**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

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**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 quarterlyperiod ended December 28, 2006**

**OR**

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

 

**Forthe transition period from ______________ to ______________**

**Commissionfile number 333-122636**

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**MARQUEE HOLDINGS INC.**

(Exact name of registrantas specified in its charter)

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

 

**(816) 221-4000**

(Registrant’s telephone number, including area code)

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Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for 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    Acceleratedfiler  o    Non-acceleratedfiler  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.

|                                            |                                          | **Number of Shares** |
|--------------------------------------------|-----------------------------------------------|----------------------|
| ** **                                 | **Title of Each Class of  Common Stock** | ** **           |   | ** ** | **Outstanding as of December 28,  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 on Form 10-Qfor the quarterly period ended December 28, 2006 to include the amended Item 1.Financial Statements (unaudited), Item 2. Management’s Discussion and Analysisof Financial Condition and Results of Operations, Item 4. Controls andProcedures and Item 6. Exhibits which gives effect to the restatement formanagement-purchased shares and stock option awards and disclosure about arelated material weakness in our internal control over financial reporting. Therehave been no other changes, events or other transactions to recognize since theoriginal filing date.

 

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**MARQUEE HOLDINGSINC. AND SUBSIDIARY**

**INDEX**
|             | ** ** | ** **                                                                                      | ** ** | **Page  Number** |
|-------------|------------|-------------------------------------------------------------------------------------------------|------------|------------------|
| ** **  | ** ** | **PART I—FINANCIAL  INFORMATION**                                                     |       |             |
| **Item 1.** | ** ** | **Financial Statements (unaudited)**                                                            |       | 3                |
|        |       | Consolidated Statements of Operations                                                           |       | 5                |
|        |       | Consolidated Balance Sheets                                                                     |       | 6                |
|        |       | Consolidated Statements of Cash Flows                                                           |       | 7                |
|        |       | Notes to Consolidated Financial Statements                                                      |       | 8                |
| **Item 2.** | ** ** | **Management’s Discussion and Analysis of Financial Condition  and Results of Operations** |       | 34               |
| **Item 4.** | ** ** | **Controls and Procedures**                                                                     |       | 51               |
| ** **  | ** ** | **PART II—OTHER  INFORMATION**                                                        |       |             |
| **Item 6.** | ** ** | **Exhibits**                                                                                    |       | 53               |
|        | ** ** | **Signatures**                                                                                  |       | 54               |

 

2

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**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 for the thirteen weeksended December 28, 2006 and the thirteen and thirty-nine week periods endedDecember 29, 2005 and as of March 30, 2006 needed to be restated tocorrect 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 held bymanagement (including the management-purchased shares referred to above) for aperiod of six months following a change in control or the employee'stermination for any reason (including voluntary termination).  For all terminations except voluntarytermination, the call price for the shares is fair value.  For voluntary terminations, the call price forthe shares is the lower of fair value on the call notice date or the price paid.

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

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 ofthe management purchased shares and does not intend to do so. Accordingly, theCompany has restated the financial statements for the thirteen weeks ended December 28,2006 and the thirteen and thirty-nine week periods ended December 29, 2005and 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.      *Stock Option 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 obtained 

3

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upon exercise of options)is not within the employee's control. Accordingly, the Company has restated itsfinancial statements for the thirteen weeks ended December 28, 2006 andthe thirteen and thirty-nine week periods ended December 29, 2005 and asof March 30, 2006 to reverse the previously recorded mark to market effectsrelating to the stock options awarded to this member of management that hadbeen incorrectly classified as liabilities and to reflect these options asadditional paid-in capital (rather than as liabilities).  There was no impact on net cash provided byoperating activities as a result of the above mentioned items. 

The Company has restated its financial statements forthe thirteen week period ended December 28, 2006 and the thirteen andthirty-nine week periods ended December 29, 2005 and as of March 30,2006 to record the net effect of the adjustments discussed above. The Companyis restating the thirteen weeks ended December 28, 2006 as a result of outof period adjustments relating to the thirteen weeks ended June 29, 2006and the thirteen weeks ended September 28, 2006 recorded during thecurrent period related to the adjustments described above. The restatement doesnot impact the financial statements as of and for the thirty-nine weeks endedDecember 28, 2006. The net effects of the adjustments recorded to restatethe financial statements are summarized as follows (dollars in thousands):

| ** **                                                      | ** ** | **Stock based** | ** ** | ** **             | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------|------------|----------------------|------------|------------------------|------------|------------|------------|
| ** **                                                      | ** ** | **Compensation**     | ** ** | **Other Expense** | ** ** | ** ** | ** ** |
| **Thirteen Weeks Ended  December 28, 2006** | ** ** | **Expense(1)**       | ** ** | **(Income)**           | ** ** | **Total**  | ** ** |
| Increase (decrease) in  Net Loss                                |       |                 | $          | (411                   | )          |       |       | $ | 1,120 |   |   | $ | 709 |   |
|                                                                 |            |                      |            |                        |            |            |            |  |  |  |  |  |  |  |

 

| ** **                                                      | ** ** | **Stock based** | ** ** | ** **             | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------|------------|----------------------|------------|------------------------|------------|------------|------------|
| ** **                                                      | ** ** | **Compensation**     | ** ** | **Other Expense** | ** ** | ** ** | ** ** |
| **Thirteen Weeks Ended  December 29, 2005** | ** ** | **Expense(1)**       | ** ** | **(Income)**           | ** ** | **Total**  | ** ** |
| Increase (decrease) in  Net Loss                                |       |                 | $          | 266                    |       |       |       | $ | (94 | ) |   | $ | 172 |   |
|                                                                 |            |                      |            |                        |            |            |            |  |  |  |  |  |  |  |

 

| ** **                                                         | ** ** | **Stock based** | ** ** | ** **             | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------|------------|----------------------|------------|------------------------|------------|------------|------------|
| ** **                                                         | ** ** | **Compensation**     | ** ** | **Other Expense** | ** ** | ** ** | ** ** |
| **Thirty-nine Weeks Ended  December 29, 2005** | ** ** | **Expense(1)**       | ** ** | **(Income)**           | ** ** | **Total**  | ** ** |
| Increase in  Deferred Income Taxes                                 |       |                 | $          | 500                    |       |       |       | $ | 500 |   |   | $ | 1,000 |   |
| Decrease in Other  Long-Term Liabilities(2)                        |       |                 | $          | 612                    |       |       |       | $ | 2,622 |   |   | $ | 3,234 |   |
| Increase in  Additional Paid-in Capital(3)                         |       |                 | $          | 1,925                  |       |       |       | $ | 3,750 |   |   | $ | 5,675 |   |
| Increase in Net Loss                                               |       |                 | $          | 813                    |       |       |       | $ | 628 |   |   | $ | 1,441 |   |

 

(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

All previously reportedamounts affected by the restatement that appear elsewhere in these footnotes tothe consolidated financial statements have also been restated. See Note 1to the Consolidated Financial Statements for more information.

4

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**MARQUEE HOLDINGSINC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands)**

| ** **                                                                 | ** ** | **Thirteen Weeks Ended**      | ** ** | **Thirty-nine Weeks Ended**   | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                 | ** ** | **December 28,  2006  (restated)** | ** ** | **December 29,  2005  (restated)** | ** ** | **December 28,  2006** | ** ** | **December 29,  2005  (restated)** | ** ** |
| ** **                                                                 | ** ** | **(unaudited)**                         | ** ** | **(unaudited)**                         | ** ** |
| Revenues                                                                   |       |                                    |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                                                                 |       |                                    | $          | 399,773                                 |       |   |   | $ | 267,683 |   |   |   | $ | 1,257,986 |   |   |   | $ | 799,860 |   |   |
| Concessions                                                                |       |                                    | 162,675    |                                    |       |   | 105,553 |   |   |   | 520,464 |   |   |   | 317,452 |   |   |
| Other revenue                                                              |       |                                    | 33,908     |                                    |       |   | 25,272 |   |   |   | 95,291 |   |   |   | 72,417 |   |   |
| Total revenues                                                             |       |                                    | 596,356    |                                    |       |   | 398,508 |   |   |   | 1,873,741 |   |   |   | 1,189,729 |   |   |
| Costs and Expenses                                                         |       |                                    |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Film exhibition costs                                                      |       |                                    | 204,031    |                                    |       |   | 140,334 |   |   |   | 651,202 |   |   |   | 428,452 |   |   |
| Concession costs                                                           |       |                                    | 18,079     |                                    |       |   | 11,442 |   |   |   | 60,871 |   |   |   | 34,346 |   |   |
| Operating expense                                                          |       |                                    | 151,537    |                                    |       |   | 103,382 |   |   |   | 469,977 |   |   |   | 312,193 |   |   |
| Rent                                                                       |       |                                    | 110,344    |                                    |       |   | 78,053 |   |   |   | 334,416 |   |   |   | 229,037 |   |   |
| General and administrative:                                                |       |                                    |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger and acquisitions costs                                              |       |                                    | 3,537      |                                    |       |   | 281 |   |   |   | 9,363 |   |   |   | 2,926 |   |   |
| Management fee                                                             |       |                                    | 1,250      |                                    |       |   | 500 |   |   |   | 3,750 |   |   |   | 1,500 |   |   |
| Other                                                                      |       |                                    | 5,955      |                                    |       |   | 10,432 |   |   |   | 35,996 |   |   |   | 29,511 |   |   |
| Preopening expense                                                         |       |                                    | 3,698      |                                    |       |   | 3,515 |   |   |   | 6,827 |   |   |   | 4,251 |   |   |
| Theatre and other closure expense                                          |       |                                    | 611        |                                    |       |   | 410 |   |   |   | 8,321 |   |   |   | 1,390 |   |   |
| Restructuring charges                                                      |       |                                    | —     |                                    |       |   | 27 |   |   |   | — |   |   |   | 3,935 |   |   |
| Depreciation and amortization                                              |       |                                    | 64,157     |                                    |       |   | 35,931 |   |   |   | 192,687 |   |   |   | 108,478 |   |   |
| Disposition of assets and other gains                                      |       |                                    | (5,334     | )                                       |       |   | (297 | ) |   |   | (11,184 | ) |   |   | (1,067 | ) |   |
| Total costs and expenses                                                   |       |                                    | 557,865    |                                    |       |   | 384,010 |   |   |   | 1,762,226 |   |   |   | 1,154,952 |   |   |
| Other expense (income)                                                     |       |                                    |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                                                                      |       |                                    | (1,967     | )                                       |       |   | (5,919 | ) |   |   | (9,401 | ) |   |   | (11,966 | ) |   |
| Interest expense                                                           |       |                                    |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate borrowings                                                       |       |                                    | 57,415     |                                    |       |   | 30,503 |   |   |   | 170,215 |   |   |   | 90,835 |   |   |
| Capital and financing lease obligations                                    |       |                                    | 1,784      |                                    |       |   | 541 |   |   |   | 4,302 |   |   |   | 2,964 |   |   |
| Investment expense (income)                                                |       |                                    | (2,995     | )                                       |       |   | 2,541 |   |   |   | (6,600 | ) |   |   | 2,062 |   |   |
| Total other expense                                                        |       |                                    | 54,237     |                                    |       |   | 27,666 |   |   |   | 158,516 |   |   |   | 83,895 |   |   |
| Loss from continuing operations before income taxes                        |       |                                    | (15,746    | )                                       |       |   | (13,168 | ) |   |   | (47,001 | ) |   |   | (49,118 | ) |   |
| Income tax provision (benefit)                                             |       |                                    | (1,500     | )                                       |       |   | (4,900 | ) |   |   | 700 |   |   |   | (20,200 | ) |   |
| Loss from continuing operations                                            |       |                                    | (14,246    | )                                       |       |   | (8,268 | ) |   |   | (47,701 | ) |   |   | (28,918 | ) |   |
| Earnings (loss) from discontinued operations, net of  income tax provision |       |                                    | (41        | )                                       |       |   | 178 |   |   |   | 2,399 |   |   |   | (24,859 | ) |   |
| Net loss                                                                   |       |                                    | $          | (14,287                                 | )          |   |   | $ | (8,090 | ) |   |   | $ | (45,302 | ) |   |   | $ | (53,777 | ) |   |
| Basic and diluted loss per share of common stock:                          |       |                                    |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations                                            |       |                                    | $          | (11.11                                  | )          |   |   | $ | (10.75 | ) |   |   | $ | (37.20 | ) |   |   | $ | (37.59 | ) |   |
| Earnings (loss)  from discontinued operations                              |       |                                    | (.03       | )                                       |       |   | .23 |   |   |   | 1.87 |   |   |   | (32.31 | ) |   |
| Net loss per  share                                                        |       |                                    | $          | (11.14                                  | )          |   |   | $ | (10.52 | ) |   |   | $ | (35.33 | ) |   |   | $ | (69.90 | ) |   |
| Average shares  outstanding:                                               |       |                                    |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                          |       |                                    | 1,282.25   |                                    |       |   | 769.35 |   |   |   | 1,282.25 |   |   |   | 769.35 |   |   |

