**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549**

----

**FORM 10-Q/A**

**(AmendmentNo. 1)**

**(Mark One)**
| x | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE**

**SECURITIES EXCHANGE ACT OF 1934** |
|---|-------------------------------------------------------------------------------------------------------------|

 

**For the quarterly period ended June 29, 2006**

**OR**
| o | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE**

**SECURITIES EXCHANGE ACT OF 1934** |
|---|--------------------------------------------------------------------------------------------------------------|

 

**For the transition period from*      *   to*      *   **

**Commission filenumber 333-122636**

----

**MARQUEEHOLDINGS INC.**

(Exact name of registrant as specified in its charter)

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

 

**(816) 221-4000**

(Registrant’s telephonenumber, including area code)

----

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days.

Yes   x     No   o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Largeaccelerated filer o  Accelerated filer o  Non-accelerated filer x

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

Yes   o     No   x

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

|                                                 | **Title of Each Class of Common Stock** | ** ** | ** **    | **Number of Shares  Outstanding as of June 29, 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 |                                                                                     |       |

 

Explanatory Note: MarqueeHoldings Inc., hereby amends Parts I and II of its Quarterly Report onForm 10-Q for the quarterly period ended June 29, 2006 to include theamended Item 1. Financial Statements (unaudited), Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations, Item 4. Controls and Procedures and Item 6. Exhibitswhich gives effect to the restatement for management-purchased shares and stockoption awards, reflects discontinued operations described in Note 3 andadds disclosure about a related material weakness in our internal control overfinancial reporting. There have been no other changes, events or othertransactions to recognize since the original filing date.

 

----

**MARQUEE HOLDINGSINC. AND SUBSIDIARY**

**INDEX**

|                                             | ** ** | ** **                                                                                      | ** ** | **Page  Number** |
|---------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|------------------|
| **PART I—FINANCIAL  INFORMATION** |
| **Item 1.**                                 | ** ** | **Financial Statements (unaudited)**                                                            |       | 3                |
|                                        |       | Consolidated Statements of Operations                                                           |       | 6                |
|                                        |       | Consolidated  Balance Sheets                                                                    |       | 7                |
|                                        |       | Consolidated Statements of Cash Flows                                                           |       | 8                |
|                                        |       | Notes to Consolidated Financial Statements                                                      |       | 9                |
| **Item 2.**                                 | ** ** | **Management’s Discussion and Analysis of Financial  Condition and Results of Operations** |       | 26               |
| **Item 4.**                                 | ** ** | **Controls and Procedures**                                                                     |       | 36               |
| **PART II—OTHER  INFORMATION**    |
| **Item 6.**                                 | ** ** | **Exhibits**                                                                                    |       | 38               |
|                                        | ** ** | **Signatures**                                                                                  |       | 39               |

 

2

----

**PART I—FINANCIALINFORMATION**

**Item 1.**                        FinancialStatements. (Unaudited)

**Restatement ofFinancial Statements**

***In connection with an ongoing review of its quarterlymark-to-market accounting for its liability classified shares and stock optionawards, the Company determined that its financial statements as of and for the thirteenweeks ended June 29, 2006 and as of March 30, 2006 needed to berestated to correct the following items:***

*1.**                 Management-purchasedshares*

On December 23, 2004, certain members of managementpurchased common shares in the Company. Due to the existence of certain put options, at the time the shares werepurchased, the Company determined that the management-purchased shares for twomembers of management should be recorded as liabilities with changes in theestimated fair value of those shares recorded through a charge or credit to thestatement 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 to above) fora period of six months following a change in control or the employee'stermination for any reason (including voluntary termination).  For all terminations except voluntary termination,the call price for the shares is fair value. For voluntary terminations, the call price for the shares is the lowerof 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.

During February 2007, the Company determined that themanagement-purchased shares should have been recorded as a component ofpermanent equity (rather than as liabilities) because (i) the put optionsreferred to above are conditional and do not contain any embedded redemptionrights and (ii) the Company has not exercised its call option on any of themanagement purchased shares and does not intend to do so.  Accordingly, the Company has restated thefinancial statements as of and for the thirteen weeks ended June 29, 2006and as of March 30, 2006 to reverse the previously recorded mark to marketeffects (income) related to the common shares purchased by the two members ofmanagement that had been incorrectly classified as liabilities since December23, 2004 and to reflect these shares within stockholders' equity.  There was no impact on net cash provided byoperating activities as a result of the above mentioned items.

*2.**                 StockOption Awards*

On December 23, 2004, certain members of managementwere granted options to purchase Company common stock.  Due to the existence of certain put options,at the time the stock options were granted, the Company determined that thestock options for two members of management should be recorded as liabilitieswith changes in the estimated fair value of those options recorded through acharge or credit to the statement of operations.  The Company also has a call option relatingto the options (and the underlying shares) similar to the call option referredto above.

During February 2007, the Company determined that theoptions 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 

3

----

obtained upon exercise ofoptions) is not within the employee's control. Accordingly, the Company hasrestated its financial statements as of and for the thirteen weeks endedJune 29, 2006 and as of March 30, 2006 to reverse the previously recordedmark to market effects relating to the stock options awarded to this member ofmanagement that had been incorrectly classified as liabilities and to reflectthese options as additional paid-in capital (rather than as liabilities).  There was no impact on net cash provided byoperating activities as a result of the above mentioned items.

TheCompany has restated its financial statements for the thirteen week periodended June 29, 2006 and as of March 30, 2006 to record the net effectof the adjustments discussed above. The net effects of the adjustments recordedto restate the financial statements are summarized as follows (dollars inthousands):

| **Thirteen Weeks Ended June 29, 2006** | ** ** | ** ** | ** ** | **Stock based  Compensation  Expense (1)** | ** ** | **Other Expense  (Income)** | ** ** | **Total** | ** ** |
|-----------------------------------------------------------------|------------|------------|------------|------------------------------------------------------|------------|----------------------------------|------------|-----------|------------|
| Decrease in Other  Long-Term Liabilities (2)                    |       |       | $          | 532                                                  |       |                             |       | $         | 2,826      |   |   | $ | 3,358 |   |
| Increase in Additional Paid-in Capital (3)                      |       |       | $          | 2,869                                                |       |                             |       | $         | 3,814      |   |   | $ | 6,683 |   |
| Increase in accumulated deficit                                 |       |       | $          | 2,114                                                |       |                             |       | $1,894    |       |   | $4,008 |   |
| Decrease  (increase) in Net Loss                                |       |       | $          | (223                                                 | )          |                             |       | $         | 906        |   |   | $ | 683 |   |

----

(1)          Included within OtherG&A

(2)          Refer to discussion ofthe adjustment for the management purchased shares and stock option awardsabove

(3)          Refer to discussion ofthe adjustment for stock option awards above

Allpreviously reported amounts affected by the restatement that appear elsewherein these footnotes to the consolidated financial statements have also beenrestated. See Note 1 to the consolidated financial statements.

**Reclassificationfor Discontinued Operations**

** **

As previouslydisclosed in our Form 10-Q for the period ended December 28,2006, we have divested of certain operations that met the criteria forreporting as discontinued operations. Under generally accepted accountingprinciples, we are required to reclassify previously reported prior periodfinancial statements to reflect the discontinued operations on a basiscomparable to the current presentation. Generally accepted accountingprinciples require our financial statements that were included in ourfiscal 2006 Annual Report on Form 10-K to be updated fordiscontinued operations in our fiscal 2007 Annual Report on Form 10-K.We have previously provided certain financial information that has been revisedin advance of filing our fiscal 2007 Annual Report on Form 10-Kin our Form 8-K filed on February 22, 2007 and our Form 8-K/A as filed onApril 16, 2007. The historical financial information included herein hasbeen revised and updated from its original presentation to incorporatethe following:

·       the reclassification of the results ofoperations for certain assets which we sold on May 11, 2006, that meet thecriteria for discontinued operations to be presented as such in accordance withStatement of Financial Accounting Standards No. 144, *Accountingfor the Impairment or Disposal of Long-Lived Assets* and theaddition to Note 3 to the Notes to the Consolidated Financial Statementsin Item 1, Financial Statements (unaudited);

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

4

----

The information included in this Amendment No. 1 onForm 10-Q/A is presented in connection with the changes described above. Theinformation, with respect to the reclassification for discontinued operations, containedin this Amendment No. 1 on Form 10-Q/A is presented for the thirteen weeksended June 29, 2006, and except as indicated above with respect to restatements,this information has not been updated to reflect financial results subsequentto that date or any other changes since the date of the Company's CurrentReport on 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 the restatementsdiscussed above there is no change to the Company's previously reportedconsolidated operating results.  There isno change to the Company’s previously reported consolidated financial conditionor cash flows except as discussed above related to the restatement.  Therefore, this filing should be readtogether with other documents we have filed with the SEC subsequent to thefiling of the original Current Report on Form 8-K filed on February 22, 2007and our Form 8-K/A as filed on April 16, 2007.  Information in such reports and documentsupdates and supersedes certain information contained in this document.

 

5

----

**MARQUEE HOLDINGSINC. AND SUBSIDIARY**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(in thousands)**

| ** **                                                                 | ** ** | **Thirteen Weeks Ended**      | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                 | ** ** | **June 29, 2006  (restated)** | ** ** | **June 30, 2005** | ** ** |
| Revenues                                                                   |       |                                    |       |   |   |   |   |   |   |
| Admissions                                                                 |       |                                    | $          | 435,640 |   |   |   | $ | 269,954 |   |   |
| Concessions                                                                |       |                                    | 181,044    |   |   |   | 109,138 |   |   |
| Other revenue                                                              |       |                                    | 29,150     |   |   |   | 24,710 |   |   |
| Total revenues                                                             |       |                                    | 645,834    |   |   |   | 403,802 |   |   |
| Costs and Expenses                                                         |       |                                    |       |   |   |   |   |   |   |
| Film exhibition costs                                                      |       |                                    | 227,951    |   |   |   | 148,627 |   |   |
| Concession costs                                                           |       |                                    | 22,015     |   |   |   | 11,521 |   |   |
| Operating expense                                                          |       |                                    | 155,181    |   |   |   | 103,654 |   |   |
| Rent                                                                       |       |                                    | 112,319    |   |   |   | 75,805 |   |   |
| General and administrative:                                                |       |                                    |       |   |   |   |   |   |   |
| Merger and acquisitions costs                                              |       |                                    | 3,752      |   |   |   | 1,685 |   |   |
| Management fee                                                             |       |                                    | 1,250      |   |   |   | 500 |   |   |
| Other                                                                      |       |                                    | 15,773     |   |   |   | 10,104 |   |   |
| Preopening expense                                                         |       |                                    | 1,042      |   |   |   | 8 |   |   |
| Theatre and other closure expense                                          |       |                                    | 2,043      |   |   |   | 634 |   |   |
| Restructuring charges                                                      |       |                                    | —     |   |   |   | 3,069 |   |   |
| Depreciation and amortization                                              |       |                                    | 63,896     |   |   |   | 35,947 |   |   |
| Disposition of assets and other gains                                      |       |                                    | 1,436      |   |   |   | (667 | ) |   |
| Total costs and expenses                                                   |       |                                    | 606,658    |   |   |   | 390,887 |   |   |
| Other expense (income)                                                     |       |                                    |       |   |   |   |   |   |   |
| Other                                                                      |       |                                    | (1,460     | ) |   |   | (1,116 | ) |   |
| Interest expense                                                           |       |                                    |       |   |   |   |   |   |   |
| Corporate borrowings                                                       |       |                                    | 56,200     |   |   |   | 30,297 |   |   |
| Capital and financing lease obligations                                    |       |                                    | 1,328      |   |   |   | 1,199 |   |   |
| Investment expense (income)                                                |       |                                    | (371       | ) |   |   | 496 |   |   |
| Total other expense                                                        |       |                                    | 55,697     |   |   |   | 30,876 |   |   |
| Loss from continuing  operations before income taxes                       |       |                                    | (16,521    | ) |   |   | (17,961 | ) |   |
| Income tax  provision (benefit)                                            |       |                                    | 300        |   |   |   | (8,400 | ) |   |
| Loss from  continuing operations                                           |       |                                    | (16,821    | ) |   |   | (9,561 | ) |   |
| Earnings (loss)  from discontinued operations, net of income tax provision |       |                                    | 2,679      |   |   |   | (21,630 | ) |   |
| Net loss                                                                   |       |                                    | $          | (14,142 | ) |   |   | $ | (31,191 | ) |   |
| Basic and diluted  loss per share of common stock:                         |       |                                    |       |   |   |   |   |   |   |
| Loss from continuing operations                                            |       |                                    | (13.12     | ) |   |   | (12.43 | ) |   |
| Earnings (loss) from discontinued operations                               |       |                                    | $          | 2.09 |   |   |   | (28.11 | ) |   |
| Net loss per  share                                                        |       |                                    | (11.03     | ) |   |   | (40.54 | ) |   |
| Average shares  outstanding:                                               |       |                                    |       |   |   |   |   |   |   |
| Basic and diluted                                                          |       |                                    | 1,282.25   |   |   |   | 769.35 |   |   |

 

