |       | 43,931     |                                                              |       |                                              |       |   | 86,052 |   |   |   | 115,296 |   |   |
| Impairment of  long-lived assets                                |       |                                                           | 11,974     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | 16,272 |   |   |
| Preopening  expense                                             |       |                                                           | 6,607      |                                                                                |       |       | 39         |                                                              |       |                                              |       |   | 1,292 |   |   |   | 3,865 |   |   |
| Theatre and other  closure expense                              |       |                                                           | 601        |                                                                                |       |       | 1,267      |                                                              |       |                                              |       |   | 10,758 |   |   |   | 4,068 |   |   |
| Restructuring  charge                                           |       |                                                           | 3,980      |                                                                                |       |       | 4,926      |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Disposition of  assets and other gains                          |       |                                                           | (997       | )                                                                                   |       |       | (302       | )                                                                 |       |                                              |       |   | (2,715 | ) |   |   | (2,590 | ) |   |
| Investment loss  (income)                                       |       |                                                           | 4,398      |                                                                                |       |       | (3,352     | )                                                                 |       |                                              |       |   | (6,473 | ) |   |   | (2,837 | ) |   |
| Other income(2)                                                 |       |                                                           | 849        |                                                                                |       |       | (33        | )                                                                 |       |                                              |       |   | — |   |   |   | 13,947 |   |   |
| General and  administrative expense—unallocated:           |       |                                                           |       |                                                                                |       |       |       |                                                              |       |                                              |       |   |   |   |   |   |   |   |   |
| Management fee                                                  |       |                                                           | 2,000      |                                                                                |       |       | 500        |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Merger and  acquisition costs                                   |       |                                                           | 12,523     |                                                                                |       |       | 22,286     |                                                              |       |                                              |       |   | 42,732 |   |   |   | 5,508 |   |   |
| Other(3)                                                        |       |                                                           | 40,251     |                                                                                |       |       | 14,615     |                                                              |       |                                              |       |   | 33,727 |   |   |   | 56,798 |   |   |
| Total Segment Adjusted EBITDA                                   |       |                                                           | $          | 270,211                                                                             |       |       |       | $                                                                 | 84,291     |                                              |       |   |   |   | $ | 220,504 |   |   |   | $ | 294,171 |   |   |

 

| **Long-term Assets (In thousands)**    | ** ** | **March 30, 2006** | ** ** | **March 31, 2005** | ** ** | ** ** | ** ** | **April 1, 2004** | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|------------|------------|-----------------------------|------------|
| ** **                                            | ** ** | **(Successor)**              | ** ** | **(Successor)**              | ** ** | ** ** | ** ** | **(Predecessor)**           | ** ** |
| U.S. and Canada  theatrical exhibition                |       |                         | $          | 4,169,212                    |       |       |       | $                           | 3,136,730  |   |   |   |   |   | $ | 1,431,036 |   |   |
| International  theatrical exhibition                  |       |                         | 396,329    |                         |       |       | 151,401    |                        |       |   |   |   | 147,009 |   |   |
| Other                                                 |       |                         | —     |                         |       |       | —     |                        |       |   |   |   | 14,869 |   |   |
| Total segment  long-term assets                       |       |                         | 4,565,541  |                         |       |       | 3,288,131  |                        |       |   |   |   | 1,592,914 |   |   |
| Construction in  progress                             |       |                         | 34,796     |                         |       |       | 29,078     |                        |       |   |   |   | 15,007 |   |   |
| Corporate                                             |       |                         | 254,717    |                         |       |       | 232,387    |                        |       |   |   |   | 283,647 |   |   |
| Accumulated  depreciation—property               |       |                         | (783,882   | )                            |       |       | (856,392   | )                           |       |   |   |   | (753,523 | ) |   |
| Accumulated  amortization—intangible assets      |       |                         | (61,286    | )                            |       |       | (40,185    | )                           |       |   |   |   | (33,801 | ) |   |
| Accumulated  amortization—other long-term assets |       |                         | (41,336    | )                            |       |       | (35,855    | )                           |       |   |   |   | (33,446 | ) |   |
| Noncurrent assets  held for sale                      |       |                         | 112,337    |                         |       |       | —     |                        |       |   |   |   | — |   |   |
| Consolidated long-term  assets, net(4)                |       |                         | $          | 4,080,887                    |       |       |       | $                           | 2,617,164  |   |   |   |   |   | $ | 1,070,798 |   |   |

 

| **Long-term Assets, net of accumulated depreciation and amortization  (In thousands)** | ** ** | **March 30, 2006** | ** ** | **March 31, 2005** | ** ** | ** ** | ** ** | **April 1, 2004** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|------------|------------|-----------------------------|------------|
| ** **                                                                                                                     | ** ** | **(Successor)**              | ** ** | **(Successor)**              | ** ** | ** ** | ** ** | **(Predecessor)**           | ** ** |
| U.S. and Canada  theatrical exhibition                                                                                         |       |                         | $          | 3,347,777                    |       |       |       | $                           | 2,360,480  |   |   |   |   |   | $ | 766,929 |   |   |
| International  theatrical exhibition                                                                                           |       |                         | 364,630    |                         |       |       | 61,303     |                        |       |   |   |   | 68,232 |   |   |
| Other                                                                                                                          |       |                         | —     |                         |       |       | —     |                        |       |   |   |   | 2,868 |   |   |
| Total segment  long-term assets(4)                                                                                             |       |                         | 3,712,407  |                         |       |       | 2,421,783  |                        |       |   |   |   | 838,029 |   |   |
| Construction in  progress                                                                                                      |       |                         | 34,796     |                         |       |       | 29,078     |                        |       |   |   |   | 15,007 |   |   |
| Corporate                                                                                                                      |       |                         | 221,347    |                         |       |       | 166,303    |                        |       |   |   |   | 217,762 |   |   |
| Noncurrent assets  held for sale                                                                                               |       |                         | 112,337    |                         |       |       | —     |                        |       |   |   |   | — |   |   |
| Consolidated long-term  assets, net(4)                                                                                         |       |                         | $          | 4,080,887                    |       |       |       | $                           | 2,617,164  |   |   |   |   |   | $ | 1,070,798 |   |   |

 

105

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Thecomponents of the reportable segments’ long-term assets to long-term assetspresented in the Consolidated Balance Sheet are as follows:

| **Consolidated Balance Sheet (In thousands)** | ** ** | **March 30, 2006** | ** ** | **March 31, 2005** | ** ** | ** ** | ** ** | **April 1, 2004** | ** ** |
|-------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|------------|------------|-----------------------------|------------|
| ** **                                                        | ** ** | **(Successor)**              | ** ** | **(Successor)**              | ** ** | ** ** | ** ** | **(Predecessor)**           | ** ** |
| Property, net                                                     |       |                         | $          | 1,501,048                    |       |       |       | $                           | 854,463    |   |   |   |   |   | $ | 777,277 |   |   |
| Intangible  assets, net                                           |       |                         | 273,308    |                         |       |       | 189,544    |                        |       |   |   |   | 23,918 |   |   |
| Goodwill                                                          |       |                         | 2,018,318  |                         |       |       | 1,401,740  |                        |       |   |   |   | 71,727 |   |   |
| Deferred income  taxes                                            |       |                         | 3,564      |                         |       |       | 53,019     |                        |       |   |   |   | 143,944 |   |   |
| Other long-term  assets                                           |       |                         | 172,312    |                         |       |       | 118,398    |                        |       |   |   |   | 53,932 |   |   |
| Noncurrent assets  held for sale                                  |       |                         | 112,337    |                         |       |       | —     |                        |       |   |   |   | — |   |   |
| Consolidated long-term  assets, net(4)                            |       |                         | $          | 4,080,887                    |       |       |       | $                           | 2,617,164  |   |   |   |   |   | $ | 1,070,798 |   |   |

 

| **Additions to long-term assets, net of acquisitions  (In thousands)** | ** ** | **52 Weeks  Ended  March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **52 Weeks  Ended  April 1, 2004** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                                                | ** ** | **(Successor)**                                    | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**                                 | ** ** |
| U.S. and Canada theatrical  exhibition                                                                    |       |                                               | $          | 90,356                                                                              |       |       |       | $                                                                 | 40,271     |                                              |       |   |   |   | $ | 55,980 |   |   |   | $ | 96,467 |   |   |
| International  theatrical exhibition                                                                      |       |                                               | 7,570      |                                                                                |       |       | 366        |                                                              |       |                                              |       |   | 2,999 |   |   |   | 1,524 |   |   |
| Other                                                                                                     |       |                                               | 1          |                                                                                |       |       | 4          |                                                              |       |                                              |       |   | 26 |   |   |   | 7,510 |   |   |
| Total segment  capital expenditures                                                                       |       |                                               | 97,927     |                                                                                |       |       | 40,641     |                                                              |       |                                              |       |   | 59,005 |   |   |   | 105,501 |   |   |
| Construction in  progress                                                                                 |       |                                               | 13,634     |                                                                                |       |       | 1,468      |                                                              |       |                                              |       |   | 5,782 |   |   |   | 5,312 |   |   |
| Corporate                                                                                                 |       |                                               | 6,107      |                                                                                |       |       | 1,805      |                                                              |       |                                              |       |   | 1,368 |   |   |   | 10 |   |   |
| Total additions to long-term  assets, net of acquisitions(2)                                              |       |                                               | $          | 117,668                                                                             |       |       |       | $                                                                 | 43,914     |                                              |       |   |   |   | $ | 66,155 |   |   |   | $ | 110,823 |   |   |

 

Areconciliation of the reportable segments’ additions to net assets to theConsolidated Statements of Cash Flow is as follows:

| **Consolidated Statements of Cash Flows  (In thousands)** | ** ** | **52 Weeks  Ended  March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **April 2, 2004  through  April 1, 2004** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **(Successor)**                                    | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**                                             | ** ** |
| Cash Flows from  investing activities:                                             |       |                                               |       |                                                                                |       |       |       |                                                              |       |                                                          |       |   |   |   |   |   |   |   |   |
| Capital  expenditures(5)                                                           |       |                                               | $          | 117,668                                                                             |       |       |       | $                                                                 | 18,622     |                                                          |       |   |   |   | $ | 66,155 |   |   |   | $ | 95,011 |   |   |
| Construction  project costs:                                                       |       |                                               |       |                                                                                |       |       |       |                                                              |       |                                                          |       |   |   |   |   |   |   |   |   |
| Reimbursable by landlord                                                           |       |                                               | —     |                                                                                |       |       | —     |                                                              |       |                                                          |       |   | — |   |   |   | — |   |   |
| Purchase of leased furniture, fixtures and equipment                               |       |                                               | —     |                                                                                |       |       | 25,292     |                                                              |       |                                                          |       |   | — |   |   |   | 15,812 |   |   |
| Total additions to long-term  assets, net of acquisitions(5)                       |       |                                               | $          | 117,668                                                                             |       |       |       | $                                                                 | 43,914     |                                                          |       |   |   |   | $ | 66,155 |   |   |   | $ | 110,823 |   |   |

 

106

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Informationabout the Company’s revenues and assets by geographic area is as follows:

| **Revenues (In thousands)** | ** ** | **52 Weeks  Ended  March 30, 2006** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** | ** ** | ** ** | **April 2, 2004  through  December 23, 2004** | ** ** | **52 Weeks  Ended  April 1, 2004** | ** ** |
|---------------------------------------|------------|----------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                            | ** ** | **(Successor)**                                    | ** ** | **(Successor)**                                                                     | ** ** | ** ** | ** ** | **(Predecessor)**                                                 | ** ** | **(Predecessor)**                                 | ** ** |
| United States                         |       |                                               | $          | 1,593,976                                                                           |       |       |       | $                                                                 | 418,977    |                                              |       |   |   |   | $ | 1,206,689 |   |   |   | $ | 1,612,664 |   |   |
| Canada                                |       |                                               | 49,460     |                                                                                |       |       | 14,054     |                                                              |       |                                              |       |   | 37,766 |   |   |   | 48,964 |   |   |
| China (Hong Kong)                     |       |                                               | 5,567      |                                                                                |       |       | 2,522      |                                                              |       |                                              |       |   | 5,632 |   |   |   | 8,166 |   |   |
| France                                |       |                                               | 4,492      |                                                                                |       |       | 1,338      |                                                              |       |                                              |       |   | 3,270 |   |   |   | 3,813 |   |   |
| United Kingdom                        |       |                                               | 10,465     |                                                                                |       |       | 2,569      |                                                              |       |                                              |       |   | 5,915 |   |   |   | 4,625 |   |   |
| Mexico                                |       |                                               | 22,918     |                                                                                |       |       | —     |                                                              |       |                                              |       |   | — |   |   |   | — |   |   |
| Total revenues                        |       |                                               | $          | 1,686,878                                                                           |       |       |       | $                                                                 | 439,460    |                                              |       |   |   |   | $ | 1,259,272 |   |   |   | $ | 1,678,232 |   |   |

 

| **Long-term assets (In thousands), Gross** | ** ** | **March 30, 2006** | ** ** | **March 31, 2005** | ** ** | ** ** | ** ** | **April 1, 2004** | ** ** |
|----------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|------------|------------|-----------------------------|------------|
| ** **                                                     | ** ** | **(Successor)**              | ** ** | **(Successor)**              | ** ** | ** ** | ** ** | **(Predecessor)**           | ** ** |
| United States                                                  |       |                         | $          | 4,428,750                    |       |       |       | $                           | 3,289,380  |   |   |   |   |   | $ | 1,651,506 |   |   |
| Canada                                                         |       |                         | 56,717     |                         |       |       | 100,909    |                        |       |   |   |   | 91,900 |   |   |
| China (Hong Kong)                                              |       |                         | —     |                         |       |       | 11,863     |                        |       |   |   |   | 11,282 |   |   |
| Japan                                                          |       |                         | —     |                         |       |       | 46,393     |                        |       |   |   |   | 40,158 |   |   |
| France                                                         |       |                         | 9,229      |                         |       |       | 9,797      |                        |       |   |   |   | 7,825 |   |   |
| Portugal                                                       |       |                         | 16,343     |                         |       |       | 17,315     |                        |       |   |   |   | 14,729 |   |   |
| Spain                                                          |       |                         | 68,559     |                         |       |       | 60,899     |                        |       |   |   |   | 61,738 |   |   |
| United Kingdom                                                 |       |                         | 12,603     |                         |       |       | 13,040     |                        |       |   |   |   | 12,430 |   |   |
| Mexico                                                         |       |                         | 375,190    |                         |       |       | —     |                        |       |   |   |   | — |   |   |
| Total long-term  assets(4)                                     |       |                         | $          | 4,967,391                    |       |       |       | $                           | 3,549,596  |   |   |   |   |   | $ | 1,891,568 |   |   |

----

(1)                Revenues fromOther decreased due to the contribution of NCN’s assets to NCM onMarch 29, 2005. The revenues of NCN during fiscal 2006 are related torun-off of customer contracts entered into prior to March 29, 2005. TheCompany’s share of advertising revenues generated by NCM are included in U.S.and Canada theatrical exhibition.