 

*See Notes to ConsolidatedFinancial Statements.*

5

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**MARQUEE HOLDINGSINC. AND SUBSIDIARYCONSOLIDATED BALANCE SHEETS(in thousands, except share data)**

| ** **                                                                                                                                                                             | ** ** | **December 28,  2006** | ** ** | **March 30,  2006  (restated)** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|--------------------------------------|------------|
| ** **                                                                                                                                                                             | ** ** | **(unaudited)**             | ** ** |
| **ASSETS**                                                                                                                                                                             |       |                        |       |                                 |       |   |   |
| Current assets:                                                                                                                                                                        |       |                        |       |                                 |       |   |   |
| Cash  and equivalents                                                                                                                                                                  |       |                        | $          | 470,448                              |       |   | $ | 232,366 |   |
| Receivables,  net of allowance for doubtful accounts of $1,403 as of December 28, 2006  and $1,339 as of March 30, 2006                                                      |       |                        | 85,463     |                                 |       | 54,725 |   |
| Other  current assets                                                                                                                                                                  |       |                        | 31,816     |                                 |       | 34,647 |   |
| Current  assets held for sale                                                                                                                                                          |       |                        | —     |                                 |       | 4,726 |   |
| Total  current assets                                                                                                                                                                  |       |                        | 587,727    |                                 |       | 326,464 |   |
| Property, net                                                                                                                                                                          |       |                        | 1,324,427  |                                 |       | 1,501,048 |   |
| Intangible assets, net                                                                                                                                                                 |       |                        | 244,943    |                                 |       | 273,308 |   |
| Goodwill                                                                                                                                                                               |       |                        | 2,089,730  |                                 |       | 2,018,318 |   |
| Other long-term  assets                                                                                                                                                                |       |                        | 137,718    |                                 |       | 175,876 |   |
| Noncurrent assets held  for sale                                                                                                                                                       |       |                        | 7,300      |                                 |       | 112,337 |   |
| Total  assets                                                                                                                                                                          |       |                        | $          | 4,391,845                            |       |   | $ | 4,407,351 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                         |       |                        |       |                                 |       |   |   |
| Current liabilities:                                                                                                                                                                   |       |                        |       |                                 |       |   |   |
| Accounts  payable                                                                                                                                                                      |       |                        | $          | 174,165                              |       |   | $ | 150,383 |   |
| Accrued  expenses and other liabilities                                                                                                                                                |       |                        | 178,915    |                                 |       | 157,227 |   |
| Deferred  revenues and income                                                                                                                                                          |       |                        | 114,200    |                                 |       | 95,812 |   |
| Current  maturities of corporate borrowings and capital and financing lease  obligations                                                                                               |       |                        | 21,433     |                                 |       | 30,804 |   |
| Current  liabilities held for sale                                                                                                                                                     |       |                        | —     |                                 |       | 8,233 |   |
| Total  current liabilities                                                                                                                                                             |       |                        | 488,713    |                                 |       | 442,459 |   |
| Corporate  borrowings                                                                                                                                                                  |       |                        | 2,449,898  |                                 |       | 2,428,996 |   |
| Capital and financing  lease obligations                                                                                                                                               |       |                        | 50,664     |                                 |       | 64,016 |   |
| Other long-term  liabilities                                                                                                                                                           |       |                        | 408,840    |                                 |       | 417,335 |   |
| Noncurrent liabilities  held for sale                                                                                                                                                  |       |                        | —     |                                 |       | 11,903 |   |
| Total  liabilities                                                                                                                                                                     |       |                        | 3,398,115  |                                 |       | 3,364,709 |   |
| Stockholders’ equity:                                                                                                                                                             |       |                        |       |                                 |       |   |   |
| Class  A-1 Common Stock voting ($0.01 par value, 1,500,000 shares authorized;  382,475.00000 shares issued and outstanding as of December 28, 2006 and March 30,  2006)           |       |                        | 4          |                                 |       | 4 |   |
| Class  A-2 Common Stock voting ($0.01 par value, 1,500,000 shares authorized;  382,475.00000 shares issued and outstanding as of December 28, 2006 and March 30,  2006)           |       |                        | 4          |                                 |       | 4 |   |
| Class  N Common Stock nonvoting ($0.01 par value, 375,000 shares authorized;  5,128.77496 shares issued and outstanding as of December 28, 2006 and March  30, 2006)                   |       |                        | —     |                                 |       | — |   |
| Class  L-1 Common Stock voting ($0.01 par value, 1,500,000 shares authorized;  256,085.61252 shares issued and outstanding as of December 28, 2006 and March 30,  2006)           |       |                        | 3          |                                 |       | 3 |   |
| Class  L-2 Common Stock voting ($0.01 par value, 1,500,000 shares authorized;  256,085. 61252 shares issued and outstanding as of December 28, 2006 and  March 30, 2006, respectively) |       |                        | 3          |                                 |       | 3 |   |
| Additional  paid-in capital                                                                                                                                                            |       |                        | 1,313,084  |                                 |       | 1,313,899 |   |
| Accumulated  other comprehensive loss                                                                                                                                                  |       |                        | (13,453    | )                                    |       | (10,658 | ) |
| Accumulated  deficit                                                                                                                                                                   |       |                        | (305,915   | )                                    |       | (260,613 | ) |
| Total  stockholders’ equity                                                                                                                                                       |       |                        | 993,730    |                                 |       | 1,042,642 |   |
| Total liabilities and  stockholders’ equity                                                                                                                                       |       |                        | $          | 4,391,845                            |       |   | $ | 4,407,351 |   |

 

*See Notes to ConsolidatedFinancial Statements.*

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**MARQUEE HOLDINGS INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)**

| ** **                                                                       | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|----------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                       | ** ** | **December 28,  2006**           | ** ** | **December 29,  2005  (restated)** | ** ** |
| ** **                                                                       | ** ** | **(unaudited)**                       | ** ** |
| **INCREASE IN CASH AND EQUIVALENTS**                                             |       |                                  |       |   |   |   |   |   |   |
| **Cash flows from operating activities:**                                        |       |                                  |       |   |   |   |   |   |   |
| Net loss                                                                         |       |                                  | $          | (45,302 | ) |   |   | $ | (53,777 | ) |   |
| Adjustments to reconcile net loss to net cash  provided by operating activities: |       |                                  |       |   |   |   |   |   |   |
| Depreciation and amortization                                                    |       |                                  | 193,232    |   |   |   | 112,828 |   |   |
| Amortization of discount on corporate borrowings                                 |       |                                  | 16,776     |   |   |   | 14,932 |   |   |
| Non-cash portion of stock-based  compensation                                    |       |                                  | 6,216      |   |   |   | 2,705 |   |   |
| Non-cash portion of pension and postretirement  expense                          |       |                                  | (6,155     | ) |   |   | 3,565 |   |   |
| Deferred income taxes                                                            |       |                                  | (865       | ) |   |   | (917 | ) |   |
| Equity in losses from investments                                                |       |                                  | 3,681      |   |   |   | 3,578 |   |   |
| Disposition of assets and other gains                                            |       |                                  | (663       | ) |   |   | (132 | ) |   |
| Change in assets and liabilities, net of effects from  acquisition:              |       |                                  |       |   |   |   |   |   |   |
| Receivables                                                                      |       |                                  | (25,400    | ) |   |   | (19,405 | ) |   |
| Other assets                                                                     |       |                                  | (6,350     | ) |   |   | 21,553 |   |   |
| Accounts payable                                                                 |       |                                  | 24,388     |   |   |   | (7,260 | ) |   |
| Accrued expenses and other liabilities                                           |       |                                  | 44,683     |   |   |   | 11,665 |   |   |
| Other, net                                                                       |       |                                  | 1,110      |   |   |   | 2,165 |   |   |
| Net cash provided by operating activities                                        |       |                                  | 205,351    |   |   |   | 91,500 |   |   |
| **Cash flows from investing activities:**                                        |       |                                  |       |   |   |   |   |   |   |
| Capital expenditures                                                             |       |                                  | (100,836   | ) |   |   | (77,336 | ) |   |
| Proceeds on disposal—discontinued operations                                |       |                                  | 35,446     |   |   |   | 53,456 |   |   |
| Proceeds on disposal—continuing operations                                  |       |                                  | 116,439    |   |   |   | 3,032 |   |   |
| Net change in reimbursable construction advances                                 |       |                                  | 289        |   |   |   | (3,090 | ) |   |
| Other, net                                                                       |       |                                  | (926       | ) |   |   | (2,652 | ) |   |
| Net cash provided by (used in) investing activities                              |       |                                  | 50,412     |   |   |   | (26,590 | ) |   |
| **Cash flows from financing activities:**                                        |       |                                  |       |   |   |   |   |   |   |
| Proceeds from sale/leasebacks                                                    |       |                                  | —     |   |   |   | 6,661 |   |   |
| Repayment of Cinemex Credit Facility                                             |       |                                  | (841       | ) |   |   | — |   |   |
| Principal payments under capital and financing lease  obligations                |       |                                  | (2,800     | ) |   |   | (2,369 | ) |   |
| Principal payments under mortgage                                                |       |                                  | (83        | ) |   |   | — |   |   |
| Payments on Term Loan B                                                          |       |                                  | (4,875     | ) |   |   | — |   |   |
| Change in construction payables                                                  |       |                                  | (3,325     | ) |   |   | (5,103 | ) |   |
| Deferred financing costs                                                         |       |                                  | (2,171     | ) |   |   | (938 | ) |   |
| Net cash used in financing activities                                            |       |                                  | (14,095    | ) |   |   | (1,749 | ) |   |
| Effect of exchange rate changes on cash and  equivalents                         |       |                                  | (3,586     | ) |   |   | 601 |   |   |
| **Net increase in cash and equivalents**                                         |       |                                  | 238,082    |   |   |   | 63,762 |   |   |
| **Cash and equivalents at beginning of period**                                  |       |                                  | 232,366    |   |   |   | 72,945 |   |   |
| **Cash and equivalents at end of period**                                        |       |                                  | $          | 470,448 |   |   |   | $ | 136,707 |   |   |
| **SUPPLEMENTAL DISCLOSURES OF CASH FLOW  INFORMATION**                           |       |                                  |       |   |   |   |   |   |   |
| **Cash paid during the period for:**                                             |       |                                  |       |   |   |   |   |   |   |
| Interest (including amounts capitalized of $1,405 and  $2,306)                   |       |                                  | $          | 121,667 |   |   |   | $ | 58,460 |   |   |
| Income taxes paid                                                                |       |                                  | 687        |   |   |   | 1,247 |   |   |
| **Schedule of non-cash investing and  financing activities:**                    |       |                                  |       |   |   |   |   |   |   |
| Assets  capitalized under EITF 97-10                                             |       |                                  | $          | 7,060 |   |   |   | $ | — |   |   |