*See Notes to ConsolidatedFinancial Statements.*

6

----

**MARQUEE HOLDINGSINC. AND SUBSIDIARY**

**CONSOLIDATED BALANCESHEETS**

**(inthousands, except share data)**

| ** **                                                                                                                                                                                      | ** ** | **June 29, 2006  (restated)** | ** ** | **March 30, 2006  (restated)** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|------------------------------------------|------------|
| **ASSETS**                                                                                                                                                                                      |       |                                    |       |                                     |       |   |   |   |   |
| Current assets:                                                                                                                                                                                 |       |                                    |       |                                     |       |   |   |   |   |
| Cash and  equivalents                                                                                                                                                                           |       |                                    | $          | 345,777                                  |       |   |   | $ | 232,366 |   |   |
| Receivables, net  of allowance for doubtful accounts of $1,204 as of June 29, 2006 and  $1,339 as of March 30, 2006                                                                   |       |                                    | 60,740     |                                     |       |   | 54,725 |   |   |
| Other current  assets                                                                                                                                                                           |       |                                    | 35,634     |                                     |       |   | 34,647 |   |   |
| Current assets  held for sale                                                                                                                                                                   |       |                                    | 308        |                                     |       |   | 4,726 |   |   |
| Total current  assets                                                                                                                                                                           |       |                                    | 442,459    |                                     |       |   | 326,464 |   |   |
| Property, net                                                                                                                                                                                   |       |                                    | 1,456,217  |                                     |       |   | 1,501,048 |   |   |
| Intangible assets, net                                                                                                                                                                          |       |                                    | 261,973    |                                     |       |   | 273,308 |   |   |
| Goodwill                                                                                                                                                                                        |       |                                    | 2,013,241  |                                     |       |   | 2,018,318 |   |   |
| Deferred income taxes                                                                                                                                                                           |       |                                    | 5,584      |                                     |       |   | 3,564 |   |   |
| Other long-term  assets                                                                                                                                                                         |       |                                    | 171,611    |                                     |       |   | 172,312 |   |   |
| Noncurrent assets held  for sale                                                                                                                                                                |       |                                    | 40,982     |                                     |       |   | 112,337 |   |   |
| Total assets                                                                                                                                                                                    |       |                                    | $          | 4,392,067                                |       |   |   | $ | 4,407,351 |   |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                  |       |                                    |       |                                     |       |   |   |   |   |
| Current liabilities:                                                                                                                                                                            |       |                                    |       |                                     |       |   |   |   |   |
| Accounts payable                                                                                                                                                                                |       |                                    | $          | 163,394                                  |       |   |   | $ | 150,383 |   |   |
| Accrued expenses  and other liabilities                                                                                                                                                         |       |                                    | 180,172    |                                     |       |   | 157,227 |   |   |
| Deferred revenues  and income                                                                                                                                                                   |       |                                    | 93,808     |                                     |       |   | 95,812 |   |   |
| Current maturities  of corporate borrowings and capital and financing lease obligations                                                                                                         |       |                                    | 28,959     |                                     |       |   | 30,804 |   |   |
| Current  liabilities held for sale                                                                                                                                                              |       |                                    | 2,579      |                                     |       |   | 8,233 |   |   |
| Total current  liabilities                                                                                                                                                                      |       |                                    | 468,912    |                                     |       |   | 442,459 |   |   |
| Corporate borrowings                                                                                                                                                                            |       |                                    | 2,429,665  |                                     |       |   | 2,428,996 |   |   |
| Capital and financing  lease obligations                                                                                                                                                        |       |                                    | 45,192     |                                     |       |   | 64,016 |   |   |
| Other long-term  liabilities                                                                                                                                                                    |       |                                    | 415,833    |                                     |       |   | 417,335 |   |   |
| Noncurrent liabilities  held for sale                                                                                                                                                           |       |                                    | 11,990     |                                     |       |   | 11,903 |   |   |
| Total liabilities                                                                                                                                                                               |       |                                    | 3,371,592  |                                     |       |   | 3,364,709 |   |   |
| Stockholders’ equity:                                                                                                                                                                      |       |                                    |       |                                     |       |   |   |   |   |
| Class A-1  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  382,475.00000 shares issued and outstanding as of June 29, 2006 and  March 30, 2006)               |       |                                    | 4          |                                     |       |   | 4 |   |   |
| Class A-2  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  382,475.00000 shares issued and outstanding as of June 29, 2006 and  March 30, 2006)               |       |                                    | 4          |                                     |       |   | 4 |   |   |
| Class N  Common Stock nonvoting ($.01 par value, 375,000 shares authorized;  5,128.77496 shares issued and outstanding as of June 29, 2006 and  March 30, 2006)                  |       |                                    | —     |                                     |       |   | — |   |   |
| Class L-1  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  256,085.61252 shares issued and outstanding as of June 29, 2006 and  March 30, 2006)               |       |                                    | 3          |                                     |       |   | 3 |   |   |
| Class L-2  Common Stock voting ($.01 par value, 1,500,000 shares authorized;  256,085.61252 shares issued and outstanding as of June 29, 2006 and  March 30, 2006, respectively) |       |                                    | 3          |                                     |       |   | 3 |   |   |
| Additional paid-in  capital                                                                                                                                                                     |       |                                    | 1,314,794  |                                     |       |   | 1,313,899 |   |   |
| Accumulated other  comprehensive loss                                                                                                                                                           |       |                                    | (19,578    | )                                        |       |   | (10,658 | ) |   |
| Accumulated  deficit                                                                                                                                                                            |       |                                    | (274,755   | )                                        |       |   | (260,613 | ) |   |
| Total  stockholders’ equity                                                                                                                                                                |       |                                    | 1,020,475  |                                     |       |   | 1,042,642 |   |   |
| Total liabilities  and stockholders’ equity                                                                                                                                                |       |                                    | $          | 4,392,067                                |       |   |   | $ | 4,407,351 |   |   |

 

*See Notes to ConsolidatedFinancial Statements.*

7

----

**MARQUEE HOLDINGSINC. AND SUBSIDIARY**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(inthousands)**

| ** **                                                                       | ** ** | **Thirteen Weeks Ended**      | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                       | ** ** | **June 29, 2006  (restated)** | ** ** | **June 30, 2005** | ** ** |
| **INCREASE  IN CASH AND EQUIVALENTS**                                            |       |                                    |       |   |   |   |   |   |   |
| **Cash  flows from operating activities:**                                       |       |                                    |       |   |   |   |   |   |   |
| Net loss                                                                         |       |                                    | $          | (14,142 | ) |   |   | $ | (31,191 | ) |   |
| Adjustments to  reconcile net loss to net cash provided by operating activities: |       |                                    |       |   |   |   |   |   |   |
| Depreciation and amortization                                                    |       |                                    | 64,441     |   |   |   | 38,215 |   |   |
| Amortization of discount on corporate borrowings                                 |       |                                    | 5,469      |   |   |   | 4,855 |   |   |
| Non-cash portion of stock-based  compensation                                    |       |                                    | 1,020      |   |   |   | 1,116 |   |   |
| Non-cash portion of pension and postretirement  expense                          |       |                                    | 1,611      |   |   |   | 847 |   |   |
| Deferred income taxes                                                            |       |                                    | (854       | ) |   |   | 9,500 |   |   |
| Equity in losses from investments                                                |       |                                    | 2,157      |   |   |   | 646 |   |   |
| Disposition of assets and other (gains) losses                                   |       |                                    | (103       | ) |   |   | 8 |   |   |
| Change in assets and liabilities, net of effects from  acquisition:              |       |                                    |       |   |   |   |   |   |   |
| Receivables                                                                      |       |                                    | (2,764     | ) |   |   | (7,467 | ) |   |
| Other assets                                                                     |       |                                    | (4,440     | ) |   |   | (2,076 | ) |   |
| Accounts payable                                                                 |       |                                    | 21,525     |   |   |   | 12,259 |   |   |
| Accrued expenses and other liabilities                                           |       |                                    | 19,291     |   |   |   | 4,999 |   |   |
| Other, net                                                                       |       |                                    | 2,727      |   |   |   | 1,012 |   |   |
| Net cash provided by operating activities                                        |       |                                    | 95,938     |   |   |   | 32,723 |   |   |
| **Cash  flows from investing activities:**                                       |       |                                    |       |   |   |   |   |   |   |
| Capital expenditures                                                             |       |                                    | (32,843    | ) |   |   | (16,072 | ) |   |
| Loan to NCM                                                                      |       |                                    | —     |   |   |   | (1,850 | ) |   |
| Proceeds on disposal—discontinued operations                                |       |                                    | —     |   |   |   | 44,861 |   |   |
| Proceeds on disposal—continuing operations                                  |       |                                    | 66,113     |   |   |   | — |   |   |
| Net change in reimbursable construction advances                                 |       |                                    | 749        |   |   |   | (5,803 | ) |   |
| Other, net                                                                       |       |                                    | (5,191     | ) |   |   | (1,067 | ) |   |
| Net cash provided by investing activities                                        |       |                                    | 28,828     |   |   |   | 20,069 |   |   |
| **Cash  flows from financing activities:**                                       |       |                                    |       |   |   |   |   |   |   |
| Repayment of Cinemex Credit Facility                                             |       |                                    | (602       | ) |   |   | — |   |   |
| Principal payments under capital and financing lease  obligations                |       |                                    | (955       | ) |   |   | (843 | ) |   |
| Principal payments under mortgage                                                |       |                                    | (27        | ) |   |   | — |   |   |
| Payments on Term Loan B                                                          |       |                                    | (1,625     | ) |   |   | — |   |   |
| Change in construction payables                                                  |       |                                    | (9,195     | ) |   |   | 3,453 |   |   |
| Deferred financing costs                                                         |       |                                    | (1,777     | ) |   |   | (1,151 | ) |   |
| Net cash (used in) provided by financing activities                              |       |                                    | (14,181    | ) |   |   | 1,459 |   |   |
| Effect of exchange rate changes on cash and  equivalents                         |       |                                    | 2,826      |   |   |   | 1,023 |   |   |
| **Net  increase in cash and equivalents**                                        |       |                                    | 113,411    |   |   |   | 55,274 |   |   |
| **Cash and  equivalents at beginning of period**                                 |       |                                    | 232,366    |   |   |   | 72,945 |   |   |
| **Cash and  equivalents at end of period**                                       |       |                                    | $          | 345,777 |   |   |   | $ | 128,219 |   |   |
| **SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION**                           |       |                                    |       |   |   |   |   |   |   |
| **Cash  paid during the period for:**                                            |       |                                    |       |   |   |   |   |   |   |
| Interest (including amounts capitalized of $276 and  $483)                       |       |                                    | $          | 17,366 |   |   |   | $ | 6,183 |   |   |
| Income taxes paid (refunded)                                                     |       |                                    | 732        |   |   |   | (6 | ) |   |
| **Schedule of non-cash investing and  financing activities:**                    |       |                                    |       |   |   |   |   |   |   |
| Assets capitalized  under EITF 97-10                                             |       |                                    | $          | — |   |   |   | $ | 1,734 |   |   |

 

*See Notes toConsolidated Financial Statements.*

8

----

**MARQUEEHOLDINGS INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**June 29,2006(Unaudited)

**NOTE1—BASIS OF PRESENTATION**

MarqueeHoldings Inc. (“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.

AMCE,through its direct and indirect subsidiaries, including American Mulit-Cinema, Inc.(“AMC”) and its subsidiaries’ Grupo Cinemex, S.A. de C.V. (“Cinemex”) and AMCEEntertainment International, Inc. (“AMCEI”) and its subsidiaries(collectively with Holdings and AMCE, unless the context otherwise requires,the “Company”), is principally involved in the theatrical exhibition businessand owns, operates or has interests in theatres located in the United Statesand Canada (“U.S. and Canada” formerly, North American theatrical exhibition)and in Mexico, Argentina, Brazil, Chile, Uruguay, China (Hong Kong), France,Spain and the United Kingdom. The Company discontinued its operations in Japanduring the first quarter of fiscal 2006. The Company’s U.S. and Canadatheatrical exhibition business is conducted through AMC and AMCEI. The Company’sInternational theatrical exhibition business is conducted primarily throughCinemex and AMCEI. See Note 2 for a discussion of the Merger with Loews onJanuary 26, 2006.

Theaccompanying unaudited consolidated financial statements have been prepared inresponse to the requirements of Form 10-Q and should be read inconjunction with Holdings’ annual report on Form 10-K/A for the year(52 weeks) ended March 30, 2006. In the opinion of management, theseinterim financial statements reflect all adjustments (consisting of normalrecurring adjustments) necessary for a fair statement of the Company’sfinancial position and results of operations. Due to the seasonal nature of theCompany’s business, results for the thirteen weeks ended June 29, 2006 arenot necessarily indicative of the results to be expected for the fiscal year(52 weeks) ending March 29, 2007.

The March 30,2006 consolidated balance sheet data was derived from the audited balance sheetincluded in the 10-K/A, but does not include all disclosures required bygenerally accepted accounting principles.

Certainamounts have been reclassified from prior period consolidated financialstatements to conform with the current period presentation.

***Restatement***:   In connection with an ongoing review of its quarterlymark-to-market accounting for its liability classified shares and stock optionawards, the Company determined that its financial statements as of and for the thirteenweeks ended June 29, 2006  and as ofMarch 30, 2006 needed to be restated to correct the following items:

1.                 *Management-purchased shares*

On December 23, 2004,certain members of management purchased common shares in the Company.  Due to the existence of certain put options,at the time the shares were purchased, the Company determined that the management-purchasedshares for two members of management should be recorded as liabilities withchanges in the estimated fair value of those shares recorded through a chargeor credit to the statement of operations.

Additionally, under aManagement Shareholders' Agreement, the Company has a call option allowing itto reacquire shares held by management (including the management-purchasedshares referred to above) for a period of six months following a change incontrol or the employee's termination for any 

9

----

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 the lower of fair value on the call noticedate or the price paid.

FAS 123R provides that ifthe Company has a call option on shares held by employees and it is probablethat the employer would prevent the employee from bearing those risks andrewards associated with equity share ownership for a reasonable period of time(six months or more) from the date the share is issued, then liabilityclassification is required.

DuringFebruary 2007, the Company determined that the management-purchased sharesshould have been recorded as a component of permanent equity (rather than asliabilities) because (i) the put options referred to above are conditional anddo not contain 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, theCompany has restated the financial statements as of and for the thirteen weeksended June 29, 2006 and as of 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 these shareswithin stockholders' equity.  There wasno impact on net cash provided by operating activities as a result of the abovementioned items.

2.                 *Stock Option Awards*

On December 23, 2004,certain members of management were granted options to purchase Company commonstock.  Due to the existence of certainput options, at the time the stock options were granted, the Company determinedthat the stock options for two members of management should be recorded asliabilities with changes in the estimated fair value of those options recordedthrough a charge or credit to the statement of operations.  The Company also has a call option relatingto the options (and the underlying shares) similar to the call option referredto above.

During February 2007, theCompany determined 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 thirteen weeksended June 29, 2006 and as of March 30, 2006 to reverse the previouslyrecorded mark to market effects relating to the stock options awarded to thismember of management that had been incorrectly classified as liabilities and toreflect these options as additional paid-in capital (rather than asliabilities).  There was no impact on netcash provided by operating activities as a result of the above mentioned items.

TheCompany has restated its financial statements for the thirteen weeks endedJune 29, 2006  and as ofMarch 30, 2006 to record the net effect of the adjustments discussedabove. The net effects of the adjustments recorded to restate the financialstatements are summarized as follows (dollars in thousands):

| **Thirteen Weeks Ended June 29, 2006** | ** ** | ** ** | ** ** | **Stock based  Compensation  Expense (1)** | ** ** | **Other Expense  (Income)** | ** ** | **Total** | ** ** |
|-----------------------------------------------------------------|------------|------------|------------|------------------------------------------------------|------------|----------------------------------|------------|-----------|------------|
| Decrease in Other  Long-Term Liabilities (2)                    |       |       | $          | 532                                                  |       |                             |       | $         | 2,826      |   |   | $ | 3,358 |   |
| Increase in  Additional Paid-in Capital (3)                     |       |       | $          | 2,869                                                |       |                             |       | $         | 3,814      |   |   | $ | 6,683 |   |
| Incrrease in  accumulated deficit                               |       |       | $          | 2,114                                                |       |                             |       | $         | 1,894      |   |   | $ | 4,008 |   |
| Decrease (increase) in  Net Loss                                |       |       | $          | (223                                                 | )          |                             |       | $         | 906        |   |   | $ | 683 |   |

----

(1)          Includedwithin Other G&A

(2)          Referto discussion of the adjustment for the management purchased shares and stockoption awards above

10

----

(3)          Referto discussion of the adjustment for stock option awards above

Allpreviously reported amounts affected by the restatement that appear elsewherein these footnotes to the consolidated financial statements have also beenrestated.