(2)                Other income iscomprised of the write off of deferred financing charges, net recoveries forproperty loss related to Hurricane Katrina.

(3)                Including stock-basedcompensation expense of $3,433,000 and $1,201,000 for the Successor periodsended March 30, 2006 and March 31, 2005 and $0 and $8,727,000 for thePredecessor periods ended December 23, 2004 and April 1, 2004,respectively.

(4)                Consolidatedlong-term assets are comprised of property, intangible assets, deferred incometaxes, goodwill and other long-term assets. Segment long term assets arecomprised of property intangibles and goodwill.

(5)                See Note 2Acquisitions for additions to property, intangible assets, deferred incometaxes, goodwill, and other long-term assets resulting from acquisitions.

107

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**NOTE 17—CONDENSEDCONSOLIDATING FINANCIAL INFORMATION**

The accompanying condensed consolidating financialinformation of the Predecessor (“AMCE”) has been prepared and presentedpursuant to SEC Regulation S-X Rule 3-10 “Financial statementsof guarantors and issuers of guaranteed securities registered or beingregistered.” This information is not necessarily intended to present thefinancial position, results of operations and cash flows of the individualcompanies or groups of companies in accordance with accounting principlesgenerally accepted in the United States of America. Each of the subsidiaryguarantors are 100% owned by AMCE. The subsidiary guarantees of AMCE’s debtsare full and unconditional and joint and several. The Company’s investments inits consolidated subsidiaries are presented under the equity method ofaccounting.

Condensed consolidating financial information of theSuccessor is not presented as AMCE has not guaranteed the outstandingborrowings of Holdings, nor has Holdings guaranteed the outstanding borrowingsof AMCE.

108

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**April 2, 2004 through December 23, 2004(Predecessor):**

| **(In thousands)**                                       | ** ** | **Parent  Obligor** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-Guarantors** | ** ** | **Consolidating  Adjustments** | ** ** | **Consolidated AMC  Entertainment, Inc.** | ** ** |
|---------------------------------------------------------------|------------|---------------------|------------|----------------------------|------------|--------------------------------|------------|--------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                    | ** ** | ** **          | ** ** | ** **                 | ** ** | ** **                     | ** ** | ** **                     | ** ** | **(Predecessor)**                                   | ** ** |
| **Revenues**                                                  |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |
| Admissions                                                    |       | $                   | —     |                       | $          | 841,183                        |       |                           | $          | 6,293                                               |       |   |   | $ | — |   |   |   | $ | 847,476 |   |   |
| Concessions                                                   |       | —              |       | 326,715                    |       |                           | 2,255      |                           |       |                                                | —     |   |   |   | 328,970 |   |   |
| Other theatre                                                 |       | —              |       | 81,204                     |       |                           | 1,622      |                           |       |                                                | —     |   |   |   | 82,826 |   |   |
| Total revenues                                                |       | —              |       | 1,249,102                  |       |                           | 10,170     |                           |       |                                                | —     |   |   |   | 1,259,272 |   |   |
| Costs and Expenses:                                           |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |
| Film exhibition  costs                                        |       | —              |       | 449,781                    |       |                           | 2,946      |                           |       |                                                | —     |   |   |   | 452,727 |   |   |
| Concession costs                                              |       | —              |       | 37,298                     |       |                           | 582        |                           |       |                                                | —     |   |   |   | 37,880 |   |   |
| Operating expense                                             |       | —              |       | 319,118                    |       |                           | 5,309      |                           |       |                                                | —     |   |   |   | 324,427 |   |   |
| Rent                                                          |       | —              |       | 217,240                    |       |                           | 6,494      |                           |       |                                                | —     |   |   |   | 223,734 |   |   |
| General and  administrative expense                           |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |
| Merger and  acquisition costs                                 |       | —              |       | 42,732                     |       |                           | —     |                           |       |                                                | —     |   |   |   | 42,732 |   |   |
| Other                                                         |       | 143                 |       | 33,093                     |       |                           | 491        |                           |       |                                                | —     |   |   |   | 33,727 |   |   |
| Preopening  expense                                           |       | —              |       | 1,292                      |       |                           | —     |                           |       |                                                | —     |   |   |   | 1,292 |   |   |
| Theatre and other  closure expense                            |       | —              |       | 10,758                     |       |                           | —     |                           |       |                                                | —     |   |   |   | 10,758 |   |   |
| Depreciation and  amortization                                |       | —              |       | 85,108                     |       |                           | 944        |                           |       |                                                | —     |   |   |   | 86,052 |   |   |
| Disposition of  assets and other gains                        |       | —              |       | (2,715                     | )          |                           | —     |                           |       |                                                | —     |   |   |   | (2,715 | ) |   |
| Total costs and  expenses                                     |       | 143                 |       | 1,193,705                  |       |                           | 16,766     |                           |       |                                                | —     |   |   |   | 1,210,614 |   |   |
| Other expense (income)                                        |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |
| Equity in net  losses of subsidiaries                         |       | 21,531              |       | 13,816                     |       |                           | —     |                           |       |                                                | (35,347    | ) |   |   | — |   |   |
| Interest expense                                              |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |
| Corporate  borrowings (including intercompany)                |       | 62,691              |       | 36,817                     |       |                           | 4,473      |                           |       |                                                | (37,130    | ) |   |   | 66,851 |   |   |
| Capital and  financing lease obligations                      |       | —              |       | 5,758                      |       |                           | 90         |                           |       |                                                | —     |   |   |   | 5,848 |   |   |
| Investment income                                             |       | (38,987             | )          | (3,563                     | )          |                           | (1,053     | )                              |       |                                                | 37,130     |   |   |   | (6,473 | ) |   |
| Total other expense                                           |       | 45,235              |       | 52,828                     |       |                           | 3,510      |                           |       |                                                | (35,347    | ) |   |   | 66,226 |   |   |
| Loss from continuing  operations before income taxes          |       | (45,378             | )          | 2,569                      |       |                           | (10,106    | )                              |       |                                                | 35,347     |   |   |   | (17,568 | ) |   |
| Income tax provision  (benefit)                               |       | (9,500              | )          | 24,100                     |       |                           | 160        |                           |       |                                                | —     |   |   |   | 14,760 |   |   |
| Loss from continuing  operations                              |       | $                   | (35,878    | )                          | $          | (21,531                        | )          |                           | $          | (10,266                                             | )          |   |   | $ | 35,347 |   |   |   | $ | (32,328 | ) |   |
| Loss from discontinued  operations, net of income tax benefit |       | —              |       | —                     |       |                           | (3,550     | )                              |       |                                                | —     |   |   |   | (3,550 | ) |   |
| Net loss                                                      |       | $                   | (35,878    | )                          | $          | (21,531                        | )          |                           | $          | (13,816                                             | )          |   |   | $ | 35,347 |   |   |   | $ | (35,878 | ) |   |
| Preferred dividends                                           |       | 104,300             |       |                       |       |                           |       |                           |       |                                                |       |   |   |   | 104,300 |   |   |
| Net loss for shares of common stock                           |       | $                   | (140,178   | )                          |       |                           |       |                           |       |                                                |       |   |   |   |   | $ | (140,178 | ) |   |

 

109

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**52 weeks ended April 1, 2004 (Predecessor):**

| **(In thousands)**                                         | ** ** | **Parent  Obligor** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-Guarantors** | ** ** | **Consolidating  Adjustments** | ** ** | **Consolidated AMC  Entertainment, Inc.** | ** ** |
|-----------------------------------------------------------------|------------|---------------------|------------|----------------------------|------------|--------------------------------|------------|--------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                      | ** ** | ** **          | ** ** | ** **                 | ** ** | ** **                     | ** ** | ** **                     | ** ** | **(Predecessor)**                                   | ** ** |
| **Revenues**                                                    |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |
| Admissions                                                      |       | $                   | —     |                       | $          | 1,133,170                      |       |                           | $          | 5,938                                               |       |   |   | $ | — |   |   |   | $ | 1,139,108 |   |   |
| Concessions                                                     |       | —              |       | 434,857                    |       |                           | 1,880      |                           |       |                                                | —     |   |   |   | 436,737 |   |   |
| Other theatre                                                   |       | —              |       | 100,745                    |       |                           | 1,642      |                           |       |                                                | —     |   |   |   | 102,387 |   |   |
| Total revenues                                                  |       | —              |       | 1,668,772                  |       |                           | 9,460      |                           |       |                                                | —     |   |   |   | 1,678,232 |   |   |
| Costs and Expenses:                                             |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |
| Film exhibition  costs                                          |       | —              |       | 603,129                    |       |                           | 2,769      |                           |       |                                                | —     |   |   |   | 605,898 |   |   |
| Concession costs                                                |       | —              |       | 46,380                     |       |                           | 488        |                           |       |                                                | —     |   |   |   | 46,868 |   |   |
| Theatre operating  expense                                      |       | —              |       | 437,468                    |       |                           | 5,506      |                           |       |                                                | —     |   |   |   | 442,974 |   |   |
| Rent                                                            |       | —              |       | 280,621                    |       |                           | 7,700      |                           |       |                                                | —     |   |   |   | 288,321 |   |   |
| General and  administrative expense                             |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |
| Merger and  acquisition costs                                   |       | —              |       | 5,508                      |       |                           | —     |                           |       |                                                | —     |   |   |   | 5,508 |   |   |
| Other                                                           |       | 195                 |       | 56,117                     |       |                           | 486        |                           |       |                                                | —     |   |   |   | 56,798 |   |   |
| Preopening  expense                                             |       | —              |       | 2,921                      |       |                           | 944        |                           |       |                                                | —     |   |   |   | 3,865 |   |   |
| Theatre and other  closure expense                              |       | —              |       | 4,068                      |       |                           | —     |                           |       |                                                | —     |   |   |   | 4,068 |   |   |
| Depreciation and  amortization                                  |       | —              |       | 113,683                    |       |                           | 1,613      |                           |       |                                                | —     |   |   |   | 115,296 |   |   |
| Impairment of  long-lived assets                                |       | —              |       | 12,747                     |       |                           | 3,525      |                           |       |                                                | —     |   |   |   | 16,272 |   |   |
| Disposition of  assets and other gains                          |       | —              |       | (2,223                     | )          |                           | (367       | )                              |       |                                                | —     |   |   |   | (2,590 | ) |   |
| Total costs and  expenses                                       |       | 195                 |       | 1,560,419                  |       |                           | 22,664     |                           |       |                                                | —     |   |   |   | 1,583,278 |   |   |
| Other expense (income)                                          |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |
| Equity in net  losses of subsidiaries                           |       | 2,621               |       | 19,277                     |       |                           | —     |                           |       |                                                | (21,898    | ) |   |   | — |   |   |
| Other expense                                                   |       | —              |       | 13,947                     |       |                           | —     |                           |       |                                                | —     |   |   |   | 13,947 |   |   |
| Interest expense                                                |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |
| Corporate  borrowings (including intercompany)                  |       | 67,928              |       | 53,633                     |       |                           | 3,488      |                           |       |                                                | (58,086    | ) |   |   | 66,963 |   |   |
| Capital and  financing lease obligations                        |       | —              |       | 8,579                      |       |                           | 119        |                           |       |                                                | —     |   |   |   | 8,698 |   |   |
| Investment income                                               |       | (54,630             | )          | (3,993                     | )          |                           | (2,300     | )                              |       |                                                | 58,086     |   |   |   | (2,837 | ) |   |
| Total other expense                                             |       | 15,919              |       | 91,443                     |       |                           | 1,307      |                           |       |                                                | (21,898    | ) |   |   | 86,771 |   |   |
| Earnings (loss) from  continuing operations before income taxes |       | (16,114             | )          | 16,910                     |       |                           | (14,511    | )                              |       |                                                | 21,898     |   |   |   | 8,183 |   |   |
| Income tax provision  (benefit)                                 |       | (5,400              | )          | 15,700                     |       |                           | 100        |                           |       |                                                | —     |   |   |   | 10,400 |   |   |
| Earnings (loss) from  continuing operations                     |       | (10,714             | )          | 1,210                      |       |                           | (14,611    | )                              |       |                                                | 21,898     |   |   |   | (2,217 | ) |   |
| Loss from discontinued  operations, net of income tax benefit   |       | —              |       | (3,831                     | )          |                           | (4,666     | )                              |       |                                                | —     |   |   |   | (8,497 | ) |   |
| Net loss                                                        |       | $                   | (10,714    | )                          | $          | (2,621                         | )          |                           | $          | (19,277                                             | )          |   |   | $ | 21,898 |   |   |   | $ | (10,714 | ) |   |
| Preferred dividends                                             |       | 40,277              |       |                       |       |                           |       |                           |       |                                                |       |   |   |   | 40,277 |   |   |
| Net loss for shares of common stock                             |       | $                   | (50,991    | )                          |       |                           |       |                           |       |                                                |       |   |   |   |   | $ | (50,991 | ) |   |