 

*See Notes to ConsolidatedFinancial Statements.*

7

----

**MARQUEE HOLDINGS INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**December 28,2006(Unaudited)

**NOTE 1—BASIS OFPRESENTATION**

Marquee Holdings Inc. (“Holdings”) is an investmentvehicle owned by J.P. Morgan Partners, LLC, Apollo Management, L.P. and certainrelated investment funds and affiliates of Bain Capital Partners, The CarlyleGroup and Spectrum Equity Investors. Holdings was formed for the purpose ofacquiring AMC Entertainment Inc. (“AMCE”) pursuant to a definitive mergeragreement approved by AMCE’s Board of Directors on July 22, 2004. Holdings is aholding company with no operations of its own and it has one direct subsidiary,AMCE.

AMCE, through its direct and indirect subsidiaries,including American Multi-Cinema, Inc. (“AMC”) and its subsidiaries,Grupo Cinemex, S.A. de C.V. (“Cinemex”) and AMC Entertainment International, Inc.(“AMCEI”) and its subsidiaries (collectively with Holdings and AMCE, unless thecontext otherwise requires, the “Company”), is principally involved in the theatricalexhibition business and owns, operates or has interests in theatres located inthe United States and Canada (“U.S. and Canada” formerly, North Americantheatrical exhibition) and in Mexico, Argentina, Brazil, Chile, Uruguay, China(Hong Kong), France and the United Kingdom. The Company discontinued itsoperations in Japan during the first quarter of fiscal 2006 and discontinuedits operations in Spain and Portugal during the third quarter of fiscal 2007.The Company’s U.S. and Canada theatrical exhibition business is conductedthrough AMC and AMCEI. The Company’s international theatrical exhibitionbusiness is conducted primarily through Cinemex and AMCEI. See Note 2—Acquisitionsfor a discussion of the Merger with Loews on January 26, 2006.

The accompanying unaudited consolidated financialstatements have been prepared in response to the requirements of Form 10-Qand should be read in conjunction with the Holdings’ annual report on Form 10-K/Afor the year (52 weeks) ended March 30, 2006. In the opinion ofmanagement, these interim financial statements reflect all adjustments(consisting of normal recurring adjustments) necessary for a fair statement ofthe Company’s financial position and results of operations. Due to the seasonalnature of the Company’s business, results for the thirty-nine weeks ended December 28,2006 are not necessarily indicative of the results to be expected for the fiscalyear (52 weeks) ending March 29, 2007.

The March 30, 2006 consolidated balance sheetdata was derived from the audited balance sheet included in the 10-K/A, butdoes not include all disclosures required by generally accepted accountingprinciples.

***Restatement:***In connection with an ongoingreview of its quarterly mark-to-market accounting for its liability classifiedshares and stock option awards, the Company determined that its financialstatements for the thirteen weeks ended December 28, 2006 and the thirteenand thirty-nine week periods December 29, 2005 and as of March 30,2006 needed to be restated 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.

8

----

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 isrequired.  

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 ofthe management purchased shares and does not intend to do so.  Accordingly, the Company has restated thefinancial statements for the thirteen weeks ended December 28, 2006 andthe thirteen and thirty-nine week periods ended December 29, 2005 and asof 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 noimpact on net cash provided by operating activities as a result of the above mentioneditems.

2.      *Stock OptionAwards*

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 obtained upon exercise of options) is not withinthe employee's control. Accordingly, the Company has restated its financialstatements for the thirteen weeks ended December 28, 2006 and the thirteenand thirty-nine week periods ended December 29, 2005 and as of March 30,2006 to reverse the previously recorded mark to market effects relating to thestock options awarded to this member of management that had been incorrectlyclassified as liabilities and to reflect these options as additional paid-in capital(rather than as liabilities).  There wasno impact on net cash provided by operating activities as a result of the abovementioned items. 

9

----

TheCompany has restated its financial statements for the thirteen weeks endedDecember 28, 2006 and the thirteen and thirty-nine week periods ended December 29,2005 and as of March 30, 2006 to record the net effect of the adjustmentsdiscussed above. The Company is restating the thirteen weeks ended December 28,2006 as a result of out of period adjustments relating to the thirteen weeksended June 29, 2006 and the thirteen weeks ended September 28, 2006recorded during the current period related to the adjustments described above.The restatement does not impact the financial statements as of and for thethirty-nine weeks ended December 28, 2006. The net effects of theadjustments recorded to restate the financial statements are summarized asfollows (dollars in thousands):

| ** **                                                      | ** ** | **Stock based** | ** ** | ** **             | ** ** | ** **   | ** ** |
|-----------------------------------------------------------------|------------|----------------------|------------|------------------------|------------|--------------|------------|
| ** **                                                      | ** ** | **Compensation**     | ** ** | **Other Expense** | ** ** | ** **   | ** ** |
| **Thirteen Weeks Ended  December 28, 2006** | ** ** | ** **           | ** ** | **Expense(1)**         | ** ** | **(Income)** | ** ** | **Total** | ** ** |
| Increase (decrease) in  Net Loss                                |       |                 | $          | (411                   | )          |         |       | $ | 1,120 |   |   | $ | 709 |   |
|                                                                 |            |                      |            |                        |            |              |            |  |  |  |  |  |  |  |  |  |

 

| ** **                                                      | ** ** | **Stock based** | ** ** | ** **             | ** ** | ** **   | ** ** |
|-----------------------------------------------------------------|------------|----------------------|------------|------------------------|------------|--------------|------------|
| ** **                                                      | ** ** | **Compensation**     | ** ** | **Other Expense** | ** ** | ** **   | ** ** |
| **Thirteen Weeks Ended  December 29, 2005** | ** ** | ** **           | ** ** | **Expense(1)**         | ** ** | **(Income)** | ** ** | **Total** | ** ** |
| Increase (decrease) in  Net Loss                                |       |                 | $          | 266                    |       |         |       | $ | (94 | ) |   | $ | 172 |   |
|                                                                 |            |                      |            |                        |            |              |            |  |  |  |  |  |  |  |  |  |

 

| ** **                                                         | ** ** | **Stock based** | ** ** | ** **             | ** ** | ** **   | ** ** |
|--------------------------------------------------------------------|------------|----------------------|------------|------------------------|------------|--------------|------------|
| ** **                                                         | ** ** | **Compensation**     | ** ** | **Other Expense** | ** ** | ** **   | ** ** |
| **Thirty-nine Weeks Ended  December 29, 2005** | ** ** | ** **           | ** ** | **Expense(1)**         | ** ** | **(Income)** | ** ** | **Total** | ** ** |
| Increase in  Deferred Income Taxes .                               |       |                 | $          | 500                    |       |         |       | $ | 500 |   |   | $ | 1,000 |   |
| Decrease in Other  Long-Term Liabilities(2).                       |       |                 | $          | 612                    |       |         |       | $ | 2,622 |   |   | $ | 3,234 |   |
| Increase in  Additional Paid-in Capital(3)                         |       |                 | $          | 1,925                  |       |         |       | $ | 3,750 |   |   | $ | 5,675 |   |
| Increase in Net Loss                                               |       |                 | $          | 813                    |       |         |       | $ | 628 |   |   | $ | 1,441 |   |
|                                                                    |            |                      |            |                        |            |              |            |  |  |  |  |  |  |  |  |  |

----

(1)          Included within OtherG&A

(2)          Refer to discussion of theadjustment for the management purchased shares and stock option awards above