| ** **                                                         | ** ** | **Thirteen Weeks Ended  June 29, 2006** | ** ** |
|--------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **As**                                                      | ** ** | ** ** | ** ** | **Discontinued** | ** ** | **As Restated** | ** ** |
| ** **                                                         | ** ** | **Reported**                                                | ** ** | **Restatement(1)** | ** ** | **Operations(2)** | ** ** | **& Adjusted** | ** ** |
| Revenues                                                           |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                                                         |       | $                                                           | 439,532    |   |   | $ | — |   |   |   | $ | (3,892 | ) |   |   | $ | 435,640 |   |   |
| Concessions                                                        |       | 182,336                                                     |       |   | — |   |   |   | (1,292 | ) |   |   | 181,044 |   |   |
| Other revenue                                                      |       | 29,322                                                      |       |   | — |   |   |   | (172 | ) |   |   | 29,150 |   |   |
| Total revenues                                                     |       | 651,190                                                     |       |   | — |   |   |   | (5,356 | ) |   |   | 645,834 |   |   |
| Costs and Expenses                                                 |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Film exhibition costs                                              |       | 229,852                                                     |       |   | — |   |   |   | (1,901 | ) |   |   | 227,951 |   |   |
| Concession costs                                                   |       | 22,270                                                      |       |   | — |   |   |   | (255 | ) |   |   | 22,015 |   |   |
| Operating expense                                                  |       | 156,370                                                     |       |   | — |   |   |   | (1,189 | ) |   |   | 155,181 |   |   |
| Rent                                                               |       | 113,729                                                     |       |   | — |   |   |   | (1,410 | ) |   |   | 112,319 |   |   |
| General and administrative:                                        |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger and acquisition costs                                       |       | 3,752                                                       |       |   | — |   |   |   | — |   |   |   | 3,752 |   |   |
| Management fee                                                     |       | 1,250                                                       |       |   | — |   |   |   | — |   |   |   | 1,250 |   |   |
| Other                                                              |       | 15,600                                                      |       |   | 223 |   |   |   | (50 | ) |   |   | 15,773 |   |   |
| Preopening expense                                                 |       | 1,042                                                       |       |   | — |   |   |   | — |   |   |   | 1,042 |   |   |
| Theatre and other closure expense                                  |       | 2,043                                                       |       |   | — |   |   |   | — |   |   |   | 2,043 |   |   |
| Depreciation and amortization                                      |       | 64,441                                                      |       |   | — |   |   |   | (545 | ) |   |   | 63,896 |   |   |
| Disposition of assets and other gains                              |       | (1,453                                                      | )          |   | — |   |   |   | 2,889 |   |   |   | 1,436 |   |   |
| Total costs and expenses                                           |       | 608,896                                                     |       |   | 223 |   |   |   | (2,461 | ) |   |   | 606,658 |   |   |
| Other expense (income)                                             |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income                                                       |       | (554                                                        | )          |   | (906 | ) |   |   | — |   |   |   | (1,460 | ) |   |
| Interest expense                                                   |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate borrowings                                               |       | 56,200                                                      |       |   | — |   |   |   | — |   |   |   | 56,200 |   |   |
| Capital and financing lease obligations                            |       | 1,548                                                       |       |   | — |   |   |   | (220 | ) |   |   | 1,328 |   |   |
| Investment income                                                  |       | (375                                                        | )          |   | — |   |   |   | 4 |   |   |   | (371 | ) |   |
| Total other expense                                                |       | 56,819                                                      |       |   | (906 | ) |   |   | (216 | ) |   |   | 55,697 |   |   |
| Earnings (loss)  from continuing operations before income taxes    |       | (14,525                                                     | )          |   | 683 |   |   |   | (2,679 | ) |   |   | (16,521 | ) |   |
| Income tax provision  (benefit)                                    |       | 300                                                         |       |   | — |   |   |   | -— |   |   |   | 300 |   |   |
| Earnings (loss)  from continuing operations                        |       | (14,825                                                     | )          |   | 683 |   |   |   | (2,679 | ) |   |   | (16,821 | ) |   |
| Earnings (loss)  from discontinued operations, net of income taxes |       | —                                                      |       |   | — |   |   |   | 2,679 |   |   |   | 2,679 |   |   |
| Net earnings  (loss)                                               |       | $                                                           | (14,825    | ) |   | $ | 683 |   |   |   | $ | — |   |   |   | $ | (14,142 | ) |   |
| Basic and diluted  loss per share of common stock:                 |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations                                    |       | $                                                           | (11.56     | ) |   |   |   |   |   |   |   |   |   | $ | (13.12 | ) |   |
| Earnings from discontinued operations                              |       | —                                                      |       |   |   |   |   |   |   |   |   |   | 2.09 |   |   |
| Net loss per  share                                                |       | $                                                           | (11.56     | ) |   |   |   |   |   |   |   |   |   | $ | (11.03 | ) |   |
| Average shares  outstanding:                                       |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                  |       | 1,282.25                                                    |       |   |   |   |   |   |   |   |   |   | 1,282.25 |   |   |

 

11

----

 

| ** **                               | ** ** | **As of June 29, 2006** | ** ** | **As of March 30, 2006** | ** ** |
|------------------------------------------|------------|---------------------------------------------|------------|----------------------------------------------|------------|
| ** **                               | ** ** | **As**                                      | ** ** | ** **                                   | ** ** | **As** | ** ** | **As** | ** ** | ** ** | ** ** | **As** | ** ** |
| ** **                               | ** ** | **Reported**                                | ** ** | **Restatement(1)**                           | ** ** | **Restated** | ** ** | **Reported** | ** ** | **Restatement(1)** | ** ** | **Restated** | ** ** |
| **Assets**                               | ** ** | ** **                                  | ** ** |                                         | ** ** | ** ** |   | ** ** | ** ** | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |
| Current assets:                          |       |                                        |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                     |       | $                                           | 345,777    |                                         |       | $ | — |   |   | $ | 345,777 |   | $ | 232,366 |   |   | $ | — |   |   | $ | 232,366 |   |
| Receivables                              |       | 60,740                                      |       |                                         | —     |   |   | 60,740 |   | 54,725 |   |   | — |   |   | 54,725 |   |
| Other current assets                     |       | 35,634                                      |       |                                         | —     |   |   | 35,634 |   | 34,647 |   |   | — |   |   | 34,647 |   |
| Current assets held for sale             |       | 308                                         |       |                                         | —     |   |   | 308 |   | 4,726 |   |   | — |   |   | 4,726 |   |
| Total current assets                     |       | 442,459                                     |       |                                         | —     |   |   | 442,459 |   | 326,464 |   |   | — |   |   | 326,464 |   |
| Property                                 |       | 1,456,217                                   |       |                                         | —     |   |   | 1,456,217 |   | 1,501,048 |   |   | — |   |   | 1,501,048 |   |
| Intangible assets                        |       | 261,973                                     |       |                                         | —     |   |   | 261,973 |   | 273,308 |   |   | — |   |   | 273,308 |   |
| Goodwill                                 |       | 2,013,241                                   |       |                                         | —     |   |   | 2,013,241 |   | 2,018,318 |   |   | — |   |   | 2,018,318 |   |
| Deferred income taxes                    |       | 5,584                                       |       |                                         | —     |   |   | 5,584 |   | 3,564 |   |   | — |   |   | 3,564 |   |
| Other long-term assets                   |       | 171,611                                     |       |                                         | —     |   |   | 171,611 |   | 172,312 |   |   | — |   |   | 172,312 |   |
| Non-current assets held for sale         |       | 40,982                                      |       |                                         | —     |   |   | 40,982 |   | 112,337 |   |   | — |   |   | 112,337 |   |
| Total assets                             |       | $                                           | 4,392,067  |                                         |       | $ | - |   |   | $ | 4,392,067 |   | $ | 4,407,351 |   |   | $ | - |   |   | $ | 4,407,351 |   |
| **Liabilities and Stockholders' Equity** | ** ** | ** **                                  | ** ** |                                         | ** ** | ** ** |   | ** ** | ** ** | ** ** | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |
| Current  liabilities:                    |       |                                        |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts payable                         |       | $                                           | 163,394    |                                         |       | $ | - |   |   | $ | 163,394 |   | $ | 150,383 |   |   | $ | — |   |   | $ | 150,383 |   |
| Accrued expenses and other liabilities   |       | 180,172                                     |       |                                         | -          |   |   | 180,172 |   | 157,227 |   |   | — |   |   | 157,227 |   |
| Deferred revenues and income             |       | 93,808                                      |       |                                         | -          |   |   | 93,808 |   | 95,812 |   |   | - |   |   | 95,812 |   |
| Current maturities                       |       | 28,959                                      |       |                                         | -          |   |   | 28,959 |   | 30,804 |   |   | - |   |   | 30,804 |   |
| Current liabilities held for sale        |       | 2,579                                       |       |                                         | -          |   |   | 2,579 |   | 8,233 |   |   | - |   |   | 8,233 |   |
| Total current liabilities                |       | 468,912                                     |       |                                         | -          |   |   | 468,912 |   | 442,459 |   |   | - |   |   | 442,459 |   |
| Corporate borrowings                     |       | 2,429,665                                   |       |                                         | -          |   |   | 2,429,665 |   | 2,428,996 |   |   | - |   |   | 2,428,996 |   |
| Capital and financing lease obligations  |       | 45,192                                      |       |                                         | -          |   |   | 45,192 |   | 64,016 |   |   | - |   |   | 64,016 |   |
| Other long-term liabilities              |       | 419,191                                     |       |                                         | (3,358     | ) |   | 415,833 |   | 419,474 |   |   | (2,139 | ) |   | 417,335 |   |
| Non-current liabilities held for sale    |       | 11,990                                      |       |                                         | -          |   |   | 11,990 |   | 11,903 |   |   | - |   |   | 11,903 |   |
| Total liabilities                        |       | 3,374,950                                   |       |                                         | (3,358     | ) |   | 3,371,592 |   | 3,366,848 |   |   | (2,139 | ) |   | 3,364,709 |   |
| Stockholders' equity:                    |       |                                        |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock                             |       | 14                                          |       |                                         | -          |   |   | 14 |   | 14 |   |   | - |   |   | 14 |   |
| Additional paid-in capital               |       | 1,308,111                                   |       |                                         | 6,683      |   |   | 1,314,794 |   | 1,307,752 |   |   | 6,147 |   |   | 1,313,899 |   |
| Accumulated other comprehensive income   |       | (19,578                                     | )          |                                         | -          |   |   | (19,578 | ) | (10,658 | ) |   | - |   |   | (10,658 | ) |
| Accumulated deficit                      |       | (271,430                                    | )          |                                         | (3,325     | ) |   | (274,755 | ) | (256,605 | ) |   | (4,008 | ) |   | (260,613 | ) |
| Total stockholders' equity               |       | 1,017,117                                   |       |                                         | 3,358      |   |   | 1,020,475 |   | 1,040,503 |   |   | 2,139 |   |   | 1,042,642 |   |
| Total liabilities  and equity            |       | $                                           | 4,392,067  |                                         |       | $ | — |   |   | $ | 4,392,067 |   | $ | 4,407,351 |   |   | $ | — |   |   | $ | 4,407,351 |   |

----

(1)           As discussed in this Note, the Company restated itsfinancial statements for management-purchased shares and stock option awards. 

(2)           As discussed in Note 3—Discontinued Operations, theCompany classified the results of operations of its Iberia theatres asdiscontinued operations during the thirteen weeks ended December 28, 2006. As aresult, conforming classifications are made for these periods. The reclassificationfor discontinued operations was not an error in the prior financial statements,rather it was performed to be consistent with the treatment in the annualfinancial statements.

***Discontinued Operations:***   The results of operations for theCompany’s discontinued operations have been eliminated from the Company’scontinuing operations and classified as discontinued operations for 

12

----

***each period presented within the Company’s ConsolidatedStatements of Operations.  See Note3—Discontinued Operations.***

***Assets held for Sale***:   In conjunction with the Merger(see Note 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 sold 4 of thesetheatres during the 13 weeks ended June 29, 2006.

Additionally, the Companyentered into an agreement to sell its consolidated operations in Spain andPortugal and as a result, the Company classified the assets and liabilities ofthese theatres as *held for sale*as of March 30, 2006. These sales were subsequently consummated on May 11,2006.

***Loss per share:  ***Basic loss per share iscomputed by dividing net loss by the weighted-average number of common sharesoutstanding. Diluted loss per share includes the effects of outstanding stockoptions, if dilutive. Options to purchase 39,476.72872 and38,876.272 shares of common stock at $1,000.00 per share were outstandingduring the thirteen weeks ended June 29, 2006 and June 30, 2005,respectively, but were not included in the computation of diluted loss pershare because the options were anti-dilutive.

**NOTE 2—ACQUISITIONS**

On June 20, 2005,Holdings entered into a merger agreement with LCE Holdings, Inc. (“LCEHoldings”), the parent of Loews Cineplex Entertainment Corporation (“Loews”),pursuant to which LCE Holdings merged with and into Holdings, with Holdingscontinuing as the holding company for the merged businesses, and Loews mergedwith and into AMCE, with AMCE continuing after the merger (the “Merger” andcollectively, the “Mergers”). The transaction closed on January 26, 2006.Upon completion of the Mergers, the stockholders of Holdings immediately priorto the Mergers, including affiliates of J.P. Morgan Partners, LLC and ApolloManagement, L.P., held approximately 60% of the outstanding capital stock ofHoldings, and the stockholders of LCE Holdings immediately prior to the Merger,including affiliates of Bain Capital Partners, LLC, The Carlyle Group andSpectrum Equity Investors (collectively with J.P. Morgan Partners, LLC andApollo Management, L.P., the “Sponsors”), held approximately 40% of theoutstanding capital stock of Holdings.

TheCompany has accounted for the Merger as a purchase in accordance with SFAS No. 141,*Business Combinations,* for anestimated purchase price of $540,671,000. Results of operations of Loews areincluded in the Company’s Consolidated Statements of Operations from January 26,2006. The acquisition included 112 theatres with 1,308 screens in the UnitedStates, 40 theatres with 443 screens in Mexico (Cinemex), 4 managed/jointventure theatres with 55 screens in the United States and a 50% interest inYelmo Cineplex, S.L. operating 27 theatres with 311 screens in Spain that isaccounted for using the equity method. The Merger did not constitute a changein control.

13

----

**Pro Forma Effect ofMerger Transactions**

The pro forma financial information presented belowsets forth the Company’s pro forma consolidated statement of operations for thethirteen weeks ended June 30, 2005 to give effect to the Mergers and therelated debt issuances as if each transaction occurred on April 1, 2005.Such information is presented for comparative purposes only and does notpurport to represent what the Company’s results of operations would actuallyhave been had these transactions occurred on the date indicated or to projectits results of operations for any future period or date.

| ** **                                           | ** ** | **Thirteen Weeks Ended** | ** ** |
|------------------------------------------------------|------------|------------------------------------|------------|
| **(In thousands)**                              | ** ** | ** **                         | ** ** | **Pro Forma  June 30, 2005** | ** ** |
| Revenues                                             |       |                               |       |   |   |
| Admissions                                           |       |                               | $          | 400,326 |   |   |
| Concessions                                          |       |                               | 165,977    |   |   |
| Other revenue                                        |       |                               | 34,444     |   |   |
| Total revenues                                       |       |                               | 600,747    |   |   |
| Cost of operations                                   |       |                               | 389,486    |   |   |
| Rent                                                 |       |                               | 104,014    |   |   |
| General and  administrative:                         |       |                               |       |   |   |
| Merger and  acquisition costs*                       |       |                               | 3,826      |   |   |
| Management fee                                       |       |                               | 1,250      |   |   |
| Other                                                |       |                               | 21,087     |   |   |
| Preopening expense                                   |       |                               | 109        |   |   |
| Theatre and other  closure expense                   |       |                               | 634        |   |   |
| Restructuring charge                                 |       |                               | 3,089      |   |   |
| Depreciation and  amortization                       |       |                               | 68,649     |   |   |
| Disposition of assets  and other gains               |       |                               | (468       | ) |   |
| Total costs and  expenses                            |       |                               | 591,676    |   |   |
| Other income                                         |       |                               | (1,116     | ) |   |
| Interest expense                                     |       |                               | 53,878     |   |   |
| Investment expense                                   |       |                               | 1,951      |   |   |
| Total other expense                                  |       |                               | 54,713     |   |   |
| Loss from continuing  operations before income taxes |       |                               | (45,642    | ) |   |
| Income tax provision                                 |       |                               | 2,400      |   |   |
| Loss from continuing  operations                     |       |                               | (48,042    | ) |   |
| Loss from discontinued  operations                   |       |                               | (21,630    | ) |   |
| Net loss                                             |       |                               | $          | (69,672 | ) |   |
| Basic and diluted loss  per share of common stock:   |       |                               |       |   |   |
| Loss from  continuing operations                     |       |                               | $          | (37.47 | ) |   |
| Loss from  discontinued operations                   |       |                               | (16.87     | ) |   |
| Net loss per share                                   |       |                               | $          | (54.34 | ) |   |
| Average shares  outstanding:                         |       |                               |       |   |   |
| Basic and diluted                                    |       |                               | 1,282.25   |   |   |
|                                                      |            |                                    |            |  |  |  |  |  |

----

*                    Primarilyrepresents nonrecurring costs for the Merger Transactions.