 

 

 

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**April 2, 2004 through December 23, 2004(Predecessor):**
| (In thousands)                                                              | ** ** | **Parent  Obligor** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary Non-  Guarantors** | ** ** | **Consolidating  Adjustments** | ** ** | **Consolidated AMC  Entertainment, Inc.** | ** ** |
|----------------------------------------------------------------------------------|------------|---------------------|------------|----------------------------|------------|--------------------------------------|------------|--------------------------------|------------|-----------------------------------------------------|------------|
| Net cash  provided by (used in) operating activities                             |       | $                   | 13,042     |                       |       | $                                    | 130,915    |                           |       |                                                | $          | 1,407 |   |   |   | $ | — |   |   |   | $ | 145,364 |   |   |
| Cash flows from investing  activities:                                           |       |                |       |                       |       |                                 |       |                           |       |                                                |       |   |   |   |   |   |   |   |   |
| Capital  expenditures                                                            |       | —              |       |                       | (63,857    | )                                    |       |                           | (2,298     | )                                                   |       |   | — |   |   |   | (66,155 | ) |   |
| Increase  in restricted cash                                                     |       | (627,338            | )          |                       | —     |                                 |       |                           | —     |                                                |       |   | — |   |   |   | (627,338 | ) |   |
| Proceeds  from disposition of long-term assets                                   |       | —              |       |                       | 307        |                                 |       |                           | (30        | )                                                   |       |   | — |   |   |   | 277 |   |   |
| Other,  net                                                                      |       | —              |       |                       | (2,570     | )                                    |       |                           | 3,391      |                                                |       |   | — |   |   |   | 821 |   |   |
| Net  cash (used in) provided by investing activities                             |       | (627,338            | )          |                       | (66,120    | )                                    |       |                           | 1,063      |                                                |       |   | — |   |   |   | (692,395 | ) |   |
| Cash flows from financing  activities:                                           |       |                |       |                       |       |                                 |       |                           |       |                                                |       |   |   |   |   |   |   |   |   |
| Proceeds  from issuance of 85¤8% Senior Unsecured Fixed Rate Notes due 2012 |       | 250,000             |       |                       | —     |                                 |       |                           | —     |                                                |       |   | — |   |   |   | 250,000 |   |   |
| Proceeds  from issuance of Senior Unsecured Floating Rate Notes due 2010         |       | 205,000             |       |                       | —     |                                 |       |                           | —     |                                                |       |   | — |   |   |   | 205,000 |   |   |
| Proceeds  from issuance of 12% Senior Discount Notes due 2014                    |       | 169,918             |       |                       | —     |                                 |       |                           | —     |                                                |       |   | — |   |   |   | 169,918 |   |   |
| Principal  payments under capital and financing lease obligations                |       | —              |       |                       | (1,807     | )                                    |       |                           | (213       | )                                                   |       |   | — |   |   |   | (2,020 | ) |   |
| Change  in intercompany advances                                                 |       | (992                | )          |                       | (6,379     | )                                    |       |                           | 7,371      |                                                |       |   | — |   |   |   | — |   |   |
| Change  in construction payables                                                 |       | —              |       |                       | (2,234     | )                                    |       |                           | —     |                                                |       |   | — |   |   |   | (2,234 | ) |   |
| Cash  portion of preferred dividends                                             |       | (9,349              | )          |                       | —     |                                 |       |                           | —     |                                                |       |   | — |   |   |   | (9,349 | ) |   |
| Proceeds from exercise of stock options                                          |       | 52                  |       |                       | —     |                                 |       |                           | —     |                                                |       |   | — |   |   |   | 52 |   |   |
| Treasury  stock purchases and other                                              |       | (333                | )          |                       | —     |                                 |       |                           | —     |                                                |       |   | — |   |   |   | (333 | ) |   |
| Net  cash provided by (used in) financing activities                             |       | 614,296             |       |                       | (10,420    | )                                    |       |                           | 7,158      |                                                |       |   | — |   |   |   | 611,034 |   |   |
| Effect  of exchange rate changes on cash and equivalents                         |       | —              |       |                       | —     |                                 |       |                           | (615       | )                                                   |       |   | — |   |   |   | (615 | ) |   |
| Net  increase (decrease) in cash and equivalents                                 |       | —              |       |                       | 54,375     |                                 |       |                           | 9,013      |                                                |       |   | — |   |   |   | 63,388 |   |   |
| Cash  and equivalents at beginning of period                                     |       | —              |       |                       | 304,409    |                                 |       |                           | 28,839     |                                                |       |   | — |   |   |   | 333,248 |   |   |
| Cash and equivalents at  end of period                                           |       | $                   | —     |                       |       | $                                    | 358,784    |                           |       |                                                | $          | 37,852 |   |   |   | $ | — |   |   |   | $ | 396,636 |   |   |

 

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**52 weeksended April 1, 2004 (Predecessor):**
| (In thousands)                                                                                                  | ** ** | **Parent  Obligor** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-Guarantors** | ** ** | **Consolidating  Adjustments** | ** ** | **Consolidated AMC  Entertainment, Inc.** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|---------------------|------------|----------------------------|------------|--------------------------------|------------|--------------------------------|------------|-----------------------------------------------------|------------|
| Net  cash provided by operating activities                                                                           |       | $                   | 2,456      |                       |       | $                              | 160,723    |                           |       |                                                | $          | 760 |   |   |   | $ | — |   |   |   | $ | 163,939 |   |   |
| Cash flows from investing  activities:                                                                               |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |   |   |
| Capital  expenditures                                                                                                |       | —              |       |                       | (93,957    | )                              |       |                           | (1,054     | )                                                   |       |   | — |   |   |   | (95,011 | ) |   |
| Proceeds  from sale/leasebacks                                                                                       |       | —              |       |                       | 63,911     |                           |       |                           | —     |                                                |       |   | — |   |   |   | 63,911 |   |   |
| Acquisition  of Megastar Cinemas L.L.C., net of cash acquired                                                        |       | —              |       |                       | (13,374    | )                              |       |                           | —     |                                                |       |   | — |   |   |   | (13,374 | ) |   |
| Acquisition  of GC Companies, Inc., net of cash acquired and proceeds from sale of  venture capital investments |       | —              |       |                       | (2,075     | )                              |       |                           | —     |                                                |       |   | — |   |   |   | (2,075 | ) |   |
| Purchase  of leased furniture, fixtures and equipment                                                                |       | —              |       |                       | (15,812    | )                              |       |                           | —     |                                                |       |   | — |   |   |   | (15,812 | ) |   |
| Payment  on disposal-discontinued operations                                                                         |       | —              |       |                       | (5,252     | )                              |       |                           | —     |                                                |       |   | — |   |   |   | (5,252 | ) |   |
| Proceeds  from disposition of long-term assets                                                                       |       | —              |       |                       | 9,289      |                           |       |                           | —     |                                                |       |   | — |   |   |   | 9,289 |   |   |
| Other,  net                                                                                                          |       | —              |       |                       | (7,557     | )                              |       |                           | (3,497     | )                                                   |       |   | — |   |   |   | (11,054 | ) |   |
| Net  cash used in investing activities                                                                               |       | —              |       |                       | (64,827    | )                              |       |                           | (4,551     | )                                                   |       |   | — |   |   |   | (69,378 | ) |   |
| Cash flows from financing  activities:                                                                               |       |                |       |                       |       |                           |       |                           |       |                                                |       |   |   |   |   |   |   |   |   |
| Proceeds  from issuance of 8% Senior Subordinated Notes due 2014                                                     |       | 300,000             |       |                       | (6,000     | )                              |       |                           | —     |                                                |       |   | — |   |   |   | 294,000 |   |   |
| Repurchase  of Notes due 2009 and 2011                                                                               |       | (292,117            | )          |                       | —     |                           |       |                           | —     |                                                |       |   | — |   |   |   | (292,117 | ) |   |
| Principal  payments under capital and financing lease obligations                                                    |       | —              |       |                       | (2,339     | )                              |       |                           | (235       | )                                                   |       |   | — |   |   |   | (2,574 | ) |   |
| Deferred  financing costs on credit facility due 2009                                                                |       | —              |       |                       | (3,725     | )                              |       |                           | —     |                                                |       |   | — |   |   |   | (3,725 | ) |   |
| Change  in intercompany advances                                                                                     |       | (13,788             | )          |                       | (2,864     | )                              |       |                           | 16,652     |                                                |       |   | — |   |   |   | — |   |   |
| Change  in construction payables                                                                                     |       | —              |       |                       | (4,307     | )                              |       |                           | —     |                                                |       |   | — |   |   |   | (4,307 | ) |   |
| Proceeds  from exercise of stock options                                                                             |       | 3,894               |       |                       | —     |                           |       |                           | —     |                                                |       |   | — |   |   |   | 3,894 |   |   |
| Treasury  stock purchases and other                                                                                  |       | (445                | )          |                       | —     |                           |       |                           | —     |                                                |       |   | — |   |   |   | (445 | ) |   |
| Net  cash (used in) provided by financing activities                                                                 |       | (2,456              | )          |                       | (19,235    | )                              |       |                           | 16,417     |                                                |       |   | — |   |   |   | (5,274 | ) |   |
| Effect  of exchange rate changes on cash and equivalents                                                             |       | —              |       |                       | —     |                           |       |                           | (451       | )                                                   |       |   | — |   |   |   | (451 | ) |   |
| Net  increase in cash and equivalents                                                                                |       | —              |       |                       | 76,661     |                           |       |                           | 12,175     |                                                |       |   | — |   |   |   | 88,836 |   |   |
| Cash  and equivalents at beginning of year                                                                           |       | —              |       |                       | 227,748    |                           |       |                           | 16,664     |                                                |       |   | — |   |   |   | 244,412 |   |   |
| Cash and equivalents at  end of year                                                                                 |       | $                   | —     |                       |       | $                              | 304,409    |                           |       |                                                | $          | 28,839 |   |   |   | $ | — |   |   |   | $ | 333,248 |   |   |

 

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**NOTE 18—RELATEDPARTY TRANSACTIONS**

**GovernanceAgreements**

In connection with the Mergers, Holdings, the Sponsorsand the other pre-existing stockholders of Holdings, as applicable,entered into various agreements defining the rights of Holdings’ stockholderswith respect to voting, governance and ownership and transfer of the stock ofHoldings, including a Second Amended and Restated Certificate of Incorporationof Holdings, a Second Amended and Restated Stockholders Agreement, a VotingAgreement among Holdings and the pre-existing stockholders of Holdings, aVoting Agreement among Holdings and the former stockholders of LCE Holdings andan Amended and Restated Management Stockholders Agreement among Holdings andcertain members of management of Holdings who are stockholders of Holdings(collectively, the “Governance Agreements”).

The Governance Agreements provide that the Board ofDirectors for Holdings will consist of up to nine directors, two of whom shallbe designated by JPMP, two of whom shall be designated by Apollo, one of whomshall be the Chief Executive Officer of Holdings, one of whom shall bedesignated by Carlyle, one of whom shall be designated by Bain, one of whomshall be designated by Spectrum and one of whom shall be designated by Bain,Carlyle and Spectrum, voting together, so long as such designee is consented toby each of Bain and Carlyle. Each of the directors respectively designated byJPMP, Apollo, Carlyle, Bain and Spectrum shall have three votes on all mattersplaced before the Board of Directors of Holdings and AMCE and the ChiefExecutive Office of Holdings and the director designated by Carlyle, Bain andSpectrum voting together will have one vote each. The number of directorsrespectively designated by the Sponsors will be reduced upon a decrease in suchSponsors’ ownership in Holdings below certain thresholds.

The Voting Agreement among Holdings and the pre-existingstockholders of Holdings provides that, until fifth anniversary of the Mergers(the “Blockout Period”), the former continuing stockholders of Holdings (otherthan Apollo and JPMP) will generally vote their voting shares of capital stockof Holdings in favor of any matter in proportion to the shares of capital stockof Apollo and JPMP voted in favor of such matter, except in certain specifiedinstances. The Voting Agreement among Holdings and the former stockholders ofLCE Holdings further provides that during the Blockout Period, the former LCEHoldings stockholders will generally vote their voting shares of capital stockof Holdings on any matter as directed by any two of Carlyle, Bain and Spectrum,except in certain specified instances. In addition, certain actions ofHoldings, including, but not limited to, change in control transactions,acquisition or disposition transactions with a value in excess of$10.0 million, the settlement of claims or litigation in excess of$2.5 million, an initial public offering of Holdings, hiring or firing achief executive officer, chief financial officer or chief operating officer,incurring or refinancing indebtedness in excess of $5.0 million orengaging in new lines of business, require the approval of either (i) anythree of JPMP, Apollo, Carlyle or Bain or (ii) Spectrum and(a) either JPMP or Apollo and (b) either Carlyle or Bain (the“Requisite Stockholder Majority”) if at such time the Sponsors collectivelyhold at least a majority of Holdings’ voting shares.