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

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

10

----

 

| ** **                                                         | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirteen Weeks Ended** | ** ** |
|--------------------------------------------------------------------|------------|------------------------------------|------------|------------------------------------|------------|
| ** **                                                         | ** ** | **December 28, 2006**    | ** ** | **December 29, 2005**    | ** ** |
| ** **                                                         | ** ** | **As**                             | ** ** | ** **                         | ** ** | **As Restated** | ** ** | **As** | ** ** | ** ** | ** ** | **As Restated** | ** ** |
| ** **                                                         | ** ** | **Reported**                       | ** ** | **Restatement(1)**                 | ** ** | **& Adjusted** | ** ** | **Reported** | ** ** | **Restatement(1)** | ** ** | **& Adjusted** | ** ** |
| Revenues                                                           |       |                               |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                                                         |       | $                                  | 399,773    |                               |       | $ | — |   |   |   | $ | 399,773 |   |   |   | $ | 267,683 |   |   |   | $ | — |   |   |   | $ | 267,683 |   |   |
| Concessions                                                        |       | 162,675                            |       |                               | —     |   |   |   | 162,675 |   |   |   | 105,553 |   |   |   | — |   |   |   | 105,553 |   |   |
| Other  revenue                                                     |       | 33,908                             |       |                               | —     |   |   |   | 33,908 |   |   |   | 25,272 |   |   |   | — |   |   |   | 25,272 |   |   |
| Total  revenues                                                    |       | 596,356                            |       |                               | —     |   |   |   | 596,356 |   |   |   | 398,508 |   |   |   | — |   |   |   | 398,508 |   |   |
| Costs and Expenses                                                 |       |                               |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Film  exhibition costs                                             |       | 204,031                            |       |                               | —     |   |   |   | 204,031 |   |   |   | 140,334 |   |   |   | — |   |   |   | 140,334 |   |   |
| Concession  costs                                                  |       | 18,079                             |       |                               | —     |   |   |   | 18,079 |   |   |   | 11,442 |   |   |   | — |   |   |   | 11,442 |   |   |
| Operating  expense                                                 |       | 151,537                            |       |                               | —     |   |   |   | 151,537 |   |   |   | 103,382 |   |   |   | — |   |   |   | 103,382 |   |   |
| Rent                                                               |       | 110,344                            |       |                               | —     |   |   |   | 110,344 |   |   |   | 78,053 |   |   |   | — |   |   |   | 78,053 |   |   |
| General  and administrative:                                       |       |                               |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger  and acquisition costs                                      |       | 3,537                              |       |                               | —     |   |   |   | 3,537 |   |   |   | 281 |   |   |   | — |   |   |   | 281 |   |   |
| Management  fee                                                    |       | 1,250                              |       |                               | —     |   |   |   | 1,250 |   |   |   | 500 |   |   |   | — |   |   |   | 500 |   |   |
| Other                                                              |       | 6,366                              |       |                               | (411       | ) |   |   | 5,955 |   |   |   | 10,116 |   |   |   | 316 |   |   |   | 10,432 |   |   |
| Preopening  expense                                                |       | 3,698                              |       |                               | —     |   |   |   | 3,698 |   |   |   | 3,515 |   |   |   | — |   |   |   | 3,515 |   |   |
| Theatre  and other closure expense                                 |       | 611                                |       |                               | —     |   |   |   | 611 |   |   |   | 410 |   |   |   | — |   |   |   | 410 |   |   |
| Restructuring  charge                                              |       | —                             |       |                               | —     |   |   |   | — |   |   |   | 27 |   |   |   | — |   |   |   | 27 |   |   |
| Depreciation  and amortization                                     |       | 64,157                             |       |                               | —     |   |   |   | 64,157 |   |   |   | 35,931 |   |   |   | — |   |   |   | 35,931 |   |   |
| Disposition  of assets and other gains                             |       | (5,334                             | )          |                               | —     |   |   |   | (5,334 | ) |   |   | (297 | ) |   |   | — |   |   |   | (297 | ) |   |
| Total  costs and expenses                                          |       | 558,276                            |       |                               | (411       | ) |   |   | 557,865 |   |   |   | 383,694 |   |   |   | 316 |   |   |   | 384,010 |   |   |
| Other expense  (income)                                            |       |                               |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other  income                                                      |       | (3,087                             | )          |                               | 1,120      |   |   |   | (1,967 | ) |   |   | (5,875 | ) |   |   | (44 | ) |   |   | (5,919 | ) |   |
| Interest  expense                                                  |       |                               |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate  borrowings                                              |       | 57,415                             |       |                               | —     |   |   |   | 57,415 |   |   |   | 30,503 |   |   |   | — |   |   |   | 30,503 |   |   |
| Capital  and financing lease obligations                           |       | 1,784                              |       |                               | —     |   |   |   | 1,784 |   |   |   | 541 |   |   |   | — |   |   |   | 541 |   |   |
| Investment  income                                                 |       | (2,995                             | )          |                               | —     |   |   |   | (2,995 | ) |   |   | 2,541 |   |   |   | — |   |   |   | 2,541 |   |   |
| Total  other expense                                               |       | 53,117                             |       |                               | 1,120      |   |   |   | 54,237 |   |   |   | 27,710 |   |   |   | (44 | ) |   |   | 27,666 |   |   |
| Earnings (loss)  from continuing operations before income taxes    |       | (15,037                            | )          |                               | (709       | ) |   |   | (15,746 | ) |   |   | (12,896 | ) |   |   | (272 | ) |   |   | (13,168 | ) |   |
| Income tax provision  (benefit)                                    |       | (1,500                             | )          |                               | —     |   |   |   | (1,500 | ) |   |   | (4,800 | ) |   |   | (100 | ) |   |   | (4,900 | ) |   |
| Earnings (loss) from  continuing operations                        |       | (13,537                            | )          |                               | (709       | ) |   |   | (14,246 | ) |   |   | (8,096 | ) |   |   | (172 | ) |   |   | (8,268 | ) |   |
| Earnings (loss) from  discontinued operations, net of income taxes |       | (41                                | )          |                               | —     |   |   |   | (41 | ) |   |   | 178 |   |   |   | — |   |   |   | 178 |   |   |
| Net earnings (loss)                                                |       | $                                  | (13,578    | )                                  |       | $ | (709 | ) |   |   | $ | (14,287 | ) |   |   | $ | (7,918 | ) |   |   | $ | (172 | ) |   |   | $ | (8,090 | ) |   |
| Basic and diluted  loss per share of common stock:                 |       |                               |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss  from continuing operations                                   |       | $                                  | (10.56     | )                                  |       |   |   |   |   | $ | (11.11 | ) |   |   | $ | (10.52 | ) |   |   |   |   |   |   | $ | (10.75 | ) |   |
| Earnings  (loss) from discontinued operations                      |       | (0.03                              | )          |                               |       |   |   |   | (0.03 | ) |   |   | (0.23 | ) |   |   |   |   |   |   | 0.23 |   |   |
| Net loss per share                                                 |       | $                                  | (10.59     | )                                  |       |   |   |   |   | $ | (11.14 | ) |   |   | $ | (10.29 | ) |   |   |   |   |   |   | $ | (10.52 | ) |   |
| Average shares  outstanding:                                       |       |                               |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                  |       | 1,282.25                           |       |                               |       |   |   |   | 1,282.25 |   |   |   | 769.35 |   |   |   |   |   |   |   | 769.35 |   |   |

 

11

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| ** **                                                         | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|--------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                         | ** ** | **December 29, 2005**       | ** ** |
| ** **                                                         | ** ** | **As**                                | ** ** | ** ** | ** ** | **As Restated** | ** ** |
| ** **                                                         | ** ** | **Reported**                          | ** ** | **Restatement**(1) | ** ** | **& Adjusted** | ** ** |
| Revenues                                                           |       |                                  |       |   |   |   |   |   |   |
| Admissions                                                         |       | $                                     | 799,860    |   |   | $ | — |   |   | $ | 799,860 |   |
| Concessions                                                        |       | 317,452                               |       |   | — |   |   | 317,452 |   |
| Other revenue                                                      |       | 72,417                                |       |   | — |   |   | 72,417 |   |
| Total revenues                                                     |       | 1,189,729                             |       |   | — |   |   | 1,189,729 |   |
| Costs and Expenses                                                 |       |                                  |       |   |   |   |   |   |   |
| Film exhibition costs                                              |       | 428,452                               |       |   | — |   |   | 428,452 |   |
| Concession costs                                                   |       | 34,346                                |       |   | — |   |   | 34,346 |   |
| Operating expense                                                  |       | 312,193                               |       |   | — |   |   | 312,193 |   |
| Rent                                                               |       | 229,037                               |       |   | — |   |   | 229,037 |   |
| General and administrative:                                        |       |                                  |       |   |   |   |   |   |   |
| Merger and acquisition costs                                       |       | 2,926                                 |       |   | — |   |   | 2,926 |   |
| Management fee                                                     |       | 1,500                                 |       |   | — |   |   | 1,500 |   |
| Other                                                              |       | 28,198                                |       |   | 1,313 |   |   | 29,511 |   |
| Preopening expense                                                 |       | 4,251                                 |       |   | — |   |   | 4,251 |   |
| Theatre and other closure expense                                  |       | 1,390                                 |       |   | — |   |   | 1,390 |   |
| Restructuring charge                                               |       | 3,935                                 |       |   | — |   |   | 3,935 |   |
| Depreciation and amortization                                      |       | 108,478                               |       |   | — |   |   | 108,478 |   |
| Disposition of assets and other gains                              |       | (1,067                                | )          |   | — |   |   | (1,067 | ) |
| Total costs and expenses                                           |       | 1,153,639                             |       |   | 1,313 |   |   | 1,154,952 |   |
| Other expense  (income)                                            |       |                                  |       |   |   |   |   |   |   |
| Other income                                                       |       | (13,094                               | )          |   | 1,128 |   |   | (11,966 | ) |
| Interest expense                                                   |       |                                  |       |   |   |   |   |   |   |
| Corporate borrowings                                               |       | 90,835                                |       |   | — |   |   | 90,835 |   |
| Capital and financing lease obligations                            |       | 2,964                                 |       |   | — |   |   | 2,964 |   |
| Investment income                                                  |       | 2,062                                 |       |   | — |   |   | 2,062 |   |
| Total other expense                                                |       | 82,767                                |       |   | 1,128 |   |   | 83,895 |   |
| Earnings (loss)  from continuing operations before income taxes    |       | (46,677                               | )          |   | (2,441 | ) |   | (49,118 | ) |
| Income tax  provision (benefit)                                    |       | (19,200                               | )          |   | (1,000 | ) |   | (20,200 | ) |
| Earnings (loss)  from continuing operations                        |       | (27,477                               | )          |   | (1,441 | ) |   | (28,918 | ) |
| Earnings (loss)  from discontinued operations, net of income taxes |       | (24,859                               | )          |   | — |   |   | (24,859 | ) |
| Net earnings  (loss)                                               |       | $                                     | (52,336    | ) |   | $ | (1,441 | ) |   | $ | (53,777 | ) |
| Basic and diluted  loss per share of common stock:                 |       |                                  |       |   |   |   |   |   |   |
| Loss from continuing operations                                    |       | $                                     | (35.72     | ) |   |   |   |   | $ | (37.59 | ) |
| Earnings (loss) from discontinued operations                       |       | (32.31                                | )          |   |   |   |   | (32.31 | ) |
| Net loss per  share                                                |       | $                                     | (68.03     | ) |   |   |   |   | $ | (69.90 | ) |
| Average shares  outstanding:                                       |       |                                  |       |   |   |   |   |   |   |
| Basic and diluted                                                  |       | 769.35                                |       |   |   |   |   | 769.35 |   |

 

12

----

 

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

----

(1)   Asdiscussed in this Note, the Company restated its financial statements formanagement-purchased shares and stock option awards.