**NOTE 3—DISCONTINUEDOPERATIONS**

On May 11, 2006, theCompany sold two of its wholly owned subsidiaries, AMC Entertainment EspañaS.A. and Actividades Multi Cinemeas E Espectáculos, LDA (collectively “Iberia”),which owned 

14

----

andoperated 4 theatres with 86 screens in Spain and 1 theatre with 20 screens inPortugal, for a cash sales price of $35,446,000. At the date of the sale theseoperations did not meet the criteria for discontinued operations because ofcontinuing involvement in the region through an equity method investment in Yelmo.In December 2006, the company disposed of its investment in Yelmo, which ownedand 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 at June 29,2006 and March 30, 2006. The Company no longer has continuing involvement inthe region as a result of the sale of Yelmo and the results of the operationsin Iberia have been classified as discontinued operations as the Company nolonger has operations or significant cash flows from the Iberia component.

Information presented forall periods reflects the discontinued classification. All affected amountswithin the consolidated financial statements have been adjusted accordingly.The results of operations of the Iberia theatres were previously reported inthe Company's International theatrical exhibition operating segment. TheCompany has recorded a gain on sale of Iberia of approximately $2,889,000during fiscal 2007 which is included in discontinued operations. Goodwill of$11.7 million was allocated to the Iberia theatres in connection with the sale.The Iberia assets and liabilities were classified as held for sale at March 30,2006.

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:**

| ** **                                   | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirteen Weeks Ended** | ** ** |
|----------------------------------------------|------------|------------------------------------|------------|------------------------------------|------------|
| ** **                                   | ** ** | **June 29, 2006**        | ** ** | **June 29, 2005**        | ** ** |
| Revenues                                     |       |                               |       |                               |       |   |   |   |   |
| Admissions                                   |       |                               | $          | 3,892                              |       |   |   | $ | 6,452 |   |   |
| Concessions                                  |       |                               | 1,292      |                               |       |   | 2,195 |   |   |
| Other revenue                                |       |                               | 172        |                               |       |   | 333 |   |   |
| Total revenues                               |       |                               | 5,356      |                               |       |   | 8,980 |   |   |
| Costs and Expenses                           |       |                               |       |                               |       |   |   |   |   |
| Film exhibition  costs                       |       |                               | 1,901      |                               |       |   | 3,090 |   |   |
| Concession costs                             |       |                               | 255        |                               |       |   | 208 |   |   |
| Operating expense                            |       |                               | 1,189      |                               |       |   | 2,867 |   |   |
| Rent                                         |       |                               | 1,410      |                               |       |   | 2,881 |   |   |
| General and  administrative—other       |       |                               | 50         |                               |       |   | 90 |   |   |
| Depreciation and  amortization               |       |                               | 545        |                               |       |   | 1,564 |   |   |
| Disposition of  assets and other gains       |       |                               | (2,889     | )                                  |       |   | — |   |   |
| Total costs and  expenses                    |       |                               | 2,461      |                               |       |   | 10,700 |   |   |
| Interest expense                             |       |                               | 220        |                               |       |   | 486 |   |   |
| Investment income                            |       |                               | (4         | )                                  |       |   | — |   |   |
| Total other  expense                         |       |                               | 216        |                               |       |   | 486 |   |   |
| Earnings (loss) before  income taxes         |       |                               | 2,679      |                               |       |   | (2,206 | ) |   |
| Income tax provision                         |       |                               | —     |                               |       |   | 100 |   |   |
| Earnings (loss) from discontinued operations |       |                               | $          | 2,679                              |       |   |   | $ | (2,306 | ) |   |

 

On June 30, 2005, theCompany sold one of its wholly-owned subsidiaries Japan AMCTheatres Inc., including four of its five theatres in Japan. The Companysold its remaining Japanese theatre in September 2005. The Company openedits first theatre in Japan during fiscal 1997 and since that time the Companyhad incurred pre-tax losses of $38,689,000, including a $4,998,000 impairmentcharge in fiscal 2003.

15

----

Theoperations and cash flows of the Japan theatres were eliminated from the Company’songoing operations. The Company does not have any significant continuinginvolvement in the operations of the Japan theatres. The results of operationsof the Japan theatres have been classified as discontinued operations, andinformation presented for all periods reflects the new classification. Theoperations of the Japan theatres were previously reported in the Company’sInternational theatrical exhibition operating segment. Components of amountsreflected as loss from discontinued operations in the Company’s ConsolidatedStatements of Operations during the prior fiscal year are presented in thefollowing table:

**Statements of operations data:**

| ** **                                     | ** ** | **Thirteen Weeks**

**Ended** | ** ** |
|------------------------------------------------|------------|------------------------------------|------------|
| **(In thousands)**                        | ** ** | ** **                         | ** ** | **June 30, 2005** | ** ** |
| Revenues                                       |       |                               |       |   |   |
| Admissions                                     |       |                               | $          | 9,155 |   |   |
| Concessions                                    |       |                               | 1,736      |   |   |
| Other                                          |       |                               | 204        |   |   |
| Total revenues                                 |       |                               | 11,095     |   |   |
| Expense                                        |       |                               |       |   |   |
| Film exhibition  costs                         |       |                               | 4,855      |   |   |
| Concession costs                               |       |                               | 312        |   |   |
| Operating expense                              |       |                               | 2,726      |   |   |
| Rent                                           |       |                               | 3,254      |   |   |
| General and  administrative expense—other |       |                               | 768        |   |   |
| Depreciation and  amortization                 |       |                               | 704        |   |   |
| Total costs and  expenses                      |       |                               | 12,619     |   |   |
| Loss before income taxes                       |       |                               | (1,524     | ) |   |
| Income tax provision                           |       |                               | 17,800     |   |   |
| Loss from discontinued operations              |       |                               | $          | (19,324 | ) |   |
|                                                |            |                                    |            |  |  |  |  |  |

 

Goodwillof $44,774,000 was allocated to Japan AMC Theatres Inc. and disposed of inconnection with the consummation of the sale of that entity on June 30,2005. The goodwill is not deductible for tax purposes as discussed inNote 9.

**NOTE 4—COMPREHENSIVELOSS**

Thecomponents of comprehensive loss are as follows (in thousands):

| ** **                                                   | ** ** | **Thirteen Weeks Ended**  | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                   | ** ** | **June 29,  2006  (restated)** | ** ** | **June 30,  2005** | ** ** |
| Net loss                                                     |       | $                                   | (14,142    | ) | $ | (31,191 | ) |
| Foreign currency  translation adjustment                     |       | (9,376                              | )          | (2,364 | ) |
| Unrealized gain on  Cinemex swap agreement                   |       | 456                                 |       | — |   |
| Increase in  unrealized loss on marketable equity securities |       | —                              |       | (80 | ) |
| Total  comprehensive loss                                    |       | $                                   | (23,062    | ) | $ | (33,635 | ) |

 

** **

16

----

**NOTE 5—GOODWILL ANDOTHER INTANGIBLE ASSETS**

Activityof goodwill by operating segment is presented below.

| **(In thousands)**            | ** ** | ** ** | ** ** | **U.S. and  Canada** | ** ** | **International** | ** ** | **Total** | ** ** |
|------------------------------------|------------|------------|------------|---------------------------|------------|-------------------|------------|-----------|------------|
| Balance as of  March 30, 2006 |       | $          | 1,893,716  |                      |       | $                 | 124,602    |      |       | $ | 2,018,318 |   |
| Currency translation adjustment    |       | —     |       |                      | (4,958     | )                 |       | (4,958    | )          |
| Fair value  adjustments(1)         |       | (119       | )          |                      | —     |              |       | (119      | )          |
| Balance as of June 29, 2006   |       | $          | 1,893,597  |                      |       | $                 | 119,644    |      |       | $ | 2,013,241 |   |

----

(1)          Adjustmentsto fair value relate primarily to assets and liabilities of theatres closed orsold and the true-up of liabilities during fiscal 2007.

| ** **                                        | ** ** | ** ** | ** **     | **June 29, 2006**     | ** ** | **March 30, 2006**    | ** ** |
|---------------------------------------------------|------------|------------|----------------|---------------------------------|------------|---------------------------------|------------|
| **(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 |                            |       |                            | $          | 115,860 |   |   |   | $ | (15,953 | ) |   |   | $ | 116,047 |   |   |   | $ | (13,079 | ) |   |
| Loyalty program                                   |       |       | 4  years       |                            |       |                            | 46,000     |   |   |   | (17,078 | ) |   |   | 46,000 |   |   |   | (14,950 | ) |   |
| LCE trade name                                    |       |       | 5  years       |                            |       |                            | 2,300      |   |   |   | (195 | ) |   |   | 2,300 |   |   |   | (80 | ) |   |
| LCE/Cinemex  advertising and management contracts |       |       | 3 to  25 years |                            |       |                            | 48,422     |   |   |   | (6,496 | ) |   |   | 48,951 |   |   |   | (2,841 | ) |   |
| Cinemex non-compete                               |       |       | 2  years       |                            |       |                            | 6,428      |   |   |   | (1,592 | ) |   |   | 6,462 |   |   |   | (313 | ) |   |
| Other intangible  assets                          |       |       | 1 to  16 years |                            |       |                            | 27,532     |   |   |   | (24,051 | ) |   |   | 30,701 |   |   |   | (26,922 | ) |   |
| Total,  amortizable                               |       |       |           |                            |       |                            | $          | 246,542 |   |   |   | $ | (65,365 | ) |   |   | $ | 250,461 |   |   |   | $ | (58,185 | ) |   |
| Unamortized  Intangible Assets:                   |       |       |           |                            |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| AMC trademark                                     |       |       |           |                            |       |                            | $          | 74,000 |   |   |   |   |   |   |   | $ | 74,000 |   |   |   |   |   |   |
| Cinemex trademark                                 |       |       |           |                            |       |                            | 6,796      |   |   |   |   |   |   |   | 7,032 |   |   |   |   |   |   |
| Total, unamortized                                |       |       |           |                            |       |                            | $          | 80,796 |   |   |   |   |   |   |   | $ | 81,032 |   |   |   |   |   |   |
|                                                   |            |            |                |                                 |            |                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Amortizationexpense associated with the intangible assets noted above is as follows:

| ** **             | ** ** | **Thirteen Weeks Ended** | ** ** |
|------------------------|------------|------------------------------------|------------|
| ** **             | ** ** | **June 29, 2006**        | ** ** | **June 30, 2005** | ** ** |
| Recorded  Amortization |       |                               | $          | 10,299 |   |   |   | $ | 3,948 |   |   |
|                        |            |                                    |            |  |  |  |  |  |  |  |  |

 

Estimatedamortization expense for the next five fiscal years for intangible assets ownedas of June 29, 2006 is projected below:

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

 

**NOTE 6—STOCKHOLDERS’EQUITY**

Holdingsaccounts for stock options using the fair value method of accounting asprescribed by SFAS 123 (R) and SAB 107 and has valued the optionsusing the Black-Scholes formula. Holdings has recorded $1,020,000 and$1,116,000 of stock-based compensation expense related to these optionswithin General and Administrative: Other and has recognized an income taxbenefit of approximately $0 and 

17

----

$458,000 in its Consolidated Statements of Operationsduring the thirteen weeks ended June 29, 2006 and June 30, 2005,respectively. One of the holders of Holdings’ stock options has written putrights deemed to be in the holder’s control associated with his options wherebyhe can require Holdings to repurchase his options. These liability-classifiedoptions are required to be remeasured during each reporting period. A liabilityof $267,000 and $142,000 is recorded within other long term liabilities in theConsolidated Balance Sheets as of June 29, 2006 and March 30, 2006,respectively, for all options containing written put rights.

**NOTE 7—THEATRE ANDOTHER CLOSURE AND DISPOSITION OF ASSETS**

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

| ** **                                               | ** ** | **Thirteen Weeks Ended** | ** ** |
|----------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                               | ** ** | **June 29, 2006**        | ** ** | **June 30, 2005** | ** ** |
| ** **                                               | ** ** | **Theatre and Other**    | ** ** | **Merger  Exit costs(1)** | ** ** | **Total** | ** ** | **Total** | ** ** |
| Beginning balance                                        |       |                               | $          | 21,716 |   |   |   | $ | 4,618 |   |   | $ | 26,334 |   |   | $ | 28,506 |   |   |
| Theatre and other  closure expense                       |       |                               | 1,920      |   |   |   | 123 |   |   | 2,043 |   |   | 634 |   |   |
| Transfer of  deferred rent and capital lease obligations |       |                               | —     |   |   |   | — |   |   | — |   |   | 641 |   |   |
| Payments                                                 |       |                               | (4,956     | ) |   |   | (749 | ) |   | (5,705 | ) |   | (3,289 | ) |   |
| Ending balance                                           |       |                               | $          | 18,680 |   |   |   | $ | 3,992 |   |   | $ | 22,672 |   |   | $ | 26,492 |   |   |

----

(1)          There were no mergerexit costs recorded during the thirteen weeks ended June 30, 2005.

Theatre and other closurereserves for leases that have not been terminated are recorded at the presentvalue of the future contractual commitments for the base rents, taxes andmaintenance.

Theatreclosure reserves at June 29, 2006 by operating segment are as follows (inthousands):

| ** **                             | ** ** | **June 29, 2006** | ** ** |
|----------------------------------------|------------|-----------------------------|------------|
| U.S. and Canada  Theatrical Exhibition |       |                        | $          | 17,911 |   |   |
| International Theatrical  Exhibition   |       |                        | 476        |   |   |
| Other                                  |       |                        | 261        |   |   |
| Total segment  reserves                |       |                        | 18,648     |   |   |
| Corporate                              |       |                        | 4,024      |   |   |
|                                   |       |                        | $          | 22,672 |   |   |

 

**NOTE 8—RESTRUCTURING**

The Company recognizesrestructuring charges based upon the nature of the costs incurred. Costsresulting from one-time termination benefits where employees are not requiredto render future service to receive the benefits are recognized and a liabilityis recorded when management commits to a plan of termination which identifiesthe number of employees to be terminated, their job classifications, locations,expected termination dates and when the plan is communicated to the employeesand establishes the detailed terms of the benefits to be received by employees.

If employees are requiredto render service until they are terminated in order to receive the terminationbenefits, the benefits are measured at the fair value of the costs and relatedliabilities at the communication date and are recognized ratably over thefuture service period from the communication date.

During fiscal 2006, theCompany recorded a liability of $27,090,000 related to one-time terminationbenefits and other costs for the displacement of approximately 230 associatesin connection with the 

18

----

Mergersas part of purchase accounting. The Company recorded an additional $4,845,000liability related to closures of Loews’ duplicate administrative facilities inconnection with the Mergers as part of purchase accounting.

Asummary of restructuring activity, is set forth below (in thousands):

| ** **              | ** ** | **Thirteen Weeks  Ended** | ** ** |
|-------------------------|------------|--------------------------------|------------|
| ** **              | ** ** | **June 29, 2006**    | ** ** |
| **(In thousands)** | ** ** | ** **                     | ** ** | **Merger  Severance  Benefits** | ** ** |
| Beginning balance       |       |                           | $          | 10,571 |   |   |
| Merger adjustment       |       |                           | (724       | ) |   |
| Payments                |       |                           | (8,095     | ) |   |
| Ending  balance         |       |                           | $          | 1,752 |   |   |
|                         |            |                                |            |  |  |  |  |  |

 

Restructuringreserves at June 29, 2006 by operating segment are as follows (inthousands):

| ** **                            | ** ** | **June 29,  2006** | ** ** |
|---------------------------------------|------------|-------------------------|------------|
| U.S. and Canada Theatrical Exhibition |       |                    | $          | — |   |   |
| International Theatrical Exhibition   |       |                    | —     |   |   |
| Other                                 |       |                    | —     |   |   |
| Total Segment reserves                |       |                    | —     |   |   |
| Corporate                             |       |                    | 1,752      |   |   |
|                                  |       |                    | $          | 1,752 |   |   |

 

**NOTE 9—INCOME TAXES**

The difference between the effective tax rate onearnings before income taxes and the U.S. federal income tax statutory rate isas follows:

| ** **                                      | ** ** | **Thirteen Weeks Ended**           | ** ** |
|-------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                      | ** ** | **June 29, 2006  (restated)** | ** ** | **June 30, 2005        ** | ** ** |
| Federal statutory rate                          |       |                                    | 35.0       | % |   |   | 35.0 | % |   |
| Non-deductible  goodwill                        |       |                                    | —     |   |   |   | (73.6 | ) |   |
| Valuation allowance                             |       |                                    | (32.7      | ) |   |   | (0.5 | ) |   |
| State income taxes, net  of federal tax benefit |       |                                    | (1.0       | ) |   |   | (2.5 | ) |   |
| Other, net                                      |       |                                    | (3.5       | ) |   |   | (2.2 | ) |   |
| Effective tax rate                              |       |                                    | (2.2       | )% |   |   | (43.8 | )% |   |

 

The Company accounts forincome taxes in accordance with SFAS No. 109, Statement of FinancialAccounting Standards (“SFAS No. 109”), *Accounting for Income Taxes,* which requires that deferredtax assets and liabilities be recognized, using enacted tax rates, for the taxeffect of temporary differences between the financial reporting and tax basesof recorded assets and liabilities. SFAS 109 also requires that deferredtax assets be reduced by a valuation allowance if it is more likely than notthat some or all of the deferred tax assets will not be realized.