Prior to the earlier of the end of the Blockout Periodand the completion of an initial public offering of the capital stock ofHoldings or AMCE, the Governance Agreements will prohibit the Sponsors and theother pre-existing stockholders of Holdings from transferring any oftheir interests in Holdings, other than (i) certain permitted transfers toaffiliates or to persons approved of by the Sponsors and (ii) transfersafter the Blockout Period subject to the rights described below.

The Governance Agreements set forth additionaltransfer provisions for the Sponsors and the other pre-existingstockholders of Holdings with respect to the interests in Holdings, includingthe following:

*Rightof first offer.  *After the Blockout Date and prior to aninitial public offering, Holdings and, in the event Holdings does not exerciseits right of first offer, each of the Sponsors and the other pre-existingstockholders of Holdings, has a right of first offer to purchase (on a pro ratabasis in the case of the 

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stockholders) allor any portion of the shares of Holdings that a Sponsor or other formercontinuing stockholder of Holdings is proposing to sell to a third party at theprice and on the terms and conditions offered by such third party.

*Drag-along rights.  *If,prior to an initial public offering, Sponsors constituting a RequisiteStockholder Majority propose to transfer shares of Holdings to an independentthird party in a bona fide arm’s-length transaction or series oftransactions that results in a sale of all or substantially all of Holdings,such Sponsors may elect to require each of the other stockholders of Holdingsto transfer to such third party all of its shares at the purchase price andupon the other terms and subject to the conditions of the sale.

*Tag-along rights.  *Subjectto the right of first offer described above, if any Sponsor or other formercontinuing stockholder of Holdings proposes to transfer shares of Holdings heldby it, then such stockholder shall give notice to each other stockholder, whoshall each have the right to participate on a pro rata basis in the proposedtransfer on the terms and conditions offered by the proposed purchaser.

*Participant rights.  *Onor prior to an initial public offering, the Sponsors and the other pre-existingstockholders of Holdings have the pro rata right to subscribe to any issuanceby Holdings or any subsidiary of shares of its capital stock or any securitiesexercisable, convertible or exchangeable for shares of its capital stock,subject to certain exceptions.

The Governance**Agreementsalso provide for certain registration rights in the event of an initial publicoffering of Holdings, including the following:

*Demand rights.  *Subjectto the consent of at least two of any of JPMP, Apollo, Carlyle and Bain duringthe first two years following an initial public offering, each Sponsor has theright at any time following an initial public offering to make a writtenrequest to Holdings for registration under the Securities Act of part or all ofthe registrable equity interests held by such stockholders at Holdings’expense, subject to certain limitations. Subject to the same consentrequirement, the other pre-existing stockholders of Holdings as a groupshall have the right at any time following an initial public offering to makeone written request to Holdings for registration under the Securities Act ofpart or all of the registrable equity interests held by such stockholders withan aggregate offering price to the public of at least $200 million.

*Piggyback rights.  *IfHoldings at any time proposes to register under the Securities Act any equity interestson a form and in a manner which would permit registration of the registrableequity interests held by stockholders of Holdings for sale to the public underthe Securities Act, Holdings shall give written notice of the proposedregistration to each stockholder, who shall then have the right to request thatany part of its registrable equity interests be included in such registration,subject to certain limitations.

*Holdbackagreements.  *Each stockholder has agreed that it willnot offer for public sale any equity interests during a period not to exceed90 days (180 days in the case of an initial public offering) afterthe effective date of any registration statement filed by Holdings in connectionwith an underwritten public offering (except as part of such underwrittenregistration or as otherwise permitted by such underwriters), subject tocertain limitations.

**Amended andRestated Fee Agreement**

In connection with the Mergers, Holdings, AMCE and theSponsors entered into an Amended and Restated Fee Agreement, which provides foran annual management fee of $5.0 million, payable quarterly and in advanceto each Sponsor, on a pro rata basis, for the twelve year duration of theagreement, as well as reimbursements for each Sponsor’s respectiveout-of-pocket expenses in connection with the management services providedunder the agreement. In addition, the fee agreement will provide forreimbursements by AMCE to the Sponsors for their out-of-pocket expenses and toHoldings of up to $3.5 million for fees payable by Holdings in any singlefiscal year in order to maintain AMCE’s corporate existence, corporate overheadexpenses and salaries or other compensation of certain employees.

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Upon the consummation of a change in controltransaction or an initial public offering, each of the Sponsors will receive,in lieu of quarterly payments of the annual management fee, a fee equal to thenet present value of the aggregate annual management fee that would have beenpayable to the Sponsors during the remainder of the term of the fee agreement(assuming a twelve year term from the date of the original fee agreement),calculated using the treasury rate having a final maturity date that is closestto the twelfth anniversary of the date of the original fee agreement date.

The fee agreement also provides that AMCE willindemnify the Sponsors against all losses, claims, damages and liabilitiesarising in connection with the management services provided by the Sponsorsunder the fee agreement.

Holdings is owned by theSponsors, other co-investors and by certain members of management as follows:JPMP (20.784%); Apollo (20.784%); Bain Capital Partners (15.090%); The CarlyleGroup (15.090%); Spectrum Equity Investors (9.764%); Weston Presidio CapitalIV, L.P. and WPC Entrepreneur Fund II, L.P. (3.899%); Co-Investment Partners,L.P. (3.899%); Caisse de Depot et Placement du Quebec (3.120%); AlpInvestPartners CS Investments 2003 C.V., AlpInvest Partners Later Stage Co-InvestmentsCustodian II B.V. and AlpInvest Partners Later Stage Co-Investments CustodianIIA B.V. (2.730%); SSB Capital Partners (Master Fund) I, L.P. (1.950%); CSFBStrategic Partners Holdings II, L.P., CSFB Strategic Partners Parallel HoldingsII, L.P., CSFB Credit Opportunities Fund (Employee), L.P. and CSFB CreditOpportunities Fund (Helios), L.P. (1.560%); Credit Suisse Anlagestiftung, PearlHolding Limited, Vega Invest (Guernsey) Limited and Partners Group PrivateEquity Performance Holding Limited (0.780%); Screen Investors 2004, LLC(0.152%); and members of management (0.400%)(1).

**Control Arrangement**

The sponsors will have theability to control the Company’s affairs and policies and the election of directorsand appointment of management both before and after the Company’s proposed IPO.

**Continuing ServiceAgreement**

In connection with thetermination of his current employment agreement with Loews, the Company ispaying Mr. Travis Reid severance of $87,500 per month for 18 monthsfollowing the closing of the Mergers, has paid him a lump sum payment of$1,575,000, and will provide outplacement assistance and automobile benefitsthrough December 31, 2006. In addition, in order to facilitate integrationfollowing the Mergers, the Company has entered into an agreement withMr. Reid, whereby Mr. Reid is providing certain transitionalconsulting services to the Company and reports to Mr. Peter C. Brown, theCompany’s Chief Executive Officer. Pursuant to the continuing serviceagreement, which may be terminated by Mr. Reid at any time or by theCompany after December 31, 2006, the Company is paying Mr. Reid a consultingfee for each month of service at the following rate: $50,000 for each of thefirst four months, $33,333 for each of the next four months and $16,667 for anymonth thereafter. Under certain circumstances, Mr. Reid will have theright to require Holdings to purchase, and Holdings will have the right torequire Mr. Reid to sell, on one occasion, all shares of common stock ofHoldings that Mr. Reid received in the Merger in exchange for payment tohim of his original purchase price for his shares of Loews common stock. Thecontinuing service agreement is not intended to create an employmentrelationship between Mr. Reid and the Company and his services are beingprovided on an independent contractor basis.

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(1)                All percentageownerships are approximate.

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**Option Grant toTravis Reid**

Pursuant to his ContinuingService Agreement, effective as of January 26, 2006, Holdings has grantedMr. Reid an option under the Holdings 2004 Stock Option Plan to acquireClass N Common Stock at an exercise price not less than the fair marketvalue (as determined by the Board of Directors of Holdings) on the date ofgrant. The option is subject to other terms and conditions substantiallysimilar to the terms of Holdings options currently held by employees and isalso subject to the Management Stockholders Agreement. The option vests inthree installments on December 23, 2006, 2007 and 2008, and vests in fullupon a change of control of Holdings or AMCE.

**Cinemex**

Cinemex from time to timepurchases services or enters into arrangements with parties related to itsemployees. For example, Miguel Angel Dávila, Chief Executive Officer andPresident of Cinemex and on the board of Cinemex, and Adolfo Fastlicht Kurián,a Director of Cinemex, are minority investors in the construction of the newshopping center where one of Cinemex’s new theatres opened inDecember 2004. Mr. Kurián’s father is the general manager of threeconstruction companies that provide theatre construction services to Cinemexand Mr. Kurián is an investor in these companies. In addition, Cinemexsigned a waiver to allow a McDonald’s restaurant owned by Mr. Kurián’swife to open in a shopping center where, under the lease, the landlord wasprohibited from leasing space to a business that would compete with thetheatre’s concessions. A relative of Mr. Dávila is the manager ofConsultores en Información Electrónica, S.A. de C.V., the company which rendersweb hosting, electronic marketing, e-mail and software services to one ofCinemex’s subsidiaries. This arrangement may be terminated by Cinemex upon 30-daysnotice.

**Market MakingTransactions**

On August 18, 2004, Holdings sold $304,000,000 inaggregate principal amount at maturity of its 12% Senior Discount Notes due2014 (the “Holdco Notes”). On the same date, Marquee sold $250,000,000 inaggregate principal amount of its 8 5¤8% Senior Notes due 2012 and $205,000,000in aggregate principal amount of its Senior Floating Notes due 2010(Collectively, the “Senior Notes”). J.P. Morgan Securities Inc., anaffiliate of JPMP which owns approximately 20.8% of Holdings, was an initialpurchaser of both the Holdco Notes and the Senior Notes.

On January 26, 2006AMCE sold $325,000,000 in aggregate principal amount of its 11% Senior SubordinatedNotes due 2016. JP Morgan Securities Inc., an affiliate of JPMP which ownsapproximately 20.8% of Holdings, was an initial purchaser of these notes.Credit Suisse Securities (USA) LLC, whose affiliates own approximately 1.6% ofHoldings, was also an initial purchaser of these notes.

**StockholderTransactions**

On December 23, 2003 the Company’s Board ofDirectors approved payment by the Company of legal fees in the amount of$590,000 and reimbursement of other out-of-pocket expenses in the amount of$170,000 on behalf of the initial purchasers of our preferred stock. OnNovember 18, 2003 and December 23, 2003 the Company’s Board ofDirectors approved payment by the Company of legal fees in the amount of $190,000on behalf of the Company’s Class B Stockholder. The costs were incurred inconnection with the consideration of a possible business combination betweenthe Company and Loews Cineplex Entertainment Corporation.

In connection with themerger with Marquee, Apollo received an aggregate amount of cash proceeds forits shares of approximately (i) $869.8 million, including$91.1 million attributable to the special change in control distributionpayable to Apollo pursuant to the terms of the Series A convertiblepreferred stock. The Company was required to pay the Marquee Sponsors an annualmanagement fee of up to $2.0 million in the aggregate, payable quarterly,under the Management Fee Agreement. In connection with the 

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mergerwith Marquee, Holdings, Marquee and the Marquee Sponsors entered into amanagement fee agreement pursuant to which AMCE, as the surviving corporationin the merger with Marquee, paid to each of JPMP and Apollo a one-timesponsorship fee of $10.0 million in consideration of the completion of themerger with Marquee and the capitalization of Holdings. The Company recordedthe one-time sponsorship fees paid to JPMP and Apollo of $10 million eachas General and Administrative: Merger and acquisition costs for the Successorperiod from inception on July 16, 2004 through March 31, 2005. Themanagement fee agreement also provided for an annual management fee of$2.0 million, payable quarterly and in advance to each Marquee Sponsor forthe duration of the agreement, as well as reimbursements for each Marqueesponsor’s respective out-of-pocket expenses in connection with the managementservices provided under the agreement. In addition, the management feeagreement provided for reimbursements of up to $3.5 million for feespayable by Holdings in any single fiscal year in order to maintain itscorporate existence, corporate overhead expenses and salaries or othercompensation of certain employees. AMCE made cash payments of $1.0 millionto the Marquee Sponsors for the annual management fee during the fourth quarterof fiscal 2005. Also in connection with the merger with Marquee, the Companypaid legal fees on behalf of JPMP and Apollo of $6.0 million each and paidlegal fees on behalf of the Company’s Class B Stockholder of $170,000. Followingconsummation of the merger with Marquee, the Company became a privately-heldcompany, wholly owned by Holdings.

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**NOTE 19—CONDENSEDFINANCIAL INFORMATION OF PARENT COMPANY**

Marquee Holdings Inc. is a holding company thatconducts substantially all of its business operations through its subsidiaries.The Company was formed on July 16, 2004. The financial statements for theSuccessor periods ending March 30, 2006 and for the period fromJuly 16, 2004 through March 31, 2005 are for Marquee Holdings Inc.Refer to Note 17 for the parent company financial information of thePredecessor for the periods from April 2, 2004 through December 23,2004 and the period ending April 1, 2004.