***Assets held for Sale:******  ***In conjunction withthe Merger (see Note 2—Acquisitions), the Company entered into a Final Judgmentwith the Antitrust Division of the United States Department of Justice andjudgments and consent decrees with various States. These judgments and decreesrequired the Company to hold separate and divest itself of 10 certain theatres.As a result, the Company classified the assets and liabilities of thesetheatres as *held for sale*. TheCompany sold six of these theatres during the 39 weeks ended December 28,2006, exchanged two of these theatres with another theatrical exhibitor for twotheatres from that exhibitor in different markets, and closed the remainingtheatre during the third quarter of fiscal 2007. Proceeds from the sales were$64,302,080. These  theatres were part ofthe Company’s U.S. 

13

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and Canada theatricalexhibition operating segment. The Company recorded a loss on the sales of thesetheatres of $1,946,000 during the thirty-nine weeks ended December 28,2006.

The Company entered into an agreement to sell itsconsolidated operations in Spain and Portugal and as a result, the Company classifiedthe assets and liabilities of these theatres as *held for sale* as of March 30, 2006. These sales weresubsequently consummated on May 11, 2006.

Additionally, the Company has classified certain realestate as available for sale based on an active marketing program to sell the assets,which is recorded in noncurrent assets held for sale.

***Advertising Costs:******  ***The Company expensesadvertising costs as incurred and does not have any direct-response advertisingrecorded as assets. Advertising costs for the thirteen weeks ended December 28,2006 and December 29, 2005 were $6,678,000 and $6,966,000, respectively. Advertisingcosts for the thirty-nine weeks ended December 28, 2006 and December 29,2005 were $17,960,000 and $17,036,000, respectively.

***Cash and Equivalents:******  ***Under the Company’scash management system, checks issued but not presented to banks frequently resultin book overdraft balances for accounting purposes and are classified withinaccounts payable in the balance sheet. The change in book overdrafts arereported as a component of operating cash flows for accounts payable as they donot represent bank overdrafts. The amount of these checks included in accountspayable as of December 28, 2006 and March 30, 2006 was $24,393,000and $13,829,000, respectively.

***Loss per share:***   Basicloss per share is computed by dividing net loss by the weighted-average numberof common shares outstanding. Diluted loss per share includes the effects ofoutstanding stock options, 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 and thirty-nine weeks ended December 28, 2006 andDecember 29, 2005, respectively, but were not included in the computationof diluted loss per share because the options were anti-dilutive.

**NOTE 2—ACQUISITIONS**

On June 20, 2005, Holdings entered into a mergeragreement with LCE Holdings, Inc. (“LCE Holdings”), the parent of LoewsCineplex Entertainment Corporation (“Loews”), pursuant to which LCE Holdingsmerged with and into Holdings, with Holdings continuing as the holding companyfor the merged businesses, and Loews merged with and into AMCE, with AMCEcontinuing after the merger (the “Merger” and collectively, the “Mergers”). Thetransaction closed on January 26, 2006. Upon completion of the Mergers,the stockholders of Holdings immediately prior to the Mergers, includingaffiliates of J.P. Morgan Partners, LLC and Apollo Management, L.P., heldapproximately 60% of the outstanding capital stock of Holdings, and thestockholders of LCE Holdings immediately prior to the Merger, includingaffiliates of Bain Capital Partners, LLC, The Carlyle Group and Spectrum EquityInvestors (collectively with J.P. Morgan Partners, LLC and Apollo Management,L.P., the “Sponsors”), held approximately 40% of the outstanding capital stockof Holdings.

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

Marquee Holdings Inc. issued 256,085.61252 shares ofClass L-1 Common Stock and 256,085.61252 shares of Class L-2 CommonStock to the Stockholders of LCE Holdings. The Company has accounted for theMerger as a purchase in accordance with SFAS No. 141, *Business Combinations,* for a purchaseprice of $537,171,000 for the Class L-1 and Class L-2 Common Stock. Thepurchase price reflects the estimated fair value of shares issued for theMergers of $268,585,500 for the Class L-1 shares and $268,585,500 for theClass L-2 shares. The purchase price for the Merger was based on avaluation study performed by an independent third party. Results of operationsof Loews are included in the Company’s Consolidated Statements of Operationsfrom January 26, 2006. The acquisition included 112 theatres with 1,308screens in the United States, 40 theatres with 443 screens in Mexico (Cinemex),4 managed/joint venture theatres 

14

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with 55 screens in theUnited States and a 50% interest in Yelmo Cineplex, S.L. operating 27 theatreswith 311 screens in Spain that is accounted for using the equity method. TheMerger did not constitute a change in control.

The following is asummary of the allocation of the purchase price to the assets and liabilitiesof LCE Holdings based on management’s judgment after evaluating severalfactors, including actuarial estimates for pension liabilities, estimates offair value for issuance of common stock and a valuation assessment prepared bya valuation specialist:

| **(In thousands)**                  | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|------------|------------|------------|------------|
| Cash and  equivalents                    |       | $          | 142,512    |       |
| Current assets                           |       | 41,802     |       |
| Property, net                            |       | 726,993    |       |
| Intangible  assets, net                  |       | 107,269    |       |
| Goodwill                                 |       | 819,908    |       |
| Other long-term  assets                  |       | 73,902     |       |
| Current  liabilities                     |       | (180,918   | )          |
| Corporate  borrowings                    |       | (1,054,192 | )          |
| Capital and  financing lease obligations |       | (32,524    | )          |
| Other long-term  liabilities             |       | (107,581   | )          |
| Total estimated  purchase price          |       | $          | 537,171    |       |

 

Amounts recorded for goodwill were not subject toamortization, and were not considered deductible for income tax purposes.Goodwill in the amount of $615,447,000 and $204,461,000 was recorded at theCompany’s U.S. and Canada theatrical exhibition operating segment and theInternational operating segment, respectively. During the thirteen weeks ended September 28,2006, the Company recorded fair value adjustments of approximately$109 million to its preliminary allocation of purchase price related toproperty, which had the effect of reducing property and increasing goodwill.During the thirteen weeks ended September 28, 2006, the Company recorded fairvalue adjustments of approximately $15.6 million to its preliminary allocationof purchase price for deferred tax assets at Cinemex related to the adjustmentsto property, which had the effect of increasing deferred tax assets andreducing goodwill. In connection with the adjustment to fair value, the Companyrecorded a cumulative adjustment to depreciation expense of $2.2 million.

During the thirteen weeks ended December 28, 2006, theCompany recorded a fair value adjustment of approximately $26.2 million to itspreliminary allocation of purchase price related to deferred tax assetsresulting in a full valuation allowance for Cinemex which had the effect ofreducing net deferred tax assets and increasing goodwill, and recorded a fairvalue adjustment of $23.5 million related to its equity investment in YelmoCineplex, S.L. (“Yelmo”) which had the effect of increasing other long-termassets and decreasing goodwill.

The Merger included the acquisition of intangibleassets including $43,133,000 related to favorable leases with a weightedaverage amortization period of 9.7 years, $2,300,000 related to Loews  trademark and tradename with an amortizationperiod of 5 years,  $52,561,000 relatedto advertising and management contracts with a weighted average amortizationperiod of 7.5 years, $1,940,000 related to Cinemex non-compete agreement withless than one year remaining on the agreement, and $7,335,000 related to Cinemextrademark and tradename which is not amortized. The weighted average life forthe Loews and Cinemex amortizable intangible assets is 8.2 years. These fairvalues are based on management’s best estimate using available evidence,including a study performed by a valuation specialist. The Cinemex trademarkand tradename are indefinite-lived intangible assets which are notsubject to amortization but do require impairment evaluation during eachreporting period to determine whether events and circumstances continue tosupport an indefinite useful life. Intangible assets are more fully discussedin Note 5—Goodwill and Other Intangible Assets.

15

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**Pro Forma Effect ofMerger Transactions**

The pro forma financialinformation presented below sets forth the Company’s pro forma consolidatedstatement of operations for the thirteen and thirty-nine weeks ended December 29,2005 to give effect to the Mergers and the related debt issuances as if eachtransaction occurred on April 1, 2005. Such information is presented forcomparative purposes only and does not purport to represent what the Company’sresults of operations would actually have been had these transactions occurredon the date indicated or to project its results of operations for any futureperiod or date.

| ** **                                           | ** ** | **Thirteen Weeks Ended**                                | ** ** | **Thirty-Nine Weeks Ended**                       | ** ** |
|------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| **(In thousands)**                              | ** ** | **Pro Forma   December 29, 2005  (restated)** | ** ** | **Pro Forma  December 29, 2005  (restated)** | ** ** |
| Revenues                                             |       |                                                              |       |                                                        |       |   |   |   |   |
| Admissions                                           |       |                                                              | $          | 411,283                                                     |       |   |   | $ | 1,216,795 |   |   |
| Concessions                                          |       |                                                              | 167,079    |                                                        |       |   | 495,975 |   |   |
| Other revenue                                        |       |                                                              | 41,095     |                                                        |       |   | 109,841 |   |   |
| Total revenues                                       |       |                                                              | 619,457    |                                                        |       |   | 1,822,611 |   |   |
| Cost of operations                                   |       |                                                              | 385,360    |                                                        |       |   | 1,166,301 |   |   |
| Rent                                                 |       |                                                              | 107,729    |                                                        |       |   | 319,004 |   |   |
| General and administrative:                          |       |                                                              |       |                                                        |       |   |   |   |   |
| Merger and acquisition costs*                        |       |                                                              | 2,746      |                                                        |       |   | 7,940 |   |   |
| Management fee                                       |       |                                                              | 1,250      |                                                        |       |   | 3,750 |   |   |
| Other                                                |       |                                                              | 21,073     |                                                        |       |   | 63,189 |   |   |
| Preopening expense                                   |       |                                                              | 7,704      |                                                        |       |   | 8,714 |   |   |
| Theatre and other closure expense                    |       |                                                              | 410        |                                                        |       |   | 1,390 |   |   |
| Restructuring charge                                 |       |                                                              | 27         |                                                        |       |   | 3,935 |   |   |
| Depreciation and amortization                        |       |                                                              | 65,894     |                                                        |       |   | 197,321 |   |   |
| Disposition of assets and other losses (gains)       |       |                                                              | (365       | )                                                           |       |   | 24 |   |   |
| Total costs and expenses                             |       |                                                              | 591,828    |                                                        |       |   | 1,771,568 |   |   |
| Other income                                         |       |                                                              | (5,919     | )                                                           |       |   | (11,966 | ) |   |
| Interest expense                                     |       |                                                              | 55,100     |                                                        |       |   | 169,521 |   |   |
| Investment expense                                   |       |                                                              | 2,112      |                                                        |       |   | 2,888 |   |   |
| Total other expense                                  |       |                                                              | 51,293     |                                                        |       |   | 160,443 |   |   |
| Loss from continuing operations before income taxes  |       |                                                              | (23,664    | )                                                           |       |   | (109,400 | ) |   |
| Income tax provision                                 |       |                                                              | 2,400      |                                                        |       |   | 6,500 |   |   |
| Loss from continuing operations                      |       |                                                              | (26,064    | )                                                           |       |   | (115,900 | ) |   |
| Earnings (loss) from discontinued operations         |       |                                                              | 178        |                                                        |       |   | (24,859 | ) |   |
| Net loss                                             |       |                                                              | $          | (25,886                                                     | )          |   |   | $ | (140,759 | ) |   |
| Basic and diluted loss per share of common stock:    |       |                                                              |       |                                                        |       |   |   |   |   |
| Loss from continuing operations                      |       |                                                              | $          | (20.33                                                      | )          |   |   | $ | (90.39 | ) |   |
| Earnings (loss) from discontinued operations         |       |                                                              | 0.14       |                                                        |       |   | (19.39 | ) |   |
| Net loss per share                                   |       |                                                              | $          | (20.19                                                      | )          |   |   | $ | (109.78 | ) |   |
| Average shares outstanding:                          |       |                                                              |       |                                                        |       |   |   |   |   |
| Basic and diluted                                    |       |                                                              | 1,282.25   |                                                        |       |   | 1,282.25 |   |   |
| Operating Data (at period end):                      |       |                                                              |       |                                                        |       |   |   |   |   |
| Average screens—continuing operations           |       |                                                              | 5,100      |                                                        |       |   | 5,079 |   |   |
| Number of screens operated                           |       |                                                              |       |                                                        |       |   | 5,859 |   |   |
| Number of theatres operated                          |       |                                                              |       |                                                        |       |   | 435 |   |   |
| Screens per theatre                                  |       |                                                              |       |                                                        |       |   | 13.5 |   |   |
| Attendance (in thousands)—continuing operations |       |                                                              | 62,291     |                                                        |       |   | 184,300 |   |   |