Based upon theconsideration of all available evidence, the Company has provided a valuationallowance on deferred tax assets recorded beginning in the fourth quarter offiscal year 2006. The Company continues to record a full valuation allowanceagainst its deferred tax assets due to the 

19

----

uncertaintyregarding the ultimate realization of those assets in all taxing jurisdictionswith the exception of Mexico.

TheCompany determines income tax expense for interim periods by applyingSFAS No. 109 and APB Opinion No. 28, *Interim Financial Reporting*, whichprescribes the use of the full year’s estimated effective tax rate in financialstatements for interim periods. As such, permanent differences such as stateincome taxes and changes in valuation allowance impact the Company’s effectivetax rate. During the current period, income tax expense differed from theexpected tax benefit using the U.S. federal statutory tax rate of 35%primarily due to the change in valuation allowance recorded against netdeferred tax assets. Additionally, income tax expense reflects the net expenserelated to the impact of the recently enacted Texas gross margins tax. Thecurrent year disposition of Portugal and Spain operations did not have a materialimpact on the income tax provision as the tax benefit derived from the sale wasfully offset by an increase in valuation allowance. Non-deductible goodwillrelates to the goodwill disposed of with the Japan theatres, which is discussedin Note 3.

**NOTE10—EMPLOYEE BENEFIT PLANS**

The Company sponsors anon-contributory qualified defined benefit pension plan generally covering allemployees age 21 or older who have completed at least 1,000 hours ofservice in their first twelve months of employment, or in a calendar yearending thereafter, and who are not covered by a collective bargainingagreement. The Company also offers eligible retirees the opportunity toparticipate in a health plan (medical and dental) and a life insurance plan.Employees may become eligible for these benefits at retirement provided theemployee is at least age 55 and has at least 15 years of credited serviceafter age 40. The Company also sponsors a postretirement deferred compensationplan.

The Company expects tomake an annual pension contribution of $1,400,000 during its second fiscalquarter of 2007.

The measurement date usedto determine pension and other postretirement benefits is January 1 of thefiscal year for which measurements are made.

Net periodic benefit cost recognized for the threeplans during the thirteen weeks ended June 29, 2006 and June 30, 2005consists of the following:

| ** **                                | ** ** | **Pension Benefits** | ** ** | **Other Benefits**     | ** ** |
|-------------------------------------------|------------|---------------------------|------------|-----------------------------|------------|
| **(In thousands)**                   | ** ** | ** **                | ** ** | **June 29, 2006** | ** ** | **June 30, 2005** | ** ** | **June 29, 2006** | ** ** | **June 30, 2005** | ** ** |
| Components of net  periodic benefit cost: |       |                      |       |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                              |       |                      | $          | 797                         |       |   |   | $ | 959 |   |   |   | $ | 228 |   |   |   | $ | 173 |   |   |
| Interest cost                             |       |                      | 1,315      |                        |       |   | 1,150 |   |   |   | 387 |   |   |   | 261 |   |   |
| Expected return  on plan assets           |       |                      | (1,116     | )                           |       |   | (909 | ) |   |   | — |   |   |   | — |   |   |
| Curtailment gain                          |       |                      | —     |                        |       |   | — |   |   |   | — |   |   |   | (787 | ) |   |
| Net periodic benefit cost                 |       |                      | $          | 996                         |       |   |   | $ | 1,200 |   |   |   | $ | 615 |   |   |   | $ | (353 | ) |   |
|                                           |            |                           |            |                             |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

TheCompany’s reorganization activities commencing during fiscal 2005 resulted in apartial curtailment of the Company’s postretirement deferred compensation plan.The Company defers curtailment gains until they are realized and, as such,curtailment gains of $787,000 were recognized during the thirteen weeks endedJune 30, 2005.

20

----

**NOTE 11—OPERATINGSEGMENTS**

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

| ** **                             | ** ** | **Thirteen Weeks Ended**      | ** ** |
|----------------------------------------|------------|-----------------------------------------|------------|
| ** **                             | ** ** | **June 29, 2006  (restated)** | ** ** | **June 30, 2005** | ** ** |
| **Revenues**                           |       |                                    |       |   |   |   |   |   |   |
| U.S. and Canada  theatrical exhibition |       |                                    | $          | 597,691 |   |   |   | $ | 393,346 |   |   |
| International theatrical  exhibition   |       |                                    | 48,129     |   |   |   | 5,001 |   |   |
| Other                                  |       |                                    | 14         |   |   |   | 5,455 |   |   |
| Total revenues                         |       |                                    | $          | 645,834 |   |   |   | $ | 403,802 |   |   |
| **Segment  Adjusted EBITDA**           |       |                                    |       |   |   |   |   |   |   |
| U.S. and Canada  theatrical exhibition |       |                                    | $          | 116,247 |   |   |   | $ | 67,512 |   |   |
| International theatrical  exhibition   |       |                                    | 13,992     |   |   |   | (1,687 | ) |   |
| Other                                  |       |                                    | (411       | ) |   |   | (514 | ) |   |
| Segment Adjusted EBITDA                |       |                                    | $          | 129,828 |   |   |   | $ | 65,311 |   |   |

 

A reconciliation of earnings from continuingoperations before income taxes to Segment Adjusted EBITDA is as follows (inthousands):

| ** **                                            | ** ** | **Thirteen Weeks Ended**      | ** ** |
|-------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                            | ** ** | **June 29, 2006  (restated)** | ** ** | **June 30, 2005** | ** ** |
| Loss from continuing  operations before income taxes  |       |                                    | $          | (16,521 | ) |   |   | $ | (17,961 | ) |   |
| Plus:                                                 |       |                                    |       |   |   |   |   |   |   |
| Interest expense                                      |       |                                    | 57,528     |   |   |   | 31,496 |   |   |
| Depreciation and  amortization                        |       |                                    | 63,896     |   |   |   | 35,947 |   |   |
| Preopening  expense                                   |       |                                    | 1,042      |   |   |   | 8 |   |   |
| Theatre and other  closure expense                    |       |                                    | 2,043      |   |   |   | 634 |   |   |
| Restructuring  charges                                |       |                                    | —     |   |   |   | 3,069 |   |   |
| Disposition of  assets and other gains                |       |                                    | 1,436      |   |   |   | (667 | ) |   |
| Investment  income(3)                                 |       |                                    | (371       | ) |   |   | 496 |   |   |
| General and  administrative expense—unallocated: |       |                                    |       |   |   |   |   |   |   |
| Merger and  acquisition costs                         |       |                                    | 3,752      |   |   |   | 1,685 |   |   |
| Management fee                                        |       |                                    | 1,250      |   |   |   | 500 |   |   |
| Other(1)                                              |       |                                    | 15,773     |   |   |   | 10,104 |   |   |
| Segment Adjusted EBITDA                               |       |                                    | $          | 129,828 |   |   |   | $ | 65,311 |   |   |

 

21

----

Information about the Company’s long-term assets byoperating segment is as follows (in thousands):

| **Long-term Assets**                        | ** ** | ** ** | ** ** | **June 29, 2006** | ** ** | **June 30, 2005** | ** ** |
|--------------------------------------------------|------------|------------|------------|-----------------------------|------------|-----------------------------|------------|
| U.S. and Canada theatrical  exhibition           |       |       | $          | 4,226,040                   |       |                        |       | $ | 3,047,398 |   |   |
| International theatrical  exhibition             |       |       | 368,705    |                        |       |                        | 103,726    |   |   |
| Total segment  long-term assets(3)               |       |       | 4,594,745  |                        |       |                        | 3,151,124  |   |   |
| Construction in progress                         |       |       | 30,068     |                        |       |                        | 43,242     |   |   |
| Corporate                                        |       |       | 247,978    |                        |       |                        | 223,371    |   |   |
| Accumulated depreciation-property                |       |       | (853,827   | )                           |       |                        | (855,859   | ) |   |
| Accumulated amortization-intangible  assets      |       |       | (65,365    | )                           |       |                        | (39,561    | ) |   |
| Accumulated amortization-other  long-term assets |       |       | (44,973    | )                           |       |                        | (38,098    | ) |   |
| Noncurrent assets held  for sale                 |       |       | 40,982     |                        |       |                        | 35,378     |   |   |
| Consolidated long-term assets, net(3)            |       |       | $          | 3,949,608                   |       |                        |       | $ | 2,519,597 |   |   |

 

| **Long-term Assets, net of accumulated depreciation and amortization** | ** ** | ** ** | ** ** | **June 29, 2006** | ** ** | **June 30, 2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|------------|------------|-----------------------------|------------|-----------------------------|------------|
| U.S. and Canada  theatrical exhibition                                                                    |       |       | $          | 3,326,788                   |       |                        |       | $ | 2,245,120 |   |   |
| International theatrical  exhibition                                                                      |       |       | 338,027    |                        |       |                        | 41,480     |   |   |
| Total segment  long-term assets(3)                                                                        |       |       | 3,664,815  |                        |       |                        | 2,286,600  |   |   |
| Construction in progress                                                                                  |       |       | 30,068     |                        |       |                        | 43,242     |   |   |
| Corporate                                                                                                 |       |       | 213,743    |                        |       |                        | 154,377    |   |   |
| Noncurrent assets held  for sale                                                                          |       |       | 40,982     |                        |       |                        | 35,378     |   |   |
| Consolidated long-term assets, net(3)                                                                     |       |       | $          | 3,949,608                   |       |                        |       | $ | 2,519,597 |   |   |

 

| **Consolidated Balance Sheet** | ** ** | ** ** | ** ** | **June 29, 2006** | ** ** | **June 30, 2005** | ** ** |
|------------------------------------------|------------|------------|------------|-----------------------------|------------|-----------------------------|------------|
| Property, net                            |       |       | $          | 1,456,217                   |       |                        |       | $ | 823,020 |   |   |
| Intangible assets, net                   |       |       | 261,973    |                        |       |                        | 185,596    |   |   |
| Goodwill                                 |       |       | 2,013,241  |                        |       |                        | 1,309,624  |   |   |
| Deferred income taxes                    |       |       | 5,584      |                        |       |                        | 51,550     |   |   |
| Other long-term  assets                  |       |       | 171,611    |                        |       |                        | 114,429    |   |   |
| Noncurrent assets held  for sale         |       |       | 40,982     |                        |       |                        | 35,378     |   |   |
| Consolidated long-term assets(2)         |       |       | $          | 3,949,608                   |       |                        |       | $ | 2,519,597 |   |   |

----

(1)          Includingstock-based compensation expense of $1,020,000 and $1,116,000 for thethirteen weeks ended June 29, 2006 and June 30, 2005, respectively.

(2)          Consolidatedlong-term assets are comprised of property, intangible assets, deferred incometaxes, goodwill, other long-term assets and noncurrent assets held for sale.Segment long term assets are comprised of property, intangibles and goodwill.

(3)          Investmentincome includes equity in losses from investments of $2,157,000 and $646,000during the thirteen weeks ended June 29, 2006 and June 30, 2005,respectively.

**NOTE12—COMMITMENTS AND CONTINGENCIES**

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

22

----

*United States of Americav. AMC Entertainment Inc. and American Multi-Cinema, Inc.*   (No. 99-01034FMC (SHx), filed in the U.S. District Court for the Central District ofCalifornia). On January 29, 1999, the Department of Justice (the “Department”)filed suit alleging that AMCE’s stadium-style theatres violate the ADAand related regulations. The Department alleged that AMCE had failed to providepersons in wheelchairs seating arrangements with lines of sight comparable tothe general public. The Department alleged various non-line of sight violationsas well. The Department sought declaratory and injunctive relief regardingexisting and future theatres with stadium-style seating, compensatorydamages in the approximate amount of $75,000 and a civil penalty of $110,000.

On November 20, 2002the trial court entered summary judgment in favor of the Justice Department onthe line of sight aspects of this case. The trial court ruled that wheelchairspaces located solely on the sloped floor portion of the stadium-styleauditoriums fail to provide lines of sight comparable to the general public. Thetrial court did not address specific changes that might be required of AMCE’sexisting stadium-style auditoriums, holding that *per se* rules are simply not possiblebecause the requirements of comparable lines of sight will vary based ontheatre layout.

On January 10, 2006,the trial court ruled in favor of the Department regarding the appropriateremedy in the line of sight aspects of this case. In its decision, the courtissued a comprehensive order regarding line of sight and other related remedieswhich covers the remaining line of sight issues at the majority of the Company’sexisting and all of its future construction stadium-style theatresnationwide, as well as other related forms of relief sought by the UnitedStates in this action.

AMCE estimates that thecost of the betterments related to the remedies for line of sight violations ofthe 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 andfiled its brief.

As a result of the new order AMCE estimates the rangeof the loss to be between $349,350 and $443,938. Accordingly, AMCE has recordedthe related liability at $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 berequired at approximately 140 stadium-style theatres. AMC estimates thatthe total cost of these betterments will be $47.5 million, which isexpected to be incurred over the remaining term of the consent order of2.7 years. Through June 29, 2006 AMCE has incurred approximately$7.1 million of these costs. The estimate is based on actual costsincurred on remediation work completed to date. The actual costs of bettermentsmay vary based on the results of surveys of the remaining theatres.

*AmericanMulti-Cinema, Inc. v. Midwest Drywall Company, Inc., HaskellConstructors, Ltd. etal.*   (Case No. 00CV84908,Circuit Court of Platte County, Missouri) and American Multi-Cinema, Inc. v. Bovis Construction Corp. etal. (Civil Action No. 0207139, Court of Common Pleas of BucksCounty, Pennsylvania). AMCE is the plaintiff in these and related suits inwhich it seeks to recover damages from the construction manager, certainfireproofing applicators and other parties to correct the defective applicationof certain fireproofing materials at 21 theatres. AMCE currently estimates itsclaim for repair costs at these theatres will aggregate approximately$33.6 million of which it has expended approximately 

23

----

$27.4 million throughJune 29, 2006. The remainder is for projected costs of repairs yet to beperformed. AMCE also is seeking additional damages for lost profits, interestand legal and other expenses incurred.

AMCE has received settlement payments from variousparties in connection with this matter of $1,350,000, $935,000, $2,610,000 and$925,000 during fiscal 2007, 2006, 2005 and 2004, respectively. AMCE receivedadditional settlement payments aggregating $3,850,000 subsequent to June 29,2006 and has entered into settlement agreements with various parties providingfor additional settlement payments to AMCE aggregating $7,775,000. Gaincontingencies are recognized upon receipt and recorded in disposition of assetsand other gains in the Consolidated Statements 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 in June 1999,Loews has had a dispute with Metreon with respect to (1) constructioncosts that Metreon claims are Loews’ responsibility under the lease and (2) thepercentage of the center occupied by the theatre and the nature, magnitude andallocation of the costs that Metreon is seeking to include as operatingexpenses under the lease. The amount of operating expenses claimed by Metreonto be allocable to this theatre is based upon the landlord’s assertion thatLoews occupies at least 48.5% of the center. Loews asserted that it occupiedsubstantially less of the center and that various expenses included inoperating 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 in April 2006and has renewed settlement discussions with AMCE.