There are significantrestrictions on the Company’s ability to obtain funds from any of itssubsidiaries through dividends, loans or advances. Accordingly, these condensedfinancial statements have been presented on a “parent-only” basis. Undera parent-only presentation, the Company’s investments in its consolidatedsubsidiaries are presented under the equity method of accounting. These parent-onlyfinancial statements should be read in conjunction with Marquee Holdings Inc’saudited consolidated financial statements included elsewhere herein.

**Marquee Holdings Inc.CONDENSED STATEMENTS OF OPERATIONS—PARENT ONLY**

| **(In thousands)**                   | ** ** | **52 Weeks  Ended  March 30,  2006  (restated)** | ** ** | **From Inception  July 16, 2004  through  March 31,  2005** | ** ** |
|-------------------------------------------|------------|------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                | ** ** | **(Successor)**                                            | ** ** | **(Successor)**                                                                 | ** ** |
| Costs and Expenses                        |       |                                                       |       |                                                                            |       |   |   |
| General and  administrative:              |       |                                                       |       |                                                                            |       |   |   |
| Merger and  acquisition costs             |       | $                                                          | 36         |                                                                            |       | $        18 |   |   |
| Other                                     |       | 267                                                        |       |                                                                            | 15         |   |   |
| Total costs and  expenses                 |       | 303                                                        |       |                                                                            | 33         |   |   |
| Other expense (income)                    |       |                                                       |       |                                                                            |       |   |   |
| Equity in loss of  AMC Entertainment Inc. |       | 190,876                                                    |       |                                                                            | 34,763     |   |   |
| Interest expense                          |       |                                                       |       |                                                                            |       |   |   |
| Corporate  borrowings                     |       | 22,902                                                     |       |                                                                            | 12,834     |   |   |
| Investment income                         |       | (258                                                       | )          |                                                                            | (840       | ) |   |
| Total other expense                       |       | 213,520                                                    |       |                                                                            | 46,757     |   |   |
| Loss before income taxes                  |       | (213,823                                                   | )          |                                                                            | (46,790    | ) |   |
| Income tax provision  (benefit)           |       | 2,400                                                      |       |                                                                            | (2,400     | ) |   |
| Net loss                                  |       | $                                                          | (216,223   | )                                                                               |       | $ | (44,390 | ) |   |
|                                           |            |                                                            |            |                                                                                 |            |  |  |  |  |

 

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**Marquee HoldingsInc.CONSOLIDATED BALANCE SHEETS—PARENT ONLY**

| ** **                                                                                                                                                                                             | ** ** | **March 30,  2006  (restated)**                  | ** ** | **March 31,  2005** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                                                                                                                                                             | ** ** | **(Successor)**                                       | ** ** | **(Successor)**          | ** ** |
| ** **                                                                                                                                                                                             | ** ** | **(In thousands, except  share data)** | ** ** |
| **Assets**                                                                                                                                                                                             |       |                                                  |       |                     |       |   |   |
| Cash and equivalents                                                                                                                                                                                   |       | $                                                     | 2,251      |                     |       | $ | 1,996 |   |   |
| Total current  assets                                                                                                                                                                                  |       | 2,251                                                 |       |                     | 1,996      |   |   |
| Investment in AMC  Entertainment Inc.                                                                                                                                                                  |       | 1,244,192                                             |       |                     | 901,725    |   |   |
| Deferred income taxes                                                                                                                                                                                  |       | —                                                |       |                     | 2,400      |   |   |
| Other long-term  assets                                                                                                                                                                                |       | 4,396                                                 |       |                     | 4,352      |   |   |
| Total assets                                                                                                                                                                                           |       | $                                                     | 1,250,839  |                     |       | $ | 910,473 |   |   |
| **Liabilities and Stockholders’  Equity**                                                                                                                                                         |       |                                                  |       |                     |       |   |   |
| Current liabilities:                                                                                                                                                                                   |       |                                                  |       |                     |       |   |   |
| Due to AMC  Entertainment Inc.                                                                                                                                                                         |       | $                                                     | 1,886      |                     |       | $ | 1,185 |   |   |
| Accrued expenses  and other liabilities                                                                                                                                                                |       | 159                                                   |       |                     | 180        |   |   |
| Total current  liabilities                                                                                                                                                                             |       | 2,045                                                 |       |                     | 1,365      |   |   |
| Corporate borrowings                                                                                                                                                                                   |       | 205,127                                               |       |                     | 182,561    |   |   |
| Other long-term  liabilities                                                                                                                                                                           |       | 1,025                                                 |       |                     | 4,509      |   |   |
| Total liabilities                                                                                                                                                                                      |       | 208,197                                               |       |                     | 188,435    |   |   |
| Stockholders’ Equity:                                                                                                                                                                             |       |                                                  |       |                     |       |   |   |
| Common Stock  ($.01 par value, 7,000,000 shares authorized; 0 and 769,350 shares issued and  outstanding as of March 30, 2006 and March 31, 2005, respectively)                              |       | —                                                |       |                     | 8          |   |   |
| Class A-1  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  382,475.00000 and 0 shares issued and outstanding as of March 30, 2006  and March 31, 2005, respectively) |       | 4                                                     |       |                     | —     |   |   |
| Class A-2  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  382,475.00000 and 0 shares issued and outstanding as of March 30, 2006  and March 31, 2005, respectively) |       | 4                                                     |       |                     | —     |   |   |
| Class N  Common Stock nonvoting ($.01 par value, 375,000 shares authorized;  5,128.77496 and 0 shares issued and outstanding as of March 30, 2006 and  March 31, 2005, respectively)    |       | —                                                |       |                     | —     |   |   |
| Class L-1  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  256,085.61252 and 0 shares issued and outstanding as of March 30, 2006  and March 31, 2005, respectively) |       | 3                                                     |       |                     | —     |   |   |
| Class L-2  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  256,085.61252 and 0 shares issued and outstanding as of March 30, 2006  and March 31, 2005, respectively) |       | 3                                                     |       |                     | —     |   |   |
| Additional paid-in  capital                                                                                                                                                                            |       | 1,313,899                                             |       |                     | 766,035    |   |   |
| Accumulated other  comprehensive income (loss)                                                                                                                                                         |       | (10,658                                               | )          |                     | 385        |   |   |
| Accumulated  deficit                                                                                                                                                                                   |       | (260,613                                              | )          |                     | (44,390    | ) |   |
| Total  stockholders’ equity                                                                                                                                                                       |       | 1,042,642                                             |       |                     | 722,038    |   |   |
| Total liabilities and stockholders’ equity                                                                                                                                                        |       | $                                                     | 1,250,839  |                     |       | $ | 910,473 |   |   |

 

 

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**Marquee HoldingsInc.CONDENSED STATEMENTS OF CASH FLOWS—PARENT ONLY**

| **(In thousands)**                                                          | ** ** | **52 Weeks  Ended  March 30, 2006  (restated)** | ** ** | **From Inception  July 16, 2004  through  March 31, 2005** | ** ** |
|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                                                                       | ** ** | **(Successor)**                                                | ** ** | **(Successor)**                                                                     | ** ** |
| **INCREASE (DECREASE) IN CASH AND  EQUIVALENTS**                                 |       |                                                           |       |                                                                                |       |   |   |   |   |
| **Cash flows from operating  activities**                                        |       |                                                           |       |                                                                                |       |   |   |   |   |
| Net loss                                                                         |       |                                                           | $          | (216,223                                                                            | )          |   |   | $ | (44,390 | ) |   |
| Adjustments to  reconcile net loss to net cash provided by operating activities: |       |                                                           |       |                                                                                |       |   |   |   |   |
| Amortization of  discount on corporate borrowings                                |       |                                                           | 22,566     |                                                                                |       |   | 12,643 |   |   |
| Deferred income  taxes                                                           |       |                                                           | 2,400      |                                                                                |       |   | (2,400 | ) |   |
| Equity in loss of  AMC Entertainment Inc.                                        |       |                                                           | 190,876    |                                                                                |       |   | 34,763 |   |   |
| Net change in  operating activities:                                             |       |                                                           |       |                                                                                |       |   |   |   |   |
| Receivables                                                                      |       |                                                           | 701        |                                                                                |       |   | 1,185 |   |   |
| Accrueds and  other liabilities                                                  |       |                                                           | (21        | )                                                                                   |       |   | 180 |   |   |
| Other, net                                                                       |       |                                                           | (428       | )                                                                                   |       |   | 187 |   |   |
| Net cash provided  by (used in) operating activities                             |       |                                                           | (129       | )                                                                                   |       |   | 2,168 |   |   |
| **Cash flows from investing  activities**                                        |       |                                                           |       |                                                                                |       |   |   |   |   |
| Investment in AMC  Entertainment Inc.                                            |       |                                                           | —     |                                                                                |       |   | (934,901 | ) |   |
| Net cash (used  in) investing activities                                         |       |                                                           | —     |                                                                                |       |   | (934,901 | ) |   |
| **Cash flows from financing  activities**                                        |       |                                                           |       |                                                                                |       |   |   |   |   |
| Proceeds from  issuance of 12% Senior Discount Notes due 2014                    |       |                                                           | —     |                                                                                |       |   | 169,918 |   |   |
| Proceeds from  issuance of common stock                                          |       |                                                           | —     |                                                                                |       |   | 769,350 |   |   |
| Deferred  financing costs                                                        |       |                                                           | 384        |                                                                                |       |   | (4,539 | ) |   |
| Net cash provided  by financing activities                                       |       |                                                           | 384        |                                                                                |       |   | 934,729 |   |   |
| **Net increase in cash and  equivalents**                                        |       |                                                           | 255        |                                                                                |       |   | 1,996 |   |   |
| **Cash and equivalents at  beginning of year**                                   |       |                                                           | 1,996      |                                                                                |       |   | — |   |   |
| **Cash and equivalents at end of year**                                          |       |                                                           | $          | 2,251                                                                               |       |   |   | $ | 1,996 |   |   |

 

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**MarqueeHoldings Inc.CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY—PARENT ONLY**

| **(in thousands, except share and per**                  | ** ** | **Preferred Stock** | ** ** | **Common Stock** | ** ** | **Class A-1  Voting  Common Stock** | ** **    | **Class A-2  Voting  Common Stock** | ** ** | **Class N  Nonvoting  Common Stock** | ** ** |       |
|-----------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------|------------|-----------------------------------------------|---------------|-----------------------------------------------|------------|------------------------------------------------|------------|------------|
| **share data)**                                                              | ** ** | ** **               | ** ** | **Shares**            | ** ** | **Amount**                                    | ** **    | **Shares**                                    | ** ** | **Amount**                                     | ** ** | **Shares** | ** ** | **Amount** | ** ** | **Shares** | ** ** | **Amount** | ** ** | **Shares** | ** ** | **Amount** | ** ** |   |
| **Successor from Inception on  July 16, 2004 through   March 30, 2006** | ** ** |                     | ** ** | ** **            |       |                                          | ** **    | ** **                                    |       | ** **                                     | ** ** |       | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   |
| Balance, July 16,  2004                                                      |       |                     | —     | ** **            |       |                                          | $ — | ** **                                    |       | —                                         |       |       | $ — |   |   | — |   |   | $ — | ** ** |   | — |   |   | $ — | ** ** |   | — |   |   | $ — | ** ** |   |
| Comprehensive loss:                                                               |       |                     |       | ** **            |       |                                          |          | ** **                                    |       |                                           |       |       |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Net  loss                                                                         |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Foreign  currency translation adjustment                                          |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Unrealized  loss on marketable securities                                         |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Comprehensive loss                                                                |       |                     |       | ** **            |       |                                          |          | ** **                                    |       |                                           |       |       |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Stock-based  compensation-options                                                 |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Issuance  of Common Stock                                                         |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | 769,350                                        |       |       | 8 |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Balance,  March 31, 2005                                                     |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | 769,350                                        |       |       | 8 |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Comprehensive loss:                                                               |       |                     |       | ** **            |       |                                          |          | ** **                                    |       |                                           |       |       |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |
| Net  loss (restated)                                                              |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Foreign  currency translation adjustment                                          |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Additional  minimum pension liability                                             |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Unrealized  gain on Cinemex swap agreements                                       |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Unrealized  loss on marketable securities                                         |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Comprehensive loss  (restated)                                                    |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Stock-based  compensation-options (restated)                                      |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | —                                         |       |       | — |   |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   | — |   |   | — | ** ** |   |
| Issuance  of Common Stock for Merger                                              |       |                     | —     | ** **            |       |                                          | —        | ** **                                    |       | (769,350                                       | )          |       | (8 | ) |   | 382,475.00000 |   |   | 4 | ** ** |   | 382,475.00000 |   |   | 4 | ** ** |   | 5,128.77496 |   |   | — | ** ** |   |
| Balance, March 30, 2006 (restated)                                           |       |                     | —     | ** **            |       |                                          | $ — | ** **                                    |       | —                                         |       |       | $ — |   |   | 382,475.00000 |   |   | $ 4 | ** ** |   | 382,475.00000 |   |   | $ 4 | ** ** |   | 5,128.77496 |   |   | $ — | ** ** |   |
|                                                                                   |            |                          |            |                       |            |                                               |               |                                               |            |                                                |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