 

----

*                    Primarilyrepresents nonrecurring costs for the Merger Transactions.

16

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**NOTE 3—DISCONTINUEDOPERATIONS**

On May 11, 2006, the Company sold two of its wholly-ownedsubsidiaries, AMC Entertainment España S.A. and Actividades Multi-Cinemeas EEspectaculos, LDA (collectively “Iberia”), which owned and operated 4 theatreswith 86 screens in Spain and 1 theatre with 20 screens in Portugal, for a cashsales price of $35,446,000. At the date of the sale these operations did notmeet the criteria for discontinued operations because of continuing involvementin the region through an equity method investment in Yelmo. InDecember 2006, the Company disposed of its investment in Yelmo, whichowned and operated 27 theatres with 310 screens in Spain, for proceeds of$52,137,000. There was no gain or loss recorded on the sale of Yelmo. Theinvestment in Yelmo was reported within other long-term assets at March 30,2006. The Company no longer has continuing involvement in the region as aresult of the sale of Yelmo and the results of the operations in Iberia havebeen classified as discontinued operations as the Company no longer hasoperations or significant cash flows from the Iberia component.

Information presented for all periods reflects thediscontinued classification. The results of operations of the Iberia theatreswere previously reported in the Company’s International theatrical exhibitionoperating segment. The Company has recorded a gain on sale of Iberia ofapproximately $2,609,000 which is included in discontinued operations. Goodwillof $11.7 million was allocated to the Iberia theatres in connection with thesale. The Iberia assets and liabilities were classified as held for sale atMarch 30, 2006.

Components of amountsreflected as earnings (loss) from discontinued operations for Iberia in theCompany’s Consolidated Statements of Operations are presented in the followingtable:

**Statements of operations data:**

| ** **                                             | ** ** | **Thirteen Weeks  Ended**    | ** ** | **Thirty-Nine Weeks  Ended** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------|------------|-----------------------------------|------------|
| **(In thousands)**                                | ** ** | **December 28,   2006** | ** ** | **December 29,   2005** | ** ** | **December 28,   2006** | ** ** | **December 29,   2005** | ** ** |
| Revenues:                                              |       |                              |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                                             |       |                              | $          | —                            |       |   |   | $ | 8,848 |   |   |   | $ | 3,892 |   |   |   | $ | 23,491 |   |   |
| Concessions                                            |       |                              | —     |                              |       |   | 3,012 |   |   |   | 1,292 |   |   |   | 8,125 |   |   |
| Other                                                  |       |                              | —     |                              |       |   | 452 |   |   |   | 172 |   |   |   | 1,194 |   |   |
| Total revenues                                         |       |                              | —     |                              |       |   | 12,312 |   |   |   | 5,356 |   |   |   | 32,810 |   |   |
| Costs and  Expenses:                                   |       |                              |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Film exhibition costs                                  |       |                              | —     |                              |       |   | 4,479 |   |   |   | 1,901 |   |   |   | 11,623 |   |   |
| Concession costs                                       |       |                              | —     |                              |       |   | 657 |   |   |   | 255 |   |   |   | 1,521 |   |   |
| Operating expense                                      |       |                              | —     |                              |       |   | 2,601 |   |   |   | 1,189 |   |   |   | 8,133 |   |   |
| Rent                                                   |       |                              | —     |                              |       |   | 2,759 |   |   |   | 1,410 |   |   |   | 8,467 |   |   |
| General and administrative expense—other          |       |                              | —     |                              |       |   | 15 |   |   |   | 50 |   |   |   | 132 |   |   |
| Depreciation and amortization                          |       |                              | —     |                              |       |   | 724 |   |   |   | 545 |   |   |   | 3,644 |   |   |
| Disposition of assets and other gains (losses)         |       |                              | 41         |                              |       |   | — |   |   |   | (2,609 | ) |   |   | — |   |   |
| Total costs and expenses                               |       |                              | 41         |                              |       |   | 11,235 |   |   |   | 2,741 |   |   |   | 33,520 |   |   |
| Other Expense  (Income):                               |       |                              |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                       |       |                              |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital, financing lease obligations &  other |       |                              | —     |                              |       |   | 458 |   |   |   | 220 |   |   |   | 1,415 |   |   |
| Investment Income                                      |       |                              | —     |                              |       |   | (2 | ) |   |   | (4 | ) |   |   | (3 | ) |   |
| Total other expense                                    |       |                              | —     |                              |       |   | 456 |   |   |   | 216 |   |   |   | 1,412 |   |   |
| Earnings (loss)  before income taxes                   |       |                              | (41        | )                                 |       |   | 621 |   |   |   | 2,399 |   |   |   | (2,122 | ) |   |
| Income tax  provision                                  |       |                              | —     |                              |       |   | 100 |   |   |   | — |   |   |   | 300 |   |   |
| Earnings (loss) from  discontinued operations          |       |                              | $          | (41                               | )          |   |   | $ | 521 |   |   |   | $ | 2,399 |   |   |   | $ | (2,422 | ) |   |

 

17

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On June 30, 2005, theCompany sold one of its wholly-owned subsidiaries, Japan AMCTheatres Inc., including four of its five theatres in Japan for a cashsales price of $44,861,000. The Company sold its remaining Japanese theatre inSeptember 2005 for a cash sales price of $8,595,000. The Company opened itsfirst theatre in Japan during fiscal 1997 and since that time the Company hadincurred pre-tax losses of $38,689,000, including a $4,998,000 impairmentcharge in fiscal 2003. There was no gain or loss recorded on the dispositionsof the Japanese theatres.

Theoperations and cash flows of the Japan theatres were eliminated from theCompany’s ongoing operations. The Company does not have any significantcontinuing involvement in the operations of the Japan theatres. The results ofoperations of the Japan theatres have been classified as discontinuedoperations, and information presented for all periods reflects theclassification. The operations of the Japan theatres were previously reportedin the Company’s International theatrical exhibition operating segment.

Components of amountsreflected as loss from discontinued operations in the Company’s ConsolidatedStatements of Operations for Japan are presented in the following table:

**Statements of operations data:**

| ** **                                    | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-Nine Weeks Ended** | ** ** |
|-----------------------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| **(In thousands)**                       | ** ** | **December 28,  2006**        | ** ** | **December 29,   2005**     | ** ** | **December 28,  2006** | ** ** | **December 29,   2005** | ** ** |
| Revenues                                      |       |                               |       |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                                    |       |                               | $          | —                                |       |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | 11,293 |   |   |
| Concessions                                   |       |                               | —     |                                  |       |   | — |   |   |   | — |   |   |   | 2,134 |   |   |
| Other                                         |       |                               | —     |                                  |       |   | 30 |   |   |   | — |   |   |   | 345 |   |   |
| Total revenues                                |       |                               | —     |                                  |       |   | 30 |   |   |   | — |   |   |   | 13,772 |   |   |
| Expense                                       |       |                               |       |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Film exhibition costs                         |       |                               | —     |                                  |       |   | — |   |   |   | — |   |   |   | 6,076 |   |   |
| Concession costs                              |       |                               | —     |                                  |       |   | (59 | ) |   |   | — |   |   |   | 323 |   |   |
| Operating expense                             |       |                               | —     |                                  |       |   | 13 |   |   |   | — |   |   |   | 3,244 |   |   |
| Rent                                          |       |                               | —     |                                  |       |   | — |   |   |   | — |   |   |   | 3,918 |   |   |
| General and administrative expense—other |       |                               | —     |                                  |       |   | 619 |   |   |   | — |   |   |   | 1,842 |   |   |
| Depreciation and amortization                 |       |                               | —     |                                  |       |   | — |   |   |   | — |   |   |   | 706 |   |   |
| Total costs and expenses                      |       |                               | —     |                                  |       |   | 573 |   |   |   | — |   |   |   | 16,109 |   |   |
| Loss before  income taxes                     |       |                               | —     |                                  |       |   | (543 | ) |   |   | — |   |   |   | (2,337 | ) |   |
| Income tax  provision (benefit)               |       |                               | —     |                                  |       |   | (200 | ) |   |   | — |   |   |   | 20,100 |   |   |
| Loss from discontinued  operations            |       |                               | $          | —                                |       |   |   | $ | (343 | ) |   |   | $ | — |   |   |   | $ | (22,437 | ) |   |

 

Goodwill of $44,774,000was allocated to Japan AMC Theatres Inc. and goodwill of $6,599,000 was allocatedto the Company’s Japan branch and disposed of in connection with theconsummation of the sale of that entity on June 30, 2005. The goodwill isnot deductible for tax purposes as discussed in Note 12—Income Taxes.