The Company is a party to variousother legal proceedings in the ordinary course of business, none of which isexpected to have a material adverse effect on us.

**NOTE 13—NEW ACCOUNTING PRONOUNCEMENTS**

In July 2006, theFASB released FASB Interpretation No. 48, *Accountingfor Uncertainty in Income Taxes—an Interpretation of FASB Statement 109*(“FIN 48” or the “Interpretation”), which clarifies the accounting foruncertainty in income taxes recognized in companies’ financial statements inaccordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN48 prescribes a recognition threshold and measurement attribute for thefinancial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. The evaluation of a tax position inaccordance with FIN 48 is a two-step process. The first step is recognitionwhereby companies must determine whether it is more likely than not that a taxposition will be sustained upon examination. The second step is measurementwhereby a tax position that meets the more-likely-than-not recognitionthreshold is measured to determine the amount of benefit to recognize in thefinancial statements. The interpretation also provides guidance onderecognition of recognized tax benefits, classification, interest and penalties,accounting in interim periods, disclosure and transition. FIN 48 is effectivefor fiscal years beginning after December 15, 2006. The Company expects toadopt the new requirements in the first quarter of fiscal 2008 and is currentlyevaluating the impact that the adoption of FIN 48 will have on its consolidatedfinancial statements.

In June 2005, theEmerging Issues Task Force (“EITF”) reached a consensus on Issue No. 05-06,Determining the Amortization Period for Leasehold Improvements Purchased afterLease Inception or Acquired in a Business Combination (“EITF 05-06”).EITF 05-06 concludes that the amortization period for leaseholdimprovements acquired in a business combination and leasehold improvements thatare in service significantly after and not contemplated at the beginning of thelease term should be amortized over the shorter of the useful life of theassets or a term that includes required lease periods and renewals that aredeemed to be reasonably assured at the date of inception. The adoption of thispronouncement did not have a material effect on the Company’s consolidatedfinancial statements.

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 

24

----

upon theOccurrence of a Contingent Event, which requires companies to consider theprobability of the occurrence of a contingent event that is outside theemployees’ control (i.e., change in control, or death or disability) indetermining the classification of an employee stock option or similarinstrument under FASB Statement No. 123(R), Share-Based Payment,where the award requires or permits cash settlement upon the contingent event.The FSP requires companies to classify employee stock options and similarinstruments with contingent cash settlement features as equity awards providedthe contingent event that permits or requires cash settlement is not consideredprobable of occurring. The adoption of FSP 123 R-4 did not have an impacton consolidated financial position, results of operations, or cash flows.

In October 2005, theFASB issued FASB Staff Position (FSP) 13-1, *Accounting for Rental Costs Incurred during a Construction Period*.FSP 13-1 clarifies there is no distinction between the right to use aleased asset during the construction period and the right to use that assetafter the construction period. Accordingly, the Company is no longer able tocapitalize rental costs during the construction period and began expensing themas 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 FASBissued SFAS No. 154, *Accounting Changesand Error Corrections a replacement of APB Opinion No. 20 and FASBStatement No. 3* (SFAS 154), which requires retrospectiveapplication to prior periods’ financial statements of changes in accountingprinciple, unless it is impracticable to determine either the period-specificeffects or the cumulative effect of the change. It also requires that a changein depreciation, 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.

25

----

**Item 2.**                        Management’sDiscussion and Analysis of Financial Condition and Results of Operations.

**Forward LookingStatements**

This report includes “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of1933 and Section 21E of the Securities Exchange Act of 1934. Allstatements, other than statements of historical facts, included in thisQuarterly Report on Form 10-Q regarding the prospects of ourindustry and our prospects, plans, financial position and business strategy mayconstitute forward-looking statements. In addition, forward-lookingstatements generally can be identified by the use of forward-lookingterminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,”“plan,” “foresee,” “believe” or “continue” or the negatives of these terms orvariations of them or similar terminology. Although we believe that theexpectations reflected in these forward-looking statements arereasonable, we can give no assurance that these expectations will prove to havebeen correct. All such forward-looking statements are subject to certainrisks and uncertainties that could cause actual results to differ materiallyfrom those contemplated by the relevant forward-looking statement.Important factors that could cause actual results to differ materially from ourexpectations include, among others: (i) the cost and availability of filmsand the performance of films licensed by us; (ii) competition, includingthe introduction of alternative forms of entertainment; (iii) constructiondelays; (iv) the ability to open or close theatres and screens ascurrently planned; (v) the ability to sub-lease vacant retail space; (vi) domesticand international political, social and economic conditions; (vii) demographicchanges; (viii) increases in the demand for real estate; (ix) changesin real estate, zoning and tax laws; (x) unforeseen changes in operatingrequirements; (xi) our ability to identify suitable acquisition candidatesand successfully integrate acquisitions into our operations, including theintegration of Loews Cineplex Entertainment Corporation and the achievement ofestimated cost savings and synergies as a result of the Mergers (as definedbelow) on a timely basis; (xii) results of significant litigation; and(xiii) our ability to enter into various financing programs. Readers areurged to consider these factors carefully in evaluating the forward-lookingstatements. For further information about these and other risks anduncertainties, see Item 1A. “Risk Factors” in our Annual Report on Form 10-Kfor the fiscal year ended March 30, 2006.

Allsubsequent written and oral forward-looking statements attributable to usor persons acting on our behalf are expressly qualified in their entirety bythese cautionary statements. The forward-looking statements includedherein are made only as of the date of this Quarterly Report on Form 10-Q,and we do not undertake any obligation to release publicly any revisions tosuch forward-looking statements to reflect events or circumstances afterthe date hereof or to reflect the occurrence of unanticipated events.

**Overview**

We are one of the world’sleading theatrical exhibition companies. During the first quarter of fiscal2007, we sold 4 theatres in Spain with 86 screens, sold one theatre in Portugalwith 20 screens, sold 4 theatres with 42 screens in the U.S. as required by andin connection with the approval of the Mergers discussed below, closed 4theatres with 32 screens in the U.S., opened one new theatre with 15 screens inthe U.S., added 6 screens to an existing theatre in the U.S. and opened one newtheatre with 9 screens in Mexico resulting in a circuit total after givingeffect to the expected disposal of 6 remaining theatres with 78 screens inconnection with the approval of the Mergers of 411 theatres and 5,601 screens.As of June 29, 2006, we owned, operated or had interests in411 theatres and 5,601 screens with 82%, or 4,586 of our screens in theU.S. and Canada, and 18%, or 1,015 of our screens in Mexico, Argentina, Brazil,Chile, Uruguay, China (Hong Kong), France, Spain and the United Kingdom.

In connection with theMergers as discussed below, we acquired Loews on January 26, 2006, whichsignificantly increased our size. In the Merger, we acquired 112 theatres with1,308 screens in the United States (included in our U.S. and Canada operatingsegment) and 40 theatres with 443 screens in Mexico (included in ourInternational operating segment), that are included in our consolidated resultsof 

26

----

operationsfrom January 26, 2006. Accordingly, results of operations for the thirteenweeks ended June 29, 2006, which include thirteen weeks of operations ofthe businesses we acquired, are not comparable to our results for the thirteenweeks ended June 30, 2005. For additional information about the Mergers,see Note 2 to the Consolidated Financial Statements under Part I Item1. of this Report on Form 10-Q.

On June 20, 2005,Marquee Holdings Inc. (“Holdings”), the parent company of AMCEntertainment Inc. (“AMCE”), entered into a merger agreement with LCEHoldings, Inc. (“LCE Holdings”), the parent of Loews CineplexEntertainment Corporation (“Loews”), pursuant to which LCE Holdings merged withand into Holdings, with Holdings continuing as the holding company for themerged businesses, and Loews merged with and into AMCE, with AMCE continuingafter the merger (the “Merger” and collectively, “the Mergers”). Thetransactions closed on January 26, 2006. Upon completion of the Mergers,the stockholders of Holdings immediately prior to the Mergers held approximately60% of its outstanding capital stock, and the stockholders of LCE Holdings,including affiliates of Bain Capital Partners, LLC, The Carlyle Group andSpectrum Equity Investors, immediately prior to the Mergers held approximately40% of Holding’s outstanding capital stock.

Inconnection with the Merger, on January 26, 2006, AMCE entered into thefollowing financing transactions:

·       theissuance of $325,000,000 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 México, S.A., integrante del Grupo Financiero Banamex and thelenders named therein, consisting of a $650,000,000 term loan facility and a$200,000,000 revolving credit facility (the “New Credit Facility”);

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

·       therepayment of all outstanding amounts under Loews’ senior secured creditfacility and the termination of all commitments thereunder (the “Loews Facility”);and

·       thecompletion of a tender offer and consent solicitation (the “Tender Offer”) forall $315,000,000 aggregate principal amount of Loews’ 9.0% senior subordinatednotes due 2014.

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.

On June 30, 2005, wesold one of our wholly-owned subsidiaries, Japan AMC Theatres Inc.,including four of our five theatres in Japan. We sold our remaining Japantheatre on September 1, 2005. The operations and cash flows of the Japantheatres were eliminated from our ongoing operations as a result of thedisposal transactions. We do not have any significant continuing involvement inthe operations of the Japan theatres. The results of operations of the Japantheatres have been classified as discontinued operations, and informationpresented for all periods reflects the new classification. The operations ofthe Japan theatres were previously reported in our International theatricalexhibition operating segment.

We disposed of our onlytheatre in Hong Kong on January 5, 2006 and entered into a licenseagreement with the purchaser for continued use of our trademark. Theseoperations did not meet the criteria for reporting as discontinued operations.

In May 2006, AMCEIand its subsidiary AMC Entertainment International Limited sold its interestsin AMC Entertainment España S.A., which owned and operated 4 theatres with 86screens in Spain, and Actividades Multi-Cinemas E Espectáculos, LDA,which owned and operated 1 theatre with 20 screens in 

27

----

Portugal.These operations have been classified as discontinued operations as a result ofour disposition of Yelmo Cineplex, S.L. (“Yelmo”) in December 2006 as weno longer have continuing involvement in the region.

In December 2006 wedisposed of our equity method investment in Yelmo which owned and operated 27theatres with 310 screens in Spain on the date of the sale.

For financial reportingpurposes we have three segments, U.S. and Canada theatrical exhibition(formerly, North American theatrical exhibition), International theatricalexhibition and Other, with the most significant activity in Other related toon-screen advertising.

Our U.S. and Canada andInternational theatrical exhibition revenues are generated primarily from boxoffice admissions and theatre concession sales. The balance of our revenues aregenerated from ancillary sources, including on-screen advertising, rental oftheatre auditoriums, fees and other revenues generated from the sale of giftcertificates and theatre tickets and arcade games located in theatre lobbies.

Box office admissions areour largest source of revenue. We predominantly license “first-run” motionpictures from distributors owned by major film production companies and fromindependent distributors.

We license films on afilm-by-film and theatre-by-theatre basis. Film exhibition costs are accruedbased on the applicable admissions revenues and estimates of the finalsettlement pursuant to our film licenses. Licenses that we enter into typicallystate that rental fees are based on either aggregate terms established prior tothe opening of the picture or on a mutually agreed settlement upon theconclusion of the picture run. Under an aggregate terms formula, we pay the distributora specified percentage of box office receipts. The settlement process allowsfor negotiation based upon how a film actually performs.

Concessions sales are oursecond largest source of revenue after box office admissions. Concessions itemsinclude popcorn, soft drinks, candy, hot dogs and other products. We negotiateprices for our concessions products and supplies directly with concessionsvendors on a national or regional basis to obtain high volume discounts or bulkrates and marketing incentives.

Our revenues are dependentupon the timing and popularity of motion picture releases by distributors. Themost marketable motion pictures are usually released during the summer and theyear-end holiday seasons. Therefore, our business can be seasonal, with higherattendance and revenues generally occurring during the summer months andholiday seasons. Our results of operations may vary significantly from quarterto quarter.

During fiscal 2006, filmslicensed from our ten largest distributors based on revenues accounted forapproximately 88% of our U.S. and Canada admissions revenues. Our revenuesattributable to individual distributors may vary significantly from year toyear depending upon the commercial success of each distributor’s motionpictures in any given year.

During the period from1990 to 2005, the annual number of first-run motion pictures released bydistributors in the United States ranged from a low of 370 in 1995 to a high of535 in 2005, according to Motion Picture Association 2005 MPA MarketStatistics.

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 June 29, 2006, approximately 69% of our screens in the U.S. and Canadawere located in megaplex theatres.

28

----

**Operating Results**

Set forth in the table below is a summary of revenues,costs and expenses attributable to the Company’s U.S. and Canada andInternational theatrical exhibition operations and Other businesses. Referenceis made to Note 11 to the Notes to Consolidated Financial Statements foradditional information about our operations by operating segment.

| ** **                             | ** ** | **Thirteen Weeks Ended**                                         | ** ** |
|----------------------------------------|------------|----------------------------------------------------------------------------|------------|
| ** **                             | ** ** | **June 29, 2006**

**(restated)(3)**                             | ** ** | **June 30, 2005** | ** ** | **% Change** | ** ** |
| ** **                             | ** ** | **(thousands of dollars, except operating data)** | ** ** |
| **Revenues**                           |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| U.S. and Canada  theatrical exhibition |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Admissions                             |       |                                                                       | $          | 408,839 |   |   |   | $ | 266,364 |   |   |   | 53.5 | % |   |
| Concessions                            |       |                                                                       | 164,309    |   |   |   | 108,076 |   |   |   | 52.0 | % |   |
| Other theatre                          |       |                                                                       | 24,543     |   |   |   | 18,906 |   |   |   | 29.8 | % |   |
|                                   |       |                                                                       | 597,691    |   |   |   | 393,346 |   |   |   | 52.0 | % |   |
| International theatrical  exhibition   |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Admissions                             |       |                                                                       | 26,801     |   |   |   | 3,590 |   |   |   | * |   |   |
| Concessions                            |       |                                                                       | 16,735     |   |   |   | 1,062 |   |   |   | * |   |   |
| Other theatre                          |       |                                                                       | 4,593      |   |   |   | 349 |   |   |   | * |   |   |
|                                   |       |                                                                       | 48,129     |   |   |   | 5,001 |   |   |   | * |   |   |
| Other                                  |       |                                                                       | 14         |   |   |   | 5,455 |   |   |   | (99.7 | )% |   |
| Total revenues                         |       |                                                                       | $          | 645,834 |   |   |   | $ | 403,802 |   |   |   | 59.9 | % |   |
| **Cost of  Operations**                |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| U.S. and Canada  theatrical exhibition |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Film exhibition  costs                 |       |                                                                       | $          | 216,116 |   |   |   | $ | 146,945 |   |   |   | 47.1 | % |   |
| Concession costs                       |       |                                                                       | 18,074     |   |   |   | 11,281 |   |   |   | 60.2 | % |   |
| Theatre operating  expense             |       |                                                                       | 143,147    |   |   |   | 95,491 |   |   |   | 49.9 | % |   |
| Rent                                   |       |                                                                       | 105,567    |   |   |   | 73,233 |   |   |   | 44.2 | % |   |
| Preopening  expense                    |       |                                                                       | 565        |   |   |   | 8 |   |   |   | * |   |   |
| Theatre and other  closure expense     |       |                                                                       | 2,010      |   |   |   | 609 |   |   |   | * |   |   |
|                                   |       |                                                                       | 485,479    |   |   |   | 327,567 |   |   |   | 48.2 | % |   |
| International theatrical  exhibition   |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Film exhibition  costs                 |       |                                                                       | 11,835     |   |   |   | 1,682 |   |   |   | * |   |   |
| Concession costs                       |       |                                                                       | 3,941      |   |   |   | 240 |   |   |   | * |   |   |
| Theatre operating  expense             |       |                                                                       | 11,609     |   |   |   | 2,194 |   |   |   | * |   |   |
| Rent                                   |       |                                                                       | 6,752      |   |   |   | 2,572 |   |   |   | * |   |   |
| Preopening  expense                    |       |                                                                       | 477        |   |   |   | — |   |   |   | * |   |   |
| Theatre closure                        |       |                                                                       | 33         |   |   |   | 25 |   |   |   | 32.0 |   |   |
|                                   |       |                                                                       | 34,647     |   |   |   | 6,713 |   |   |   | * |   |   |
| Other                                  |       |                                                                       | 425        |   |   |   | 5,969 |   |   |   | (92.9 | )% |   |
| General and  administrative expense:   |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Merger and  Acquisition costs          |       |                                                                       | 3,752      |   |   |   | 1,685 |   |   |   | * |   |   |
| Management Fee                         |       |                                                                       | 1,250      |   |   |   | 500 |   |   |   | * |   |   |
| Other                                  |       |                                                                       | 15,773     |   |   |   | 10,104 |   |   |   | 56.1 | % |   |
| Restructuring charge                   |       |                                                                       | —     |   |   |   | 3,069 |   |   |   | * |   |   |
| Depreciation and  amortization         |       |                                                                       | 63,896     |   |   |   | 35,947 |   |   |   | 77.8 | % |   |
| Disposition of assets  and other gains |       |                                                                       | 1,436      |   |   |   | (667 | ) |   |   | * |   |   |
| Total costs and expenses               |       |                                                                       | $          | 606,658 |   |   |   | $ | 390,887 |   |   |   | 55.2 | % |   |