** **

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**Marquee Holdings Inc.CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY—PARENT ONLY**

| ** ** | ** ** | **Class L-1  Voting  Common Stock** | ** ** | **Class L-1  Voting  Common Stock** | ** ** | **Convertible  Class B Stock** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Accumulated  Other  Comprehensive** | ** ** | **Retained  Earnings  (Accumulated  Deficit)** | ** ** | **Common  Stock  In Treasury** | ** ** | **Total  Stockholders’  Equity** | ** ** |
|------------|------------|------------------------------------------|------------|------------------------------------------|------------|-------------------------------------|------------|----------------------------------|------------|---------------------------------------|------------|------------------------------------------------|------------|--------------------------------|------------|---------------------------------------|------------|
| ** ** | ** ** | **Shares**                               | ** ** | **Amount**                               | ** ** | **Shares**                          | ** ** | **Amount**                       | ** ** | **Shares**                            | ** ** | **Amount**                                     | ** ** | **(restated)**                 | ** ** | **Income (Loss)**                | ** ** | **(restated)** | ** ** | **Shares** | ** ** | **Amount** | ** ** | **(restated)** | ** ** |
|            |            |                                          |            |                                          |            |                                     |            |                                  |            |                                       |            |                                                |            |                                |            |                                       |            |  |  |  |  |  |  |  |  |

| **Successor from Inception on  July 16, 2004 through March 30, 2006** |   |          |   |   |   |   |   |          |   |   |          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |   |                                              |   |   |   |                                                          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |
|---------------------------------------------------------------------------------|--------|---------------|--------|--------|--------|--------|--------|---------------|--------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|---------------|--------|--------|--------|---------------------------------------------------------------------|--------|--------|--------|---------------------------------------------------|--------|--------|--------|---------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------------|--------|--------|--------|---------------------------------------------------------------------|--------|--------|
| Balance,  July 16, 2004                                                    |   | —        |   |   | — |   |   | —        |   |   | $ — |   |   |   | — |   |   |   | $ — |   |   |   | $          — |   |   |   | $       — |   |   |   | $         — |   |   |   | — |   |   |   | $ — |   |   |   | $          — |   |   |
| Comprehensive loss:                                                             |   |          |   |   |   |   |   |          |   |   |          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |   |                                              |   |   |   |                                                          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |
| Net  loss                                                                       |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | —                                                              |   |   |   | —                                            |   |   |   | (44,390                                                       | )      |   |   | — |   |   |   | —        |   |   |   | (44,390                                                             | )      |   |
| Foreign  currency translation adjustment                                        |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | —                                                              |   |   |   | 430                                               |   |   |   | —                                                        |   |   |   | — |   |   |   | —        |   |   |   | 430                                                                 |   |   |
| Unrealized  loss on marketable securities                                       |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | —                                                              |   |   |   | (45                                               | )      |   |   | —                                                        |   |   |   | — |   |   |   | —        |   |   |   | (45                                                                 | )      |   |
| Comprehensive  loss                                                             |   |          |   |   |   |   |   |          |   |   |          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |   |                                              |   |   |   |                                                          |   |   |   |   |   |   |   |          |   |   |   | (44,005                                                             | )      |   |
| Stock-based  compensation-options                                               |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | 443                                                                 |   |   |   | —                                            |   |   |   | —                                                        |   |   |   | — |   |   |   | —        |   |   |   | 443                                                                 |   |   |
| Issuance  of Common Stock                                                       |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | 765,592                                                             |   |   |   | —                                            |   |   |   | —                                                        |   |   |   | — |   |   |   | —        |   |   |   | 765,600                                                             |   |   |
| Balance,  March 31, 2005                                                   |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | 766,035                                                             |   |   |   | 385                                               |   |   |   | (44,390                                                       | )      |   |   | — |   |   |   | —        |   |   |   | 722,038                                                             |   |   |
| Comprehensive loss:                                                             |   |          |   |   |   |   |   |          |   |   |          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |   |                                              |   |   |   |                                                          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |
| Net  loss (restated)                                                            |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | —                                                              |   |   |   | —                                            |   |   |   | (216,223                                                      | )      |   |   | — |   |   |   | —        |   |   |   | (216,223                                                            | )      |   |
| Foreign  currency translation adjustment                                        |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | —                                                              |   |   |   | (11,685                                           | )      |   |   | —                                                        |   |   |   | — |   |   |   | —        |   |   |   | (11,685                                                             | )      |   |
| Additional  minimum pension liability                                           |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | —                                                              |   |   |   | (172                                              | )      |   |   | —                                                        |   |   |   | — |   |   |   | —        |   |   |   | (172                                                                | )      |   |
| Unrealized  gain on Cinemex swap agreements                                     |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | —                                                              |   |   |   | 594                                               |   |   |   | —                                                        |   |   |   | — |   |   |   | —        |   |   |   | 594                                                                 |   |   |
| Unrealized  loss on marketable securities                                       |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | —                                                              |   |   |   | 220                                               |   |   |   | —                                                        |   |   |   | — |   |   |   | —        |   |   |   | 220                                                                 |   |   |
| Comprehensive loss(restated)                                                    |   |          |   |   |   |   |   |          |   |   |          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |   |                                              |   |   |   |                                                          |   |   |   |   |   |   |   |          |   |   |   | (227,266                                                            | )      |   |
| Stock-based  compensation-options (restated)                                    |   | —        |   |   | — |   |   | —        |   |   | —        |   |   |   | — |   |   |   | —        |   |   |   | 7,199                                                               |   |   |   | —                                            |   |   |   | —                                                        |   |   |   | — |   |   |   | —        |   |   |   | 7,199                                                               |   |   |
| Issuance  of Common Stock for Merger                                            |   | 256,085.61252 |   |   | 3      |   |   | 256,085.61252 |   |   | 3             |   |   |   | — |   |   |   | —        |   |   |   | 540,665                                                             |   |   |   | —                                            |   |   |   | —                                                        |   |   |   | — |   |   |   | —        |   |   |   | 540,671                                                             |   |   |
| Balance, March 30,  2006 (restated)                                        |   | 256,085.61252 |   |   | 3      |   |   | 256,085.61252 |   |   | $ 3      |   |   |   | — |   |   |   | $ — |   |   |   | $ 1,313,899                                                    |   |   |   | $ (10,658                                    | )      |   |   | $ (260,613                                               | )      |   |   | — |   |   |   | $ — |   |   |   | $ 1,042,642                                                    |   |   |
|                                                                            |   |          |   |   |   |   |   |          |   |   |          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |   |                                              |   |   |   |                                                          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |
|                                                                            |   |          |   |   |   |   |   |          |   |   |          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |   |                                              |   |   |   |                                                          |   |   |   |   |   |   |   |          |   |   |   |                                                                |   |   |

 

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**Marquee HoldingsInc.Note to Condensed Financial Statements of Parent Company**

**BASIS OFPRESENTATION**

Holdings is an investment vehicle owned by J.P. MorganPartners, LLC Apollo Management, L.P. and certain related investment funds andaffiliates of Bain Capital Partners, The Carlyle Group and Spectrum EquityInvestors. Holdings was formed for the purpose of acquiring AMC EntertainmentInc. (“AMCE”) pursuant to a definitive merger agreement approved by AMCE’sBoard of Directors on July 22, 2004. Holdings is a holding company with nooperations of its own and it has one direct subsidiary, AMCE. The condensedfinancial statements for the period including and after December 23, 2004are designated as Successor. For the Predecessor periods, AMCE did not have aholding company structure, therefore the results of operations of the ParentCompany are the same as those of AMCE.

The Parent Company followsthe accounting policies as described in Note 1 to the Consolidated FinancialStatements of Marquee Holdings Inc. and subsidiary with the exception of itsinvestment in its subsidiary AMCE for which the Parent Company uses the equitymethod of accounting.

*Debt*

For a discussion of thedebt obligations of the Company and its subsidiaries, refer to Note 7 inthe audited consolidated financial statements included elsewhere herein.

*Commitments andContingencies*

For a discussion of the commitments and contingenciesof the Company and its subsidiaries, refer to Note 12 Commitments andContingencies in the audited consolidated financial statements included elsewhereherein.

For further information,reference should be made to the Notes to Consolidated Financial Statements ofthe Company.

**NOTE 20—SUBSEQUENTEVENTS**

In May 2006, AMCEI and its subsidiary AMCEntertainment International Limited sold its interests in AMC EntertainmentEspaña S.A., which owned and operated 4 theatres with 86 screens in Spain, andActividades Multi-Cinemas E Espectáculos, LDA, which owned and operated 1theatre with 20 screens in Portugal for a sales price of $35,446,000. Theseoperations have been classified as discontinued operations as a result of ourdisposition of Yelmo Cineplex S.L. (“Yelmo”) in December 2006.

In December 2006, the Company disposed of its equitymethod investment in Yelmo which owned and operated 27 theatres with310 screens on the date of sale.

Subsequent to March 30, 2006 the Company soldfour theatres with 42 screens in the U.S. as required by and in connection withthe approval of the Mergers for an aggregate net sales price of approximately$30.7 million. As of March 30, 2006, the assets and liabilitiesrelated to these theatres are classified as held for sale.

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**Item 9A. Controlsand Procedures**

(a)                Evaluation of disclosure controls and procedures.

***DisclosureControls and Procedures***

Our senior management isresponsible for establishing and maintaining disclosure controls and procedures(as defined in Rule 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, or the Exchange Act) designed to ensurethat information required to be disclosed by Marquee Holdings Inc. in thereports that it files or submits under the Exchange Act is recorded, processed,summarized and reported, within the time periods specified in the Securitiesand Exchange Commission’s rules and forms. Disclosure controls andprocedures include, without limitation, controls and procedures designed to ensurethat information required to be disclosed by an issuer in the reports that itfiles or submits under the Exchange Act is accumulated and communicated to theissuer’s management, including its principal executive officer or officers andprincipal financial officer or officers, or persons performing similarfunctions, as appropriate to allow timely decisions regarding requireddisclosure.

We have evaluated the effectiveness of our disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) underthe Exchange Act) as of March 30, 2006, with the participation of our ChiefExecutive Officer and Chief Financial Officer, as well as other key members ofour management. As a result of the identification of the material weakness inour internal control over financial reporting discussed below, we haveconcluded that our disclosure controls and procedures were not effective as of March30, 2006.

***Material Weakness in Internal Control Over FinancialReporting***

A material weakness is acontrol deficiency, or combination of control deficiencies, that results inmore than a remote likelihood that a material misstatement of the annual orinterim financial statements will not be prevented or detected. As of March 30,2006, we identified the following material weakness in our internal controlover financial reporting:

·       TheCompany did not maintain effective internal controls to ensure that its stock-basedcompensation awards and management-purchased shares are appropriatelyrecorded in its financial statements in accordance with generally acceptedaccounting principles. Specifically, the Company did not appropriately andtimely identify the relevant characteristic of certain put rights which resultedin the Company’s failure to properly identify the appropriate financialstatement classification of certain options and shares as a component of equity(as opposed to liabilities) which resulted in the inappropriate application ofmark-to-market accounting and incorrect expense recognition in the incomestatement. This control deficiency resulted in misstatements in theconsolidated financial statements for the annual and interim periods includedin this filing. Additionally, this control deficiency could result in materialmisstatements to annual or interim financial statements that would not be preventedor detected.

***Remediationof Material Weaknesses***

The Company will take actions to remediate thematerial weakness in our internal control over financial reporting surroundingthe application of generally accepted accounting principles with respect tostock-based compensation and management-purchased shares for thereporting period ending March 29, 2007. Specifically, the Company willmake improvements with respect to the design, precision and rigor of reviewcontrols over the application of stock-based compensation and management-purchasedshares accounting in that appropriate levels of management and legal counselnow review proposed accounting for all newly issued stock-basedcompensation awards and management-purchased shares. Further, managementwill consider using a qualified independent third-party advisor, asdeemed appropriate, with respect to more complex stock-based compensationtransactions. In addition, the put rights associated with the stock options andunderlying shares which resulted in previous awards being inappropriatelyclassified as liabilities and subject to mark-to-mark accounting in the incomestatement were cancelled and terminated during the period ended March 29,2007.

(b)                Changesin internal controls.

Asdiscussed within the *Material Weakness inInternal Control Over Financial Reporting*and*****Remediation of Material Weakness* above,the Company has identified a change in our internal control over financialreporting during the quarter ended March 29, 2007, that materially affected,or is reasonably likely to materially affect, our internal control overfinancial reporting during the year ended March 30, 2006.

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**PART IV**

**Item 15. Exhibits, Financial StatementSchedules**

(a)(1)   Thefollowing financial statements are included in Part II Item 8.:

|        | ** **                                                                                                                                                                                                        | **Page** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|   | Reports of Independent  Registered Public Accounting Firm                                                                                                                                                         | 38       |
|   | Consolidated  Statements of Operations—Successor periods ended March 30, 2006 and  March 31, 2005 and Predecessor periods ended December 23, 2004 and  April 1, 2004                     | 39       |
|   | Consolidated  Balance Sheets—March 30, 2006 and March 31, 2005 Successor                                                                                                                           | 40       |
|   | Consolidated  Statements of Cash Flows—Successor periods ended March 30, 2006 and  March 31, 2005 and Predecessor periods ended December 23, 2004 and  April 1, 2004                     | 41       |
|   | Consolidated  Statements of Stockholders’ Equity (Deficit)—Periods ended March 30,  2006 and March 31, 2005 Successor, December 23, 2004 Predecessor  and April 1, 2004 Predecessor | 42       |
|   | Notes to  Consolidated Financial Statements—Fiscal years ended March 30, 2006,  March 31, 2005 and April 1, 2004                                                                              | 44       |

 

(a)(2)         Financial StatementSchedules—All schedules have been omitted because the necessary information isincluded in the Notes to the Consolidated Financial Statements.