18

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**NOTE 4—COMPREHENSIVE LOSS**

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

| ** **                                                   | ** ** | **Thirteen Weeks Ended**      | ** ** | **Thirty-Nine Weeks Ended**   | ** ** |
|--------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                   | ** ** | **December 28,  2006  (restated)** | ** ** | **December 29,  2005  (restated)** | ** ** | **December 28,  2006** | ** ** | **December 29,  2005  (restated)** | ** ** |
| Net loss                                                     |       |                                    | $          | (14,287                                 | )          |   |   | $ | (8,090 | ) |   |   | $ | (45,302 | ) |   |   | $ | (53,777 | ) |   |
| Foreign currency  translation adjustment                     |       |                                    | 3,923      |                                    |       |   | 219 |   |   |   | (1,203 | ) |   |   | (2,145 | ) |   |
| Unrealized loss on  Cinemex swap agreement                   |       |                                    | (575       | )                                       |       |   | — |   |   |   | (1,114 | ) |   |   | — |   |   |
| Additional minimum pension  liability                        |       |                                    | (674       | )                                       |       |   | — |   |   |   | (674 | ) |   |   | — |   |   |
| Increase in unrealized  gain on marketable equity securities |       |                                    | 100        |                                    |       |   | 57 |   |   |   | 196 |   |   |   | 91 |   |   |
| Total comprehensive loss                                     |       |                                    | $          | (11,513                                 | )          |   |   | $ | (7,814 | ) |   |   | $ | (48,097 | ) |   |   | $ | (55,831 | ) |   |

 

**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               |       | —                    |       |              | 330        |      |       | 330 |   |
| Fair value adjustments(1)                     |       | 5,864                     |       |              | 75,300     |      |       | 81,164 |   |
| Goodwill allocated to sale of divestitures(2) |       | (10,082                   | )          |              | —     |      |       | (10,082 | ) |
| Balance as of  December 28, 2006         |       | $1,889,498                |       |              | $          | 200,232   |       |   | $2,089,730 |   |
|                                               |            |                           |            |                   |            |           |            |  |  |  |  |  |

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(1)          Adjustmentsto fair value relate primarily to changes in the preliminary estimated fairvalues of property, net (see Note 2-Acquisitions),a full valuation allowance recorded on the net deferred tax assets at Cinemex(see Note 12-Income Taxes), and changes in the estimated fair value forthe equity investment in Yelmo.

(2)          Allocations based on additional information the Company was awaitingwith respect to the estimated sales price for these theatres during thepreliminary allocation period.

| ** **                                        | ** ** | ** **                 | ** ** | **December 28, 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              |       |                            | $          | 117,749                       |       |   |   | $ | (21,458 | ) |   |   | $ | 117,645 |   |   |   | $ | (13,079 | ) |   |
| Loyalty  program                                  |       | 4 years                    |       |                            | 46,000     |                          |       |   | (21,332 | ) |   |   | 46,000 |   |   |   | (14,950 | ) |   |
| LCE  trade name                                   |       | 5 years                    |       |                            | 2,300      |                          |       |   | (425 | ) |   |   | 2,300 |   |   |   | (80 | ) |   |
| LCE/Cinemex  advertising and management contracts |       | 3 to 25 years              |       |                            | 51,986     |                          |       |   | (13,849 | ) |   |   | 52,159 |   |   |   | (2,841 | ) |   |
| Cinemex  non-compete                              |       | —                     |       |                            | 1,592      |                          |       |   | (1,592 | ) |   |   | 1,656 |   |   |   | (313 | ) |   |
| Other  intangible assets                          |       | 1 to 16 years              |       |                            | 23,623     |                          |       |   | (20,736 | ) |   |   | 30,701 |   |   |   | (26,922 | ) |   |
| Total,  amortizable                               |       |                       |       |                            | $          | 243,250                       |       |   |   | $ | (79,392 | ) |   |   | $ | 250,461 |   |   |   | $ | (58,185 | ) |   |
| Unamortized  Intangible Assets:                   |       |                       |       |                            |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| AMC  trademark                                    |       |                       |       |                            | $          | 74,000                        |       |   |   |   |   |   |   | $ | 74,000 |   |   |   |   |   |   |
| Cinemex  trademark                                |       |                       |       |                            | 7,085      |                          |       |   |   |   |   |   | 7,032 |   |   |   |   |   |   |
| Total,  unamortized                               |       |                       |       |                            | $          | 81,085                        |       |   |   |   |   |   |   | $ | 81,032 |   |   |   |   |   |   |

 

19

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

| ** **             | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-Nine Weeks Ended** | ** ** |
|------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| ** **             | ** ** | **December 28,  2006**        | ** ** | **December 29,  2005**           | ** ** | **December 28,  2006** | ** ** | **December 29,  2005** | ** ** |
| Recorded  Amortization |       |                               | $          | 8,938                                 |       |   |   | $ | 4,461 |   |   |   | $ | 28,243 |   |   |   | $ | 12,876 |   |   |
|                        |            |                                    |            |                                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Estimated amortization expense for the next fivefiscal years for intangible assets owned as of December 28, 2006 isprojected below:

| **(In thousands)**         | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Projected  amortization expense |       | $        | 37,146     |     | $          | 28,507   |       | $        | 22,288     |     | $          | 16,627 |   | $ | 14,686 |   |
|                                 |            |          |            |          |            |          |            |          |            |          |            |  |  |  |  |  |

 

**NOTE 6—CORPORATE BORROWINGS**

**In December 2006, Cadena Mexicanade Exhibición S.A. de C.V., a wholly-owned subsidiary of Cinemex and anindirect wholly-owned subsidiary of AMC Entertainment Inc., amended its amendedand restated senior secured revolving credit facility to extend the terms foran additional year, now maturing December 19, 2007. In December 2006,Cadena Mexicana de Exhibición S.A. de C.V. also modified the terms of itssenior secured credit facility term loan. The Cinemex term loan will mature onAugust 16, 2011 and will amortize beginning on February 16, 2009 ininstallments ranging from 10% to 30% of the principal balance per annum overthe five-year period. Additionally, the applicable margin for the rate ofinterest has been modified to be based on a ratio of Net Debt to EBITDA. Theapplicable margin will now be 200 basis points for a ratio of 2.50 times to3.00 times, 175 basis points for a ratio of 2.01 times to 2.50 times, 150 basispoints for a ratio of 1.51 times to 2.00 times and 125 basis points for a rationat or below 1.50 times.**

**As ofDecember 2006, Cinemex had 1,132.8 million Mexican pesos (approximately $104.8million) outstanding under the senior secured credit facility, and 99.1 millionMexican pesos (approximately $9.1 million) outstanding under the senior securedrevolving credit facility.**

**NOTE 7—INVESTMENTS**

**Initial PublicOffering of National CineMedia, Inc.**

On February 13, 2007,National CineMedia, Inc., a newly-formed entity that will serve as thesole manager of National CineMedia, LLC, completed its initial public offering(“IPO”) of 42,000,000 shares of common stock at a price of $21.00 per share.The shares began trading on the Nasdaq Global Market on February 8, 2007under the ticker “NCMI.” Net proceeds from the IPO were used to acquire newlyissued equity interests from National CineMedia, LLC and National CineMedia,LLC distributed the net proceeds to each of AMC, Cinemark and Regal on a prorata basis in connection with modifying payment obligations for access to ourtheatres. In connection with the completion of the IPO, National CineMedia, LLCentered into a $725 million term loan facility the net proceeds of which wereused to redeem preferred units held by each of AMC, Cinemark and Regal on a prorata basis pursuant to a recapitalization of National CineMedia, LLC uponcompletion of the IPO. The Company received net IPO and debt proceeds uponcompletion of such transactions of $517.1 million.

**Non-consolidated Entities**

The Company accounts forits investments in non-consolidated entities using the cost and equity methodsof accounting, has recorded the investments within other long-term assets inits consolidated balance sheets and records equity in earnings or losses ofthese entities within investment income in its consolidated statements ofoperations. As of December 28, 2006, the Company holds, among other equityinvestments, a 50% interest in Hoyts General Cinemas South America (“HGCSA”),an entity that operates 17 theatres in South America.

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As of December 28,2006 the Company held a 29% interest in National CineMedia, LLC. As ofDecember 28, 2006 and March 30, 2006, the Company has recorded $15.2million and $9.2 million, respectively, of amounts due from NationalCineMedia, LLC related to on-screen advertising revenue. The Company recordedrevenues for advertising from National CineMedia, LLC of $32 million and$18 million during the thirty-nine weeks ended December 28, 2006 andDecember 29, 2005, respectively. Subsequent to the IPO, the Company holdsa 18.6% interest in National CineMedia, LLC.

Condensedfinancial information of HGCSA is shown below. All amounts are presented under accounting principles generally acceptedin the United States of America. Financial information ofimmaterial non-consolidated entities has been omitted.

FinancialCondition:

| **(dollars in  thousands)**                    | ** ** | **December 28, 2006** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|
| Current assets                                 |       |                            | $          | 26,049 |   |   |
| Noncurrent assets                              |       |                            | 33,634     |   |   |
| Total assets                                   |       |                            | $          | 59,683 |   |   |
| Current liabilities                            |       |                            | $          | 50,120 |   |   |
| Noncurrent  liabilities                        |       |                            | 2,919      |   |   |
| Total liabilities                              |       |                            | 53,039     |   |   |
| Stockholders’  equity                     |       |                            | 6,644      |   |   |
| Liabilities and  stockholders’ equity     |       |                            | $          | 59,683 |   |   |
| The Company's  recorded investment in HGCSA(1) |       |                            | $          | 8,232 |   |   |

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(1)             The Company’srecorded investment exceeds its proportional ownership of the underlying equityof HGCSA. The differences will be amortized to equity in losses over theestimated useful lives of the related deferred revenues of 4 years andperiodically evaluated for impairment.

OperatingResults:

| ** **                                           | ** ** | **Thirteen Weeks Ended** | ** ** |
|------------------------------------------------------|------------|------------------------------------|------------|
| **(dollars in thousands)**                 | ** ** | **December 28, 2006**    | ** ** |
| Revenues                                             |       | $                                  | 7,522      |   |
| Operating costs  & expenses                      |       | 11,844                             |       |
| Net loss                                             |       | $                                  | (4,322     | ) |
| The Company’s  recorded equity in loss of HGCSA |       | $                                  | (2,031     | ) |

 

**NOTE 8—STOCKHOLDERS’EQUITY**

TheCompany accounts for stock options using the fair value method of accounting asprescribed by Financial Accounting Standards Board Statement No. 123(R), *Share Based Payments* (“SFAS 123(R)”) and StaffAccounting Bulletin No. 107, *Share-Based Payments*(“SAB 107”) and has valued the options using the Black-Scholes formulaincluding management’s judgement and a contemporaneous valuation prepared as ofDecember 28, 2006 by an unrelated valuation specialist which indicated afair value price per share of the underlying shares of $1,949.70 per share. TheCompany has recorded $4,160,000 and $961,000 of stock-based compensationexpense related to these options within General and Administrative: Other andhas recognized a deferred income tax benefit of $0 and $300,000 in itsConsolidated Statements of Operations during the thirteen weeks ended December 28,2006 and December 29, 2005, respectively. The Company has recorded $6,216,000and $2,705,000 of stock-based compensation expense related to theseoptions within General and Administrative: Other and has recognized an incometax benefit of approximately $0 and $1,057,000 in its Consolidated Statementsof 

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Operations during the thirty-nine weeks ended December 28,2006 and December 29, 2005, respectively. One of the holders of stockoptions has put rights associated with his options deemed to be within hiscontrol whereby he can require Holdings to repurchase his options. Theseliability-classified options are required to be remeasured during eachreporting period. A liability of $3,673,000 and $142,000 is recorded withinother long term liabilities in the Consolidated Balance Sheets as of December28, 2006 and March 30, 2006, respectively, for the options containing writtenput rights deemed to be within the holder’s control.