 

29

----

 

| ** **                                                 | ** ** | **Thirteen Weeks  Ended June 29, 2006** | ** ** | **Thirteen Weeks  Ended June 30, 2005** | ** ** |
|------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| **Operating Data (at period end):**                        |       |                                                        |       |                                                        |       |   |   |   |   |
| Screen additions                                           |       |                                                        | 30         |                                                        |       |   | — |   |   |
| Screen  dispositions                                       |       |                                                        | 180        |                                                        |       |   | 71 |   |   |
| Average screens—  continuing operations(1)            |       |                                                        | 5,139      |                                                        |       |   | 3,345 |   |   |
| Number of screens  operated(2)                             |       |                                                        | 5,601      |                                                        |       |   | 3,643 |   |   |
| Number of  theatres operated(2)                            |       |                                                        | 411        |                                                        |       |   | 242 |   |   |
| Screens per  theatre                                       |       |                                                        | 13.6       |                                                        |       |   | 15.1 |   |   |
| Attendance—  continuing operations(1)  (in thousands) |       |                                                        | 64,969     |                                                        |       |   | 39,141 |   |   |

----

(1)          Includes consolidatedtheatres only.

(2)          Excludes 6 theatres with78 screens held for disposal in connection with approval of the Mergers.

(3)          We restated ourfinancial statements for management-purchased shares and stock option awardsand to reflect reclassifications for discontinued operations. See Notes 1 and3 to our consolidated financial statements.

*                    Percentagechange in excess of 100%

**Thirteen weeksEnded June 29, 2006 and June 30, 2005**

**Revenues.****  **Total revenues increased 59.9%, or $242,032,000,during the thirteen weeks ended June 29, 2006 compared to the thirteenweeks ended June 30, 2005. This increase included approximately$203,667,000 of additional admission and concessions revenues resulting fromthe Merger.

U.S. and Canada theatricalexhibition revenues increased 52.0%, or $204,345,000, during the thirteen weeksended June 29, 2006 compared to the thirteen weeks ended June 30,2005. Admissions revenues increased 53.5%, or $142,475,000, during the thirteenweeks ended June 29, 2006 compared to the thirteen weeks ended June 30,2005, due to a 45.5% increase in total attendance, including the increasedattendance and admissions revenues of $118,841,000 due to the Merger, and a5.5% increase in average ticket prices. Admissions revenues at comparabletheatres (theatres opened on or before April 1, 2005) increased 5.6%during the thirteen weeks ended June 29, 2006 over the comparable periodlast year, primarily due to a 2% increase in attendance at comparable theatres.Based upon available industry sources, box office revenues of industrycomparable theatres increased 3.6% over this same period. Our admissionsrevenues at comparable theatres outperformed the industry primarily due to achange in the distribution and performance of films released. In certaincircumstances, high grossing films cause an expansion of the overall marketsize due to the increase in the number of prints released. Even though our boxoffice performance on such films increases due to the film’s popularity, themarket expansion from these high grossing films can result in our overallperformance against the industry being diluted. This occurred last year duringthe thirteen weeks ended June 30, 2005 with the release of a very popular,mainstream movie that was distributed to approximately 3,600 theatres andproduced box office admissions revenues in the United States and Canada ofapproximately $400 million. This caused our year over year percentagechange in box office during the thirteen weeks ended June 30, 2005 to belower than the industry’s year over year percentage change. We did notexperience this situation during the current thirteen weeks ended June 29,2006 and thus our rate of increase in admissions revenues was greater than theindustry. Our improvement relative to the industry related to this change indistribution and performance of films released more than offset the continuingimpact of competition from new build theatres. The increase in average ticketprice was primarily due to our practice of periodically reviewing 

30

----

ticketprices and the discounts we offer and making selective adjustments based uponsuch factors as general inflationary trends and conditions in local markets.Concessions revenues increased 52.0%, or $56,233,000, during the thirteen weeksended June 29, 2006 compared to the thirteen weeks ended June 30,2005 due to a 4.5% increase in average concessions per patron related to priceincreases and an increase in units sold per patron. Concession revenues increasedby $45,374,000 due to the Merger. Other theatre revenues increased 29.8%, or$5,637,000, during the thirteen weeks ended June 29, 2006 compared to thethirteen weeks ended June 30, 2005. Included in other theatre revenues areour share of on-screen advertising revenues generated by NCN and NCM. Theincrease in other theatre revenues was primarily due to increases in on-screenadvertising revenues as a result of the Merger.

International theatricalexhibition revenues increased $43,128,000 during the thirteen weeks ended June 29,2006 compared to the thirteen weeks ended June 30, 2005. Admissionsrevenues increased by $23,845,000 due to the Merger. Overall, admissionsrevenues increased $23,211,000 during the thirteen weeks ended June 29,2006 compared to the thirteen weeks ended June 30, 2005 due to an increaseof 8,279,000 in total attendance, partially offset by a 51.9% decrease inaverage ticket price due primarily to the lower average ticket prices from thetheatres acquired in Mexico. Concession revenues increased $15,673,000 (ofwhich $15,606,000 resulted from the Merger) during the thirteen weeks ended June 29,2006 compared to the thirteen weeks year ended June 30, 2005 due to theincrease in attendance and a 1.5% increase in concessions per patron.International revenues were negatively impacted by a stronger U.S. dollar,although this did not contribute materially to consolidated loss fromcontinuing operations.

Revenues from Otherdecreased 99.7%, or $5,441,000, during the thirteen weeks ended June 29,2006 compared to the thirteen weeks ended June 30, 2005 due to thecontribution of NCN’s net assets to NCM on March 29, 2005 and the run-offof customer contracts. The revenues of NCN during fiscal 2006 and 2007 arerelated to run-off of customer contracts entered into prior to March 29,2005. Our share of advertising revenues generated by NCM are included in U.S.and Canada Other theatre revenues.

**Costs and expenses.****  **Total costs and expenses increased 55.2%,or $215,771,000, during the thirteen weeks ended June 29, 2006 compared tothe thirteen weeks ended June 30, 2005. The effect of the Merger was anincrease in total costs and expenses of approximately $175,432,000.

U.S. and Canada theatricalexhibition costs and expenses increased 48.2%, or $157,912,000, during thethirteen weeks ended June 29, 2006 compared to the thirteen weeks ended June 30,2005. Film exhibition costs increased 47.1%, or $69,171,000, during thethirteen weeks ended June 30, 2006 compared to the thirteen weeks ended June 30,2005 due to the increase in admissions revenues, offset by a decrease in thepercentage of admissions paid to film distributors. As a percentage ofadmissions revenues, film exhibition costs were 52.9% in the current period ascompared with 55.2% in the prior period due to more favorable film rental termsprimarily from theatres acquired in the Merger. Concession costs increased60.2%, or $6,793,000, during the thirteen weeks ended June 29, 2006compared to the thirteen weeks ended June 30, 2005 due to the increase inconcessions revenues and an increase in concession costs as a percentage ofconcessions revenues. As a percentage of concessions revenues, concession costswere 11.0% in the current period compared with 10.4% in the prior period. As apercentage of revenues, theatre operating expense was 24.0% in the currentperiod as compared to 24.3% in the prior period. Rent expense increased 44.2%,or $32,334,000, during the thirteen weeks ended June 29, 2006 compared tothe thirteen weeks ended June 30, 2005 primarily due to the Merger, whichincreased rent expense by $27,343,000. During the thirteen weeks ended June 29,2006, we recognized $2,010,000 of theatre and other closure expense dueprimarily to the closure of one theatre with 8 screens and to accretion of theclosure liability related to theatres closed during prior periods. During thethirteen weeks ended June 30, 2005, we recognized $609,000 of theatre andother closure expense related primarily to accretion of the closure liabilityrelated to theatres closed during prior periods.

International theatrical exhibition costs and expensesincreased $27,934,000 during the thirteen weeks ended June 29, 2006 comparedto the thirteen weeks year ended June 30, 2005. Film exhibition costs 

31

----

increased $10,153,000during the thirteen weeks ended June 29, 2006 compared to the thirteenweeks ended June 30, 2005 due to the increase in admissions revenues,partially offset by a decrease in the percentage of admissions paid to filmdistributors. As a percentage of admissions revenues, film exhibition costswere 44.2% in the current period as compared with 46.9% in the prior period dueto the effect of more favorable film rental terms in Mexico. Concession costsincreased $3,701,000 during the thirteen weeks ended June 29, 2006compared to the thirteen weeks ended June 30, 2005 due to the increase inconcession revenues and an increase in concession costs as a percentage ofrevenue from 22.6% in the prior period to 23.5% in the current period. Thisincrease in concession costs as a percentage of revenues was due to the effectof higher concession costs as of percentage of concession revenues in Mexicocaused by greater concession offerings with lower margins. As a percentage ofrevenues, theatre operating expense was 24.1% in the current period compared to43.9% in the prior period. Theatre operating expense as a percentage ofrevenues in Mexico were 22.4% in the current period. Rent expense increased $4,180,000during the thirteen weeks ended June 29, 2006 compared to the thirteenweeks ended June 30, 2005 primarily as a result of the Merger. Wecontinually monitor the performance of our international theatres and factorssuch as, changing consumer preferences for filmed entertainment ininternational markets and our ability to sublease vacant retail space couldnegatively impact operating results and result in future closures, sales, dispositionsand theatre closure charges prior to expiration of underlying lease agreements.International theatrical exhibition costs and expenses were positively impactedby a stronger U.S. dollar, although this did not contribute materially toconsolidated loss from continuing operations.

Costs and expenses fromOther decreased 92.9%, or $5,544,000, during the thirteen weeks ended June 29,2006 compared to the thirteen weeks ended June 30, 2005 due to thecontribution of net assets by NCN to NCM and run-off of customer contracts.

**General and AdministrativeExpense:**

**Merger and acquisition costs.****  **Merger and acquisition costsincreased $2,067,000 from $1,685,000 to $3,752,000 during the thirteen weeksended June 29, 2006 compared to the thirteen weeks ended June 30,2005. Current year costs are primarily comprised of costs related to the Mergerand other potential divestiture activities.

**Management fees.****  **Management fees increased $750,000during the current period. For fiscal 2007, management fees of $1,250,000 willbe paid quarterly, in advance, to our Sponsors in exchange for consulting andother services.

**Other.****  **Other general and administrativeexpense increased 56.1%, or $5,669,000, during the thirteen weeks ended June 29,2006 compared to the thirteen weeks ended June 30, 2005. We incurredexpense at Cinemex of $2,605,000 and increases in other salaries of $1,017,000related to the Merger.

**Restructuring Charges.****  **Restructuring charges were $0 duringthe thirteen weeks ended June 29, 2006 as compared to $3,069,000 duringthe thirteen weeks ended June 30, 2005. The prior period expenses are primarilyrelated to one-time termination benefits and other costs related to thedisplacement of approximately 200 associates related to an organizationalrestructuring, which was completed to create a simplified organizationalstructure and contribution of assets by NCN to NCM.

**Depreciation and Amortization.****  **Depreciation and amortizationincreased 77.8%, or $27,949,000, compared to the prior period, due primarily toincreased asset values associated with fair value adjustments recorded as aresult of the Merger.

**Disposition of Assets and Other Gains.****  **Disposition of assets and othergains were $1,436,000 in the current period compared to ($667,000) in the priorperiod. The current and prior periods include $1,350,000 and $675,000,respectively, of settlements received related to fireproofing claims at varioustheatres (see Note 13—Commitments and Contingencies to ConsolidatedFinancial Statements). The current period includes a loss on the U.S.dispositions as required by and in connection with the Mergers of $2,570,000.

32

----

**Other Income.****  **Other income includes $1,460,000 and$1,116,000 of income related to the derecognition of stored value cardliabilities where we believe future redemption to be remote, during thethirteen weeks ended June 29, 2006 and June 30, 2005, respectively.

**Interest Expense.  **Interest expenseincreased 82.7%, or $26,032,000, primarily due to increased borrowings.

On January 26,2006, we issued $325,000,000 of 11% senior subordinated notes due 2016 (“Notesdue 2016”) and secured the new Senior Secured Credit Facility for $850,000,000,of which $648,375,000 is currently outstanding as a variable rate term note. Wealso incurred interest expense related to debt held by Cinemex of $3,152,000during fiscal 2007.

**Investment Expense (Income).  **Investmentincome was $371,000 for the thirteen weeks ended June 29, 2006 compared toexpense of $496,000 for the thirteen weeks ended June 30, 2005. Interestincome increased $2,268,000 from the prior period due primarily to largeramounts of cash and equivalents available for investment. Equity in losses ofnon-consolidated entities were $2,157,000 in the current period compared tolosses of $646,000 in the prior period. Current year equity in losses relatedto our investments in NCM and Yelmo Cineplex, S.L. were $1,308,000 and$1,093,000, respectively.

**Income Tax Provision (Benefit).  **Theprovision for income taxes from continuing operations was $300,000 for thethirteen weeks ended June 29, 2006 compared to a benefit of $8,400,000 forthe thirteen weeks ended June 30, 2005. See Note 9 to theConsolidated Financial Statements.

**Earnings (Loss) From Discontinued Operations, Net.  **On May 11, 2006, we sold AMCEntertainment España S.A. and Actividades Multi-Cinemas E Espectáculos, 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 continuing involvementin the region through an equity method investment in Yelmo. In December 2006, wedisposed of our investment in Yelmo, including 27 theatres with 310 screens inSpain, and the results of the operations in Iberia have now been classified asdiscontinued operations. On June 30, 2005 we sold Japan AMC Theatres, Inc.,including four theatres in Japan with 63 screens. The results of operations ofthese theatres are classified as discontinued operations. Additionally, on September 1,2005 we sold the remaining Japan theatre with 16 screens and classified itsoperations as discontinued operations. The information presented for all periodsreflect these as discontinued operations. See Note 3 to the ConsolidatedFinancial Statements for the components of the earnings (loss) fromdiscontinued operations.