(b) Exhibits

A list of exhibits required to be filed as part of thisreport on Form 10-K/A is set forth in the Exhibit Index, whichimmediately precedes such exhibits.

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.
|        |   | MARQUEE HOLDINGS INC. |
|--------|--------|-----------------------|
|   |   | By:                   |   | /s/  CHRIS A. COX |
|   |   |                  |   | Chris A. Cox  Chief Accounting Officer |
|   |   | Date:                 |   | April  16, 2007 |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.
| /s/ PETER C. BROWN    |   | Chairman of the Board, Chief    |   | April 16, 2007 |
|-----------------------|--------|---------------------------------|--------|----------------|
| Peter C. Brown        |   | Executive Officer and President |   |           |
| /s/ MICHAEL R. HANNON |   | Director                        |   | April 16, 2007 |
| Michael R. Hannon     |   |                            |   |           |
| /s/ STEPHEN P. MURRAY |   | Director                        |   | April 16, 2007 |
| Stephen P. Murray     |   |                            |   |           |
| /s/ STAN PARKER       |   | Director                        |   | April 16, 2007 |
| Stan Parker           |   |                            |   |           |
| /s/ AARON J. STONE    |   | Director                        |   | April 16, 2007 |
| Aaron J. Stone        |   |                            |   |           |
| /s/ JOHN CONNAUGHTON  |   | Director                        |   | April 16, 2007 |
| John Connaughton      |   |                            |   |           |
| /s/ MICHAEL CONNELLY  |   | Director                        |   | April 16, 2007 |
| Michael Connelly      |   |                            |   |           |
| /s/ BENJAMIN COUGHLIN |   | Director                        |   | April 16, 2007 |
| Benjamin Coughlin     |   |                            |   |           |
| /s/ TRAVIS REID       |   | Director                        |   | April 16, 2007 |
| Travis Reid           |   |                            |   |           |
| /s/ CRAIG R. RAMSEY   |   | Executive Vice President  and   |   | April 16, 2007 |
| Craig R. Ramsey       |   | Chief Financial Officer         |   |           |
| /s/ KEVIN M. CONNOR   |   | Senior Vice President,  General |   | April 16, 2007 |
| Kevin M. Connor       |   | Counsel and Secretary           |   |           |
| /s/ CHRIS A. COX      |   | Vice President and  Chief  |   | April 16, 2007 |
| Chris A. Cox          |   | Accounting Officer              |   |           |

 

126

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**EXHIBITINDEX**

| EXHIBIT NUMBER | ** ** | **DESCRIPTION** | ** ** |
|---------------------|------------|-----------------|------------|
|                | *2.1(a)    |            |       | 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(b)    |            |       | Agreement and Plan of Merger, dated June 20,  2005, by and among Marquee Holdings Inc. and LCE Holdings, Inc.  (incorporated by reference from Exhibit 2.1 to the Company’s Form 8-K  filed on June 24, 2005). |   |
|                | *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). |   |
|                | *2.3       |            |       | Agreement and Plan of Merger, dated as of  July 22, 2004 by and among Marquee Holdings, Inc., Marquee Inc. and  AMC Entertainment Inc. (incorporated by reference from Exhibit 2.1 to  Form 8-K filed June 23, 2004). |   |
|                | 3.1        |            |       | Second Amended and Restated Certificate of  Incorporation of Marquee Holdings Inc. (incorporated by reference from  Exhibit 3.1 to the Company’s Form 8-K (File No. 333-122636)  filed on January 31, 2006. |   |
|                | 3.2        |            |       | Second Amended and Restated Bylaws of Marquee  Holdings Inc. (incorporated by reference from Exhibit 3.2 to the  Company’s Form 8-K (File No. 333-122636) filed  January 31, 2006). |   |
|                | *4.1(a)    |            |       | Credit Agreement, dated January 16, 2006 among  AMC Entertainment Inc., Grupo Cinemex, S.A. de C.V., Cadena Mexicana de  Exhibicion, S.A. de C.V., the Lenders and the Issuers named therein, Citicorp  U.S. and Canada, Inc. and Banco Nacional de Mexico, S.A., Integrante del  Groupo Financiero Banamex. (incorporated by reference from Exhibit 10.7  to the Company’s Form 8-K (File No. 1-8747) filed  January 31, 2006). |   |
|                | *4.1(b)    |            |       | Guaranty, dated January 26, 2006 by AMC  Entertainment Inc. and each of the other Guarantors party thereto, in favor  of the Guaranteed Parties named therein (incorporated by reference from  Exhibit 10.8 to the Company’s Form 8-K (File No. 1-8747)  filed January 31, 2006). |   |
|                | *4.1(c)    |            |       | Pledge and Security Agreement, dated  January 26, 2006, by AMC Entertainment Inc. and each of the other  Grantors party thereto in favor of Citicorp U.S. and Canada, Inc., as  agent for the Secured Parties (incorporated by reference from  Exhibit 10.9 to the Company’s Form 8-K (File No. 1-8747)  filed January 31, 2006). |   |
|                | *4.1(d)    |            |       | Consent and Release, dated as of April 17,  2006, by and between AMC Entertainment Inc. and Citicorp U.S. and  Canada, Inc. (incorporated by reference from Exhibit 4.1(d) to  the Company’s Form S-4 (File No. 333-133574) filed  April 27, 2006). |   |

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|        | *4.2(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).                                                                                                               |   |
|--------|---------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | *4.2(b) |   |   | 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). |   |
|   | *4.2(c) |   |   | 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).                                                                                                                                        |   |
|   | *4.2(d) |   |   | Second Supplemental Indenture dated  December 23, 2004, respecting AMC Entertainment Inc.’s 91¤2%  Senior Subordinated Notes due 2011 (incorporated by reference from  Exhibit 4.1 to the Company’s 8-K (File No. 1-8747)  filed January 12, 2005).                                                                                                                       |   |
|   | *4.2(e) |   |   | Third Supplemental Indenture dated January 26,  2006, respecting AMC Entertainment Inc.’s 91¤2%  Senior Subordinated Notes due 2011 (incorporated by reference from Exhibit 4.2(e) to  the Company’s Form 10- Q filed on February 13, 2005).                                                                                                                         |   |
|   | *4.2(f) |   |   | Fourth Supplemental Indenture dated April 20,  2006, respecting AMC Entertainment Inc.’s 91¤2%  Senior Subordinated Notes due 2011 (incorporated by reference from Exhibit 4.2(f) to  the Company’s Form S-4 (File No. 333-133574) filed on  April 27, 2006).                                                                                                   |   |
|   | *4.3    |   |   | 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).                                                                                           |   |
|   | *4.4(a) |   |   | 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).                                                                        |   |
|   | *4.4(b) |   |   | First Supplemental Indenture, dated  December 23, 2004, respecting AMC Entertainment Inc.’s 97¤8%  Senior Subordinated Notes due 2012 (incorporated by reference from Exhibit 4.5(b) to  the Company’s Registration Statement on Form S-4 (File  No. 333-122376) filed on January 28, 2005).                                                                    |   |
|   | *4.4(c) |   |   | Second Supplemental Indenture, dated  January 26, 2006, respecting AMC Entertainment Inc.’s 97¤8%  Senior Subordinated Notes due 2012 (incorporated by reference from Exhibit 4.4(c) to  the Company’s Form 10- Q filed on February 13, 2005).                                                                                                                       |   |
|   | *4.4(d) |   |   | Third Supplemental Indenture dated April 20,  2006, respecting AMC Entertainment Inc.’s 97¤8%  Senior Subordinated Notes due 2012 (incorporated by reference from Exhibit 4.4(d) to  the Company’s Form S-4 (File No. 333-133574) filed  April 27, 2006).                                                                                                       |   |
|   | *4.5    |   |   | Registration Rights Agreement, dated  January 16, 2002, respecting AMC Entertainment Inc.’s 97¤8%  Senior Subordinated Notes due 2012 (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).                                                    |   |

128

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|        | *4.6(a) |   |   | Indenture, dated February 24, 2004, respecting  AMC Entertainment Inc.’s 8% Senior Subordinated Notes due 2014. (Incorporated  by reference from Exhibit 4.7 to the Company’s Registration Statement on  Form S-4 (File No. 333-113911) filed on March 24,  2004).                                                                                                |   |
|--------|---------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | *4.6(b) |   |   | First Supplemental Indenture, dated  December 23, 2004, respecting AMC Entertainment Inc.’s 8% Senior  Subordinated Notes due 2014 (incorporated by reference from Exhibit 4.7(b) to  the Company’s Registration Statement on Form S-4 (File  No. 333-122376) filed on January 28, 2005).                                                                    |   |
|   | *4.6(c) |   |   | Second Supplemental Indenture, dated  January 26, 2006, respecting AMC Entertainment Inc.’s 8% Senior  Subordinated Notes due 2014 (incorporated by reference from Exhibit 4.6(c) to  the Company’s Form 10-Q filed on February 13, 2005).                                                                                                                        |   |
|   | *4.6(d) |   |   | Third Supplemental Indenture dated April 20,  2006, respecting AMC Entertainment Inc.’s 8% Senior Subordinated Notes due  2014 (incorporated by reference from Exhibit 4.6(d) to the  Company’s Form S-4 (File No. 333-133574) filed  April 27, 2006).                                                                                                       |   |
|   | *4.7    |   |   | Registration Rights Agreement, dated  February 24, 2004, respecting AMC Entertainment Inc.’s 8% senior  subordinated notes due 2014. (Incorporated by reference from Exhibit 4.8  to the Company’s Registration Statement on Form S-4 (File  No. 333-113911) filed on March 24, 2004).                                                                            |   |
|   | *4.8(a) |   |   | Indenture, dated August 18, 2004, respecting  AMC Entertainment Inc.’s, as successor by merger to Marquee Inc.’s, 85¤8%  Senior Notes due 2012 (incorporated by reference from  Exhibit 4.9(a) to the Company’s Registration Statement on  Form S-4 (File No. 333-122376) filed on  January 28, 2005).                                             |   |
|   | *4.8(b) |   |   | First Supplemental Indenture, dated  December 23, 2004, respecting AMC Entertainment Inc.’s, as successor by  merger to Marquee Inc.’s, 85¤8% Senior  Notes due 2012 (incorporated by reference from Exhibit 4.9(a) to  the Company’s Registration Statement on Form S-4 (File  No. 333-122376) filed on January 28, 2005).                        |   |
|   | *4.8(c) |   |   | Second Supplemental Indenture, dated  January 26, 2006, respecting AMC Entertainment Inc.’s, as successor by  merger to Marquee Inc.’s, 85¤8% Senior  Notes due 2012 (incorporated by reference from Exhibit 4.8(c) to  the Company’s Form 10-Q filed on February 13, 2005).                                                                            |   |
|   | *4.8(d) |   |   | Third Supplemental Indenture dated April 20,  2006, respecting AMC Entertainment Inc.’s 85¤8%  Senior Notes due 2012 (incorporated by reference from  Exhibit 4.8(d) to the Company’s Form S-4 (File  No. 333-133574) filed April 27, 2006).                                                                                                            |   |
|   | *4.9(a) |   |   | Registration Rights Agreement dated August 18,  2004, respecting AMC Entertainment Inc.’s, as successor by merger to Marquee  Inc.’s, 85¤8%  Senior Notes due 2012 (incorporated by reference from  Exhibit 4.10(a) to the Company’s Registration Statement on  Form S-4 (File No. 333-122376) filed on January 28,  2005).                        |   |
|   | *4.9(b) |   |   | Joinder Agreement to Registration Rights Agreement  dated December 23, 2004, respecting AMC Entertainment Inc.’s, as  successor by merger to Marquee Inc.’s, 85¤8%  Senior Notes due 2012 (incorporated by reference from  Exhibit 4.10(b) to the Company’s Registration Statement on  Form S-4 (File No. 333-122376) filed on  January 28, 2005). |   |

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|        | *4.10(a) |   |   | Indenture, dated August 18, 2004, respecting  AMC Entertainment Inc.’s, as successor by merger to Marquee Inc.’s, Senior  Floating Rate Notes due 2010 (incorporated by reference from  Exhibit 4.11(a) to the Company’s Registration Statement on  Form S-4 (File No. 333-122376) filed on  January 28, 2005).                                                                                                  |   |
|--------|----------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | *4.10(b) |   |   | First Supplemental Indenture, dated  December 23, 2004, respecting AMC Entertainment Inc.’s, as successor by  merger to Marquee Inc.’s, Senior Floating Rate Notes due 2010 (incorporated  by reference from Exhibit 4.11(b) to the Company’s Registration  Statement on Form S-4 (File No. 333-122376) filed on  January 28, 2005).                                                                             |   |
|   | *4.10(c) |   |   | Second Supplemental  Indenture, dated January 26, 2006, respecting AMC Entertainment Inc.’s,  as successor by merger to Marquee Inc.’s, Senior Floating Rate Notes due 2010  (incorporated by reference from Exhibit 4.10(c) to the Company’s  Form 10-Q filed on February 13, 2005).                                                                                                                                 |   |
|   | *4.10(d) |   |   | Third  Supplemental Indenture dated April 20, 2006, respecting AMC  Entertainment Inc.’s Senior Floating Rate Notes due 2010 (incorporated by  reference from Exhibit 4.10(d) to the Company’s Form S-4  (File No. 333-133574) filed on April 27, 2006).                                                                                                                                                              |   |
|   | *4.11(a) |   |   | Registration  Rights Agreement dated August 18, 2004, respecting AMC Entertainment  Inc.’s, as successor by merger to Marquee Inc.’s, Senior Floating Rate Notes  due 2010 (incorporated by reference from Exhibit 4.12(a) to the  Company’s Registration Statement on Form S-4 (File No. 333-122376)  filed on January 28, 2005).                                                                               |   |
|   | *4.11(b) |   |   | Joinder Agreement  to Registration Rights Agreement dated December 23, 2004, respecting AMC  Entertainment Inc.’s, as successor by merger to Marquee Inc.’s, Senior  Floating Rate Notes due 2010 (incorporated by reference from  Exhibit 4.12(b) to the Company’s Registration Statement on  Form S-4 (File No. 333-122376) filed on  January 28, 2005).                                                       |   |
|   | *4.12(a) |   |   | Indenture, dated  January 26, 2006, respecting AMC Entertainment Inc.’s 11% senior  subordinated notes due 2016, between AMC Entertainment Inc. and HSBC Bank  USA, National Association (incorporated by reference from Exhibit 4.1 to  the Company’s Form 8-K (File No. 1-8747) filed on  January 31, 2006).                                                                                                             |   |
|   | *4.12(b) |   |   | First  Supplemental Indenture dated April 20, 2006, respecting AMC  Entertainment Inc.’s 11% Senior Subordinated Notes due 2016 (incorporated by  reference from Exhibit 4.12(b) to the Company’s Form S-4  (File No. 333-133574) filed April 27, 2006).                                                                                                                                                              |   |
|   | *4.13    |   |   | Registration  Rights Agreement dated January 26, 2006, respecting AMC Entertainment  Inc.’s 11% senior subordinated notes due 2016, among AMC Entertainment Inc.,  the guarantors party thereto, Credit Suisse Securities (USA) LLC, Citigroup  Global Markets Inc., and J.P. Morgan Securities Inc. (incorporated by  reference from Exhibit 4.2 to the company’s Form 8-K (File  No. 1-8747) filed on January 31, 2006). |   |
|   | *4.14    |   |   | Indenture, dated  August 18, 2004, respecting Marquee Holdings Inc.’s 12% Senior Discount  Notes due 2014 (incorporated by reference from Exhibit 4.13 to Holdings’  Registration Statement on Form S-4 (File No. 333-122636)  filed on February 8, 2005).                                                                                                                                                                 |   |

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|        | *4.15  |   |   | Registration  Rights Agreement dated August 18, 2004, respecting Marquee Holdings  Inc.’s 12% Senior Discount Notes due 2014 (incorporated by reference from  Exhibit 4.14 to Holdings’ Registration Statement on Form 5-4  (File No. 333-122636) filed on February 8, 2005).                                         |   |
|--------|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | *10.1  |   |   | Consent Decree,  dated December 21, 2005, by and among Marquee Holdings Inc., LCE  Holdings, Inc. and the State of Washington (incorporated by reference  from Exhibit 10.1 to the Company’s Form 8-K (File No. 1-  8747) filed on December 27, 2005).                                                                |   |
|   | *10.2  |   |   | Hold Separate  Stipulation and Order, dated December 21, 2005, by and among Marquee  Holdings Inc., LCE Holdings, Inc. and the State of Washington  (incorporated by reference from Exhibit 10.2 to the Company’s  Form 8-K (File No. 1-8747) filed on December 27,  2005).                                           |   |
|   | *10.3  |   |   | Final Judgment,  dated December 20, 2005, by and among Marquee Holdings Inc., LCE  Holdings, Inc. and the Antitrust Division of the United States  Department of Justice (incorporated by reference from Exhibit 10.3 to  the Company’s Form 8-K (File No. 1-8747) filed on  December 27, 2005).                      |   |
|   | *10.4  |   |   | Hold Separate Stipulation  and Order, dated December 20, 2005, by and among Marquee Holdings Inc.,  LCE Holdings and the Antitrust Division of the United States Department of  Justice (incorporated by reference from Exhibit 10.4 to the Company’s  Form 8-K (File No. 1-8747) filed on December 27,  2005).            |   |
|   | *10.5  |   |   | District of  Columbia Final Judgment, dated December 21, 2005, by and among Marquee  Holdings Inc., LCE Holdings, Inc. and the District of Columbia  (incorporated by reference from Exhibit 10.5 to the Company’s  Form 8-K (File No. 1-8747) filed on December 27,  2005).                                          |   |
|   | *10.6  |   |   | Stipulation for  Entry into Final Judgment, dated December 20, 2005, by and among Marquee  Holdings Inc., LCE Holdings, Inc. and the State of California  (incorporated by reference from Exhibit 10.6 to the Company’s  Form 8-K (File No. 1-8747) filed on December 27,  2005).                                     |   |
|   | *10.7  |   |   | Stipulated Final  Judgment, dated December 20, 2005, by and among Marquee Holdings Inc.,  LCE Holdings, Inc. and the State of California (incorporated by  reference from Exhibit 10.7 to the Company’s Form 8-K (File  No. 1-8747) filed on December 27, 2005).                                                      |   |
|   | *10.8  |   |   | Second Amended  and Restated Certificate of Incorporation of Marquee Holdings Inc.  (incorporated by reference from Exhibit 10.1 to the Company’s  Form 8-K (File No. 1-8747) filed on January 31,  2006).                                                                                                                      |   |
|   | *10.9  |   |   | Second Amended  and Restated Stockholders Agreement of Marquee Holdings Inc., dated  January 26, 2006, among Marquee Holdings Inc. and the stockholders of  Marquee Holdings Inc. party thereto (incorporated by reference from  Exhibit 10.2 to the Company’s Form 8-K (File No. 1-8747)  filed on January 31, 2006).     |   |
|   | *10.10 |   |   | Amended and  Restated Management Stockholders Agreement of Marquee Holdings Inc., dated  January 26, 2006, among Marquee Holdings Inc. and the stockholders of  Marquee Holdings Inc. party thereto (incorporated by reference from  Exhibit 10.3 to the Company’s Form 8-K (File No. 1-8747)  filed on January 31, 2006). |   |

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|        | *10.11    |   |   | Continuing  Service Agreement, dated January 26, 2006, among AMC Entertainment Inc.  (as successor to Loews Cineplex Entertainment Corporation) and Travis Reid,  and, solely for the purposes of its repurchase obligations under  Section 7 thereto, Marquee Holding Inc. (incorporated by reference from  Exhibit 10.4 to the Company’s Form 8-K (File No. 1-8747)  filed on January 31, 2006).                                                                                                                                                                                                                                      |   |
|--------|-----------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | *10.12    |   |   | Non-Qualified  Stock Option Agreement, dated January 26, 2006, between Marquee Holdings  Inc. and Travis Reid (incorporated by reference from Exhibit 10.5 to the  Company’s Form 8-K (File No. 1-8747) filed on  January 31, 2006).                                                                                                                                                                                                                                                                                                                                                                                                         |   |
|   | *10.13    |   |   | Amended and  Restated Fee Agreement, dated as of January 26, 2006, by and among  Marquee Holdings Inc., AMC Entertainment Inc., J.P. Morgan Partners, L.P.,  Apollo Management V, L.P., Apollo Investment Fund V, L.P., Apollo Overseas  Partners V, L.P., Apollo Netherlands Partners V A), L.P., Apollo Netherlands  partners V(B), L.P., Apollo German Partners V GmbH & Co KG Bain  Capital Partners, LLC, TC Group, L.L.C., a Delaware limited liability company  and Applegate and Collatos, Inc. (incorporated by reference from  Exhibit 10.6 to the Company’s Form 8-K (File No. 1-8747)  filed on January 31, 2006). |   |
|   | *10.14    |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                  |   |
|   | *10.15(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).                                                                                                                                                                                                                                                                                                                                                                            |   |
|   | *10.15(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).                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|   | *10.16    |   |   | Employment  Agreement between Marquee Holdings, Inc., AMC Entertainment Inc. and  Peter C. Brown dated December 23, 2004 (incorporated by reference  from Exhibit 10.3 to AMCE’s Registration Statement on Form S-4  (File No. 333-122376) filed on January 28, 2005).                                                                                                                                                                                                                                                                                                                                                        |   |
|   | *10.17    |   |   | Employment  agreement between Marquee Holdings, Inc., AMC Entertainment Inc.,  American Multi-Cinema, Inc. and Philip M. Singleton dated  December 23, 2004 (incorporated by reference from Exhibit 10.4 to  AMCE’s Registration Statement on Form S-4 (File No. 333-122376)  filed on January 28, 2005).                                                                                                                                                                                                                                                                                                                |   |
|   | *10.18    |   |   | 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).                                                                                                                                                                                                                                                                                                                                                      |   |
|   | *10.19    |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|   | *10.20    |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                              |   |

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|        | *10.21 |   |   | First Amended and  Restated American Multi-Cinema, Inc. Retirement Enhancement Plan  effective July 31, 2003 (incorporated by reference from  Exhibit 10.1 to the Company’s Form 10-Q (File No. 1-8747)  for the quarter ended October 2, 2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | *10.22 |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
|   | *10.23 |   |   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
|   | *10.24 |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
|   | *10.25 |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   | *10.26 |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
|   | *10.27 |   |   | 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.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|   | *10.28 |   |   | 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,  Studio 29 (Olathe), Hamilton 24, Deer Valley 30, Mesa  Grand 24 and Burbank 16. |   |

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|        | *10.29 |   |   | 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,  Studio 29 (Olathe), Hamilton 24, Deer Valley 30, Mesa  Grand 24 and Burbank 16. |   |
|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | *10.30 |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|   | *10.31 |   |   | Form of Non-Qualified  Stock Option Agreement used in December 22, 2004 option grants to  Mr. Peter C. Brown and Mr. Philip M. Singleton (incorporated by  reference from Exhibit 10.18 to AMCE’s Registration Statement on  Form S-4 (File No. 333-122376) filed on  January 28, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
|   | *10.32 |   |   | Form of  Incentive Stock Option Agreement used in December 22, 2004 option grants  to Mr. Peter C. Brown and Mr. Philip M. Singleton (incorporated by  reference from Exhibit 10.19 to AMCE’s Registration Statement on  Form S-4 (File No. 333-122376) filed on  January 28, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   | *10.33 |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|   | *10.34 |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|   | *10.35 |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|   | *10.36 |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|   | *10.37 |   |   | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |

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|        | *10.38    |   |   | 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).                                                                                                                                                                                                                  |   |
|--------|-----------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | *10.39    |   |   | 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). |   |
|   | *10.40    |   |   | Form of Indemnification Agreement dated  September 18, 2003 between the Company and Peter C. Brown,  Charles S. Sosland, Charles J. Egan, Jr., Michael N.  Garin, Marc J. Rowan, Paul E. Vardeman, Leon D. Black and Laurence M.  Berg (incorporated by reference from Exhibit 10.1 to the Company’s  Form 10-Q (File No. 1-8747) for the quarter ended  January 1, 2004).                                                                                                                                                                |   |
|   | *10.41    |   |   | 2003 AMC Entertainment Inc. Long-Term  Incentive Plan (incorporated by reference from Exhibit 10.2 to the  Company’s Form 10-Q (File No. 1-8747) for the quarter  ended October 2, 2003).                                                                                                                                                                                                                                                                                                                                                                                                        |   |
|   | *10.42    |   |   | Description of 2004 Grant under the 2003 AMC  Entertainment Inc. Long-Term Incentive Plan (incorporated by reference  from Exhibit 10.3 to the Company’s Form 10-Q (File No. 1-8747)  for the quarter ended October 2, 2003).                                                                                                                                                                                                                                                                                                                                                                    |   |
|   | *10.43(a) |   |   | Marquee Holdings Inc. 2004 Stock Option Plan  (incorporated by reference from Exhibit 10.32(a) to AMCE’s  Registration Statement on Form S-4 (File No. 333-122376)  filed on January 28, 2005).                                                                                                                                                                                                                                                                                                                                                                                             |   |
|   | *10.43(b) |   |   | Form of Non-Qualified Stock Option  Agreement (incorporated by reference from Exhibit 10.32(b) to  AMCE’s Registration Statement on Form S-4 (File No. 333-122376)  filed on January 28, 2005).                                                                                                                                                                                                                                                                                                                                                                                        |   |
|   | *10.43(c) |   |   | Form of Incentive Stock Option Agreement  (incorporated by reference from Exhibit 10.32(c) to AMCE’s  Registration Statement on Form S-4 (File No. 333-122376)  filed on January 28, 2005).                                                                                                                                                                                                                                                                                                                                                                                            |   |
|   | *10.44    |   |   | Contribution and Unit Holders Agreement, dated as of  March 29, 2005, among National Cinema Network, Inc., Regal  CineMedia Corporation and National CineMedia, LLC (incorporated by reference  from Exhibit 10.1 to the Company’s Form 8-K filed  April 4, 2005).                                                                                                                                                                                                                                                                                                                          |   |
|   | *14       |   |   | Code of Ethics (incorporated by reference from  Exhibit 14 to AMCE’s Form 10-K filed on June 23, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
|   | *21       |   |   | Subsidiaries of Holdings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|   | **31.1    |   |   | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Acts of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
|   | **31.2    |   |   | Certification of Chief Financial Officer pursuant to  Section 302 of the Sarbanes-Oxley Acts of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |

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|  | **32.1 |   |   | 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. |   |
|--|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

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*                    Previouslyfiled.

**             Filed herewith.

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