**Net Loss.  **Net loss was $14,142,000and $31,191,000 for the thirteen weeks ended June 29, 2006 and thethirteen weeks ended June 30, 2005, respectively.

**LIQUIDITY AND CAPITAL RESOURCES**

Ourrevenues are primarily collected in cash, principally through box office admissionsand theatre concessions sales. We have an operating “float” which partiallyfinances our operations and which generally permits us to maintain a smalleramount of working capital capacity. This float exists because admissionsrevenues are received in cash, while exhibition costs (primarily film rentals)are ordinarily paid to distributors from 20 to 45 days following receiptof box office admissions revenues. Film distributors generally release thefilms which they anticipate will be the most successful during the summer andholiday seasons. Consequently, we typically generate higher revenues duringsuch periods.

Cashflows provided by operating activities, as reflected in the ConsolidatedStatements of Cash Flows, were $95,938,000 and $32,723,000 during the thirteenweeks ended June 29, 2006 and June 30, 2005, respectively. Theincrease in operating cash flows during the thirteen weeks ended June 29,2006 is primarily due to increases in attendance and improvement in operatingresults, including amounts related to the Merger. We had working capitaldeficits as of June 29, 2006 and March 30, 2006 of $26,453,000 and$115,995,000, respectively. We have the ability to borrow against our creditfacility to meet obligations as 

33

----

they come due (subject to limitations on theincurrence of indebtedness in our various debt instruments) and hadapproximately $89,000,000 and $90,000,000 available on our credit facility tomeet these obligations for the periods ended June 29, 2006 and March 30,2006, respectively.

Duringthe first quarter of fiscal 2007, we sold 4 theatres in Spain with 86 screens,sold one theatre in Portugal with 20 screens, sold 4 theatres with 42 screensin the U.S. as required by and in connection with the approval of the Mergers,closed 4 theatres with 32 screens in the U.S., opened one new theatre with 15screens in the U.S., added 6 screens to an existing theatre in the U.S. andopened one new theatre with 9 screens in Mexico resulting in a circuit totalafter giving effect to the expected disposal of 6 remaining theatres with 78screens in connection with the approval of the Mergers of 411 theatres and5,601 screens.

**Cash Flows from Investing Activities**

Cashprovided by investing activities, as reflected in the Consolidated Statementsof Cash Flows were $28,828,000 and $20,069,000, during the thirteen weeks endedJune 29, 2006 and June 30, 2005, respectively. As of June 29,2006, we had construction in progress of $30,068,000. We had 7 U.S. theatreswith a total of 102 screens and one Mexico theatre with 12 screens underconstruction on June 29, 2006 that we expect to open in fiscal 2007. Cashoutflows from investing activities include capital expenditures of $32,843,000and $16,072,000 during the thirteen weeks ended June 29, 2006 and June 30,2005, respectively. We expect that our gross capital expenditures in fiscal2007 will be approximately $141,000,000.

In May 2006,AMCEI and its subsidiary AMC Entertainment International Limited sold itsinterests in AMC Entertainment España S.A., which owned and operated 4 theatreswith 86 screens in Spain, and Actividades Multi-Cinemas E Espectáculos,LDA, which owned and operated 1 theatre with 20 screens in Portugal for a netsales price of approximately $35,446,000.

Duringthe thirteen weeks ended June 29, 2006, we sold four theatres with 42screens in the U.S. as required by and in connection with the approval of theMergers for an aggregate sales price of $30,667,000.

On June 30,2005, we disposed of Japan AMC Theatres, Inc., including four theatres,for a cash sales price of $44,861,000.

Wefund the costs of constructing new theatres using existing cash balances, cashgenerated from operations or borrowed funds, as necessary. We generally leaseour theatres pursuant to long-term non-cancelable operating leases which mayrequire the developer, who owns the property, to reimburse us for a portion ofthe construction costs. However, we may decide to own the real estate assets ofnew theatres and, following construction, sell and leaseback the real estateassets pursuant to long-term non-cancelable operating leases.

Historically,we have either paid for or leased the equipment used in a theatre. We maypurchase leased equipment from lessors, if prevailing market conditions arefavorable.

**Cash Flows from Financing Activities**

Cashflows provided by (used in) financing activities, as reflected in theConsolidated Statement of Cash Flows, were $(14,181,000) and $1,459,000 duringthe thirteen weeks ended June 29, 2006 and June 30, 2005,respectively.

Referenceis made to Management’s Discussion and Analysis of Financial Condition andResults of Operations—Liquidity and Capital Resources in our Annual Report on Form 10-K/Afor the fiscal year ended March 30, 2006 for certain information about ourNew Credit Facility, the Cinemex Credit Facility, our Notes due 2011, Notes due2012, Notes due 2014, Notes due 2016, Fixed Notes due 2012, Floating Notes due2010 and Discount Notes 2014.

TheNew Credit Facility is with a syndicate of banks and other financial institutionsand provides financing of up to $850,000,000, consisting of a $650,000,000 termloan facility with a maturity of seven years and a $200,000,000 revolvingcredit facility with a maturity of six years. The revolving credit facility 

34

----

includes borrowing capacity available for Mexicanpeso-denominated revolving loans, for letters of credit and for swinglineborrowings on same-day notice. As of June 29, 2006, we had no borrowingsunder the revolving credit facility and $648,375,000 was outstanding under the termloan facility.

Borrowingsunder the New Credit Facility bear interest at a rate equal to an applicablemargin plus, at our option, either a base rate or LIBOR. The initial applicablemargin for borrowings under the revolving credit facility is 0.75% with respectto base rate borrowings and 1.75% with respect to LIBOR borrowings, and theinitial applicable margin for borrowings under the term loan facility is 1.50%with respect to base rate borrowings and 2.125% with respect to LIBORborrowings. The applicable margin for such borrowings may be reduced, subjectto AMCE attaining certain leverage ratios. In addition to paying interest onoutstanding principal under the New Credit Facility, we are required to pay acommitment fee to the lenders under the revolving credit facility in respect ofthe unutilized commitments thereunder at a rate equal to 0.375% (subject toreduction upon attainment of certain leverage ratios). We will also paycustomary letter of credit fees. We may voluntarily repay outstanding loansunder the New Credit Facility at any time without premium or penalty, otherthan customary “breakage” costs with respect to LIBOR loans. We are required torepay $1,625,000 of the term loan quarterly, beginning March 30, 2006through September 30, 2012, with any remaining balance due on January 26,2013.

Theindentures relating to our outstanding notes allow us to incur all permittedindebtedness (as defined therein) without restriction, which includes allamounts borrowed under our credit facility. The indentures also allow us toincur any amount of additional debt as long as we can satisfy the coverageratio of each indenture, both at the time of the event (under the indenture forthe Notes due 2011) and after giving effect thereto on a pro forma basis (underthe indentures for the Notes due 2011, Notes due 2012, Fixed Notes due 2012,Floating Notes due 2010 and Discount Notes due 2014). Under the indenturerelating to the Notes due 2012, Notes due 2014 and 11% Senior SubordinatedNotes due 2016 (“Notes due 2016”), the most restrictive of the indentures, wecould not borrow any amounts as of June 29, 2006 in addition to permittedindebtedness. If we cannot satisfy the coverage ratios of the indentures,generally we can incur, in addition to amounts borrowed under the creditfacility, no more than $100,000,000 of new “permitted indebtedness” under theterms of the indentures relating to the 2011, 2012, 2014, 2016 notes andDiscount Notes due 2014.

Theindentures relating to the above-described notes also contain covenantslimiting dividends, purchases or redemptions of stock, transactions withaffiliates, and mergers and sales of assets, and require us to make an offer topurchase the notes upon the occurrence of a change in control, as defined inthe indentures. Upon a change of control (as defined in the indentures), wewould be required to make an offer to repurchase all of the outstanding, Notesdue 2016, Notes due 2011, Notes due 2012, Notes due 2014, Fixed Notes due 2012,the Floating Notes due 2010 and the Discount Notes due 2014, at a price equalto 101% of the principal amount thereof plus accrued and unpaid interest to thedate of repurchase.

Asof June 29, 2006, we were in compliance with all financial covenantsrelating to the New Credit Facility, the Cinemex Credit Facility, the Notes due2016, the Notes due 2011, the Notes due 2012, Notes due 2014, the Fixed Notesdue 2012, the Floating Notes due 2010 and the Discount Notes due 2014.

Webelieve that cash generated from operations and existing cash and equivalentswill be sufficient to fund operations and planned capital expenditures andpotential acquisitions for at least the next twelve months and enable us tomaintain compliance with covenants related to the new Credit Facility and thenotes.

**NEW ACCOUNTING PRONOUNCEMENTS**

In July 2006,the FASB released FASB Interpretation No. 48, *Accounting for Uncertainty in Income Taxes—an Interpretation of FASBStatement 109* (“FIN 48” or the “Interpretation”), which clarifiesthe accounting for uncertainty in income taxes recognized in companies’financial statements in accordance with FASB Statement No. 109, “Accountingfor Income Taxes.” FIN 48 prescribes a recognition threshold and measurementattribute for the financial statement recognition and measurement of a taxposition 

35

----

taken or expected to be taken in a tax return. Theevaluation of a tax position in accordance with FIN 48 is a two-step process.The first step is recognition whereby companies must determine whether it ismore likely than not that a tax position will be sustained upon examination.The second step is measurement whereby a tax position that meets themore-likely-than-not recognition threshold is measured to determine the amountof benefit to recognize in the financial statements. The interpretation alsoprovides guidance on derecognition of recognized tax benefits, classification,interest and penalties, accounting in interim periods, disclosure andtransition. FIN 48 is effective for fiscal years beginning after December 15,2006. We expect to adopt the new requirements in the first quarter of fiscal2008 and are currently evaluating the impact that the adoption of FIN 48 willhave on our consolidated financial statements.

In June 2005,the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 05-06,*Determining the Amortization Period for LeaseholdImprovements Purchased after Lease Inception or Acquired in a BusinessCombination* (“EITF 05-06”). EITF 05-06 concludes thatthe amortization period for leasehold improvements acquired in a businesscombination and leasehold improvements that are in service significantly afterand not contemplated at the beginning of the lease term should be amortizedover the shorter of the useful life of the assets or a term that includes requiredlease periods and renewals that are deemed to be reasonably assured at the dateof inception. The adoption of this pronouncement did not have a material effecton our consolidated financial statements.

In February 2006,the FASB 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 Statement No. 123(R),Share-Based Payment, where the award requires or permits cash settlementupon the contingent event. The FSP requires companies to classify employeestock options and similar instruments with contingent cash settlement featuresas equity awards provided the contingent event that permits or requires cashsettlement is not considered probable of occurring. The adoption of FSP 123 R-4did not have an impact on our consolidated financial position, results ofoperations, or cash flows.

In October 2005,the FASB issued FASB Staff Position (FSP) 13-1, *Accounting for Rental Costs Incurred during aConstruction Period*. FSP 13-1 clarifies there is nodistinction between the right to use a leased asset during the constructionperiod and the right to use that asset after the construction period.Accordingly, we are no longer able to capitalize rental costs during theconstruction period and began expensing them as preopening expense prior to thetheatre opening date. This FSP is effective for the first reporting periodbeginning after December 15, 2005. We have adopted this FSP during thefourth quarter of fiscal 2006 which results in recognition of preopeningexpense during the “rent holiday”.

In May 2005,the FASB issued SFAS No. 154, *AccountingChanges and Error Corrections a replacement of APB Opinion No. 20 and FASBStatement No. 3* (SFAS 154), which requires retrospectiveapplication to prior periods’ financial statements of changes in accountingprinciple, unless it is impracticable to determine either the period-specificeffects or the cumulative effect of the change. It also requires that a changein depreciation, amortization, or depletion method for long-lived, nonfinancialassets be accounted for as a change in accounting estimate affected by a changein accounting principle. We are not currently contemplating an accountingchange which would be impacted by SFAS 154.

**Item4.   Controls and Procedures.**

(a)   Evaluation of disclosure controls andprocedures.

***Disclosure Controlsand Procedures***

Our senior management isresponsible for establishing and maintaining disclosure controls and procedures(as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Actof 1934, or the Exchange Act) designed to ensure that information required tobe disclosed by Marquee Holdings Inc. in 

36

----

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 and proceduresinclude, without limitation, controls and procedures designed to ensure thatinformation required to be disclosed by an issuer in the reports that it filesor submits under the Exchange Act is accumulated and communicated to the issuer’smanagement, including its principal executive officer or officers and principalfinancial officer or officers, or persons performing similar functions, asappropriate to allow timely decisions regarding required disclosure. 

We have evaluated theeffectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e)and 15d-15(e) under the Exchange Act) as of June 29, 2006, with theparticipation of our Chief Executive Officer and Chief Financial Officer, aswell as other key members of our management. As a result of the identificationof the material weakness in our internal control over financial reportingdiscussed below, we have concluded that our disclosure controls and procedureswere not effective as of June 29, 2006. 

***Material Weaknessin Internal Control Over Financial Reporting***

Amaterial weakness is a control deficiency, or combination of controldeficiencies, that results in more than a remote likelihood that a materialmisstatement of the annual or interim financial statements will not beprevented or detected. As of June 29, 2006, we identified the followingmaterial weakness in our internal control over financial reporting: 

·       TheCompany did not maintain effective internal controls to ensure that itsstock-based compensation awards and management-purchased shares areappropriately recorded in its financial statements in accordance with generallyaccepted accounting principles. Specifically, the Company did not appropriatelyand timely identify the relevant characteristic of certain put rights whichresulted in the Company’s failure to properly identify the appropriatefinancial statement classification of certain options and shares as a componentof equity (as opposed to liabilities) which resulted in the inappropriateapplication of mark-to-market accounting and incorrect expense recognition inthe income statement. 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 beprevented or detected. 

***Remediation ofMaterial Weaknesses***

The Company will takeactions to remediate the material weakness in our internal control overfinancial reporting surrounding the application of generally acceptedaccounting principles with respect to stock-based compensation andmanagement-purchased shares for the reporting period ending March 29, 2007.Specifically, the Company will make improvements with respect to the design,precision and rigor of review controls over the application of stock-basedcompensation and management-purchased shares accounting in that appropriatelevels of management and legal counsel now review proposed accounting for allnewly issued stock-based compensation awards and management-purchased shares.Further, management will consider using a qualified independent third-partyadvisor, as deemed appropriate, with respect to more complex stock-basedcompensation transactions. In addition, the put rights associated with thestock options and underlying shares which resulted in previous awards beinginappropriately classified as liabilities and subject to mark-to-markaccounting in the income statement were cancelled and terminated during theperiod ended March 29, 2007. 

(b)   Changes in internal controls.

Therehas been no change in internal control over financial reporting during thethirteen weeks ended June 29, 2006 that has materially affected, or isreasonably likely to materially affect our internal control over financialreporting.

37

----

**PART II—OTHERINFORMATION**

**Item6.   Exhibits.**

**EXHIBITINDEX**
| EXHIBIT NUMBER | ** ** | **DESCRIPTION** | ** ** | ** **                                                                                                                                                                                                                                        | ** ** |
|---------------------|------------|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                | *2.1       |            |       | 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       |            |       | 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).                                 |       |
|                | **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.                                                                                                                                        |       |
|                | **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.                                               |       |

----

*                    Previouslyfiled

**             Filed herewith

38

----

**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|                            | **MARQUEE HOLDINGS INC.**             |
|----------------------------|---------------------------------------|
| Date: April 16,  2007 | /s/ PETER C. BROWN                    |
|                       | Peter C. Brown                        |
|                       | Chairman of the Board,                |
|                       | Chief Executive Officer and President |
| Date: April 16,  2007 | /s/ CRAIG R. RAMSEY                   |
|                       | Craig R. Ramsey                       |
|                       | Executive Vice President and          |
|                       | Chief Financial Officer               |

 

39

----