Duringthe thirty-nine weeks ended December 28, 2006 the Company revised itspreliminary estimated purchase price for the Merger by $3,500,000 which reducedadditional paid-in capital and also recorded an increase to additional paid-incapital of $2,685,000 related to stock-based compensation expense.

**Common Stock Rights and Privileges**

Marquee HoldingsClass A-1 voting Common Stock, Class A-2 voting Common Stock,Class N nonvoting Common Stock, Class L-1 voting Common Stock andClass L-2 voting Common Stock entitle the holders thereof to the samerights and privileges, subject to the same qualifications, limitations andrestrictions with respect to dividends. Additionally, each share ofClass A Common Stock, Class L Common Stock and Class N CommonStock shall automatically convert into one share of Residual Common Stock on aone-for-one basis immediately prior to the consummation of an Initial PublicOffering.

**NOTE 9—THEATRE ANDOTHER CLOSURE AND DISPOSITION OF ASSETS**

Arollforward for theatre and other closure reserves for leases which haveterminated is as follows (in thousands):

| ** **                                               | ** ** | **Thirty-Nine Weeks Ended** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                               | ** ** | **December 28, 2006**       | ** ** | **December 29,  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                        |       |                                  | 8,097      |   |   |   | 224 |   |   | 8,321 |   |   | 1,390 |   |   |
| Transfer of deferred rent and capital lease  obligations |       |                                  | —     |   |   |   | — |   |   | — |   |   | 677 |   |   |
| Purchase price adjustment                                |       |                                  | (195       | ) |   |   | (718 | ) |   | (913 | ) |   | — |   |   |
| Payments                                                 |       |                                  | (11,212    | ) |   |   | (2,104 | ) |   | (13,316 | ) |   | (6,859 | ) |   |
| Ending balance                                           |       |                                  | $          | 18,406 |   |   |   | $ | 2,020 |   |   | $ | 20,426 |   |   | $ | 23,714 |   |   |

----

(1)          There were no mergerexit costs recorded during the thirty-nine weeks ended December 29, 2005.

Theatre and other closure reserves for leases thathave not been terminated are recorded at the present value of the future contractualcommitments for the base rents, taxes and maintenance. For changes in theCompany’s theatre closure liability due to the passage of time where theCompany has based its expected payments to landlords on discounted amounts,accretion expense is included as a component of theatre and other closureexpense.

 

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Theatre closure reserves at December 28, 2006 andMarch 30, 2006 by operating segment are as follows (in thousands):

| ** **                             | ** ** | **December 28,  2006** | ** ** | **March 30,  2006** | ** ** |
|----------------------------------------|------------|-----------------------------|------------|--------------------------|------------|
| U.S. and Canada  Theatrical Exhibition |       |                        | $          | 17,921                   |       |   |   | $ | 20,811 |   |   |
| International  Theatrical Exhibition   |       |                        | 517        |                     |       |   | 471 |   |   |
| Other                                  |       |                        | 156        |                     |       |   | 315 |   |   |
| Total segment reserves                 |       |                        | 18,594     |                     |       |   | 21,597 |   |   |
| Corporate                              |       |                        | 1,832      |                     |       |   | 4,737 |   |   |
|                                   |       |                        | $          | 20,426                   |       |   |   | $ | 26,334 |   |   |

 

**NOTE 10—RESTRUCTURING**

The Company recognizes restructuring charges basedupon the nature of the costs incurred. Costs resulting from one-time terminationbenefits where employees are not required to render future service to receivethe benefits are recognized and a liability is recorded when management commitsto a plan of termination which identifies the number of employees to beterminated, their job classifications, locations, expected termination datesand when the plan is communicated to the employees and establishes the detailedterms of the benefits to be received by employees.

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

During the fourth quarterof fiscal 2006, the Company recorded a liability of $27,090,000 related toone-time termination benefits and other costs for the displacement ofapproximately 230 associates in connection with the Mergers as part of purchaseaccounting. The Company recorded an additional $4,845,000 liability related toclosures of Loews’ duplicate administrative facilities in connection with theMergers as part of purchase accounting. In the thirty-nine weeks endedDecember 29, 2005, the Company recorded $3,935,000 in restructuringcharges and paid $8,353,000 in related expenses. The Company’s reorganizationwas substantially complete as of December 29, 2005.

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

| ** **              | ** ** | **Thirty-Nine Weeks Ended** | ** ** |
|-------------------------|------------|---------------------------------------|------------|
| ** **              | ** ** | **December 28, 2006**       | ** ** |
| **(In thousands)** | ** ** | ** **                            | ** ** | **Merger  Severance  Benefits** | ** ** |
| Beginning balance       |       |                                  | $          | 10,571 |   |   |
| Merger adjustment(1)    |       |                                  | (1,244     | ) |   |
| Payments                |       |                                  | (8,706     | ) |   |
| Ending balance          |       |                                  | $          | 621 |   |   |
|                         |            |                                       |            |  |  |  |  |  |

----

(1)          Represents adjustmentsto goodwill for changes in estimated termination benefits based on actualamounts.

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Restructuringreserves at December 28, 2006 and March 30, 2006 by operating segmentare as follows (in thousands):

| ** **                             | ** ** | **December 28,  2006** | ** ** | **March 30,  2006** | ** ** |
|----------------------------------------|------------|-----------------------------|------------|--------------------------|------------|
| U.S. and Canada  Theatrical Exhibition |       |                        | $—    |                     |       |   | $ | — |   |   |
| International  Theatrical Exhibition   |       |                        | —     |                     |       |   | — |   |   |
| Other                                  |       |                        | —     |                     |       |   | — |   |   |
| Total Segment reserves                 |       |                        | —     |                     |       |   | — |   |   |
| Corporate                              |       |                        | 621        |                     |       |   | 10,571 |   |   |
|                                   |       |                        | $          | 621                      |       |   |   | $ | 10,571 |   |   |
|                                        |            |                             |            |                          |            |  |  |  |  |  |  |

 

**NOTE 11—INCOMETAXES**

For the thirty-nine weeksended December 28, 2006 and December 29, 2005 our pre-tax loss was($44,602,000) and ($53,577,000) comprised of domestic jurisdictional losses of($47,501,000) and ($43,622,000) and foreign jurisdictional income of $2,899,000and loss of ($9,955,000), respectively.

Thedifference between the effective tax rate on earnings before income taxes andthe U.S. federal income tax statutory rate is as follows:

| ** **                                      | ** ** | **Thirty-Nine Weeks Ended** | ** ** |
|-------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                      | ** ** | **December 28,  2006**           | ** ** | **December 29,  2005  (restated)** | ** ** |
| Federal statutory  rate                         |       |                                  | 35.0       | % |   |   | 35.0 | % |   |
| Non-deductible  goodwill                        |       |                                  | —     |   |   |   | (34.9 | ) |   |
| Foreign rate  differential                      |       |                                  | 5.9        |   |   |   | — |   |   |
| Valuation  allowance                            |       |                                  | (35.2      | ) |   |   | (1.0 | ) |   |
| State income  taxes, net of federal tax benefit |       |                                  | (5.8       | ) |   |   | (.7 | ) |   |
| Other, net                                      |       |                                  | (1.5       | ) |   |   | 1.2 |   |   |
| Effective tax rate                              |       |                                  | (1.6       | )% |   |   | (0.4 | )% |   |

 

The Company accounts for income taxes in accordancewith SFAS No. 109, Statement of Financial Accounting Standards(“SFAS No. 109”), *Accounting forIncome Taxes,* which requires that deferred tax assets andliabilities be recognized, using enacted tax rates, for the tax effect oftemporary differences between the financial reporting and tax bases of recordedassets and liabilities. SFAS 109 also requires that deferred tax assets bereduced by a valuation allowance if it is more likely than not that some or allof 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 has recorded a full valuation allowance againstits deferred tax assets due to the uncertainty regarding the ultimaterealization of those assets in all taxing jurisdictions. The Company recorded avaluation allowance of $26.2 million against its deferred tax assets in Mexicoduring the thirteen weeks ended December 28, 2006, which had the effect ofincreasing goodwill (see Note 2-Acquistions).

The Company determinesincome tax expense for interim periods by applying SFAS No. 109and APB Opinion No. 28, *InterimFinancial Reporting*, which prescribes the use of the full year’sestimated effective tax rate in financial statements for interim periods. Assuch, permanent differences such as state income taxes and changes in valuationallowance impact the Company’s effective tax rate. During the current period, incometax expense differed from the expected tax benefit using the U.S. federalstatutory tax rate of 35% primarily due to state income taxes and the change invaluation allowance recorded against net 

24

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deferredtax assets. Additionally, income tax expense reflects the net expense relatedto the continued impact of the Texas gross margins tax. The current yeardisposition of Portugal and Spain operations did not have a material impact onthe income tax provision as the tax benefit derived from the sale was fullyoffset by an increase in valuation allowance. Non-deductible goodwill relatesto the goodwill disposed of with the Japan theatres, which is discussed inNote 3—Discontinued Operations.

**NOTE 12—EMPLOYEEBENEFIT PLANS**

The Company sponsors a frozen non-contributoryqualified defined benefit pension plan generally covering all employees age 21or older who have completed at least 1,000 hours of service in their firsttwelve months of employment, or in a calendar year ending thereafter, and whoare not covered by a collective bargaining agreement. The Company also offerseligible retirees the opportunity to participate in a health plan (medical anddental) and a life insurance plan. Employees may become eligible for these benefitsat retirement provided the employee is at least age 55 and has at least15 years of credited service after age 40. The Company also sponsors apostretirement deferred compensation plan.

As a result of the Merger, the Company acquired twopension plans in the U.S. and one in Mexico. One of the U.S. plans is a frozencash balance plan and neither of the U.S. plans have admitted new participantspost-merger. The future existence of the U.S. plans will serve to pay benefitsto the current participants under the requirements of the plan. In Mexico, aSeniority Premium and Termination Indemnity for Retirement Plan (the “MexicoPlan”) is provided to all eligible employees of Servicios CinematograficosEspecializados, S.A. de C.V. (“SCE”) and a Termination Indemnity RetirementPlan to all eligible employees of Servino, S.A. de C.V. (“Servino”). Both SCEand Servino are wholly owned subsidiaries of Cinemex. The Mexico Planestablishes compensation upon retirement (pension and seniority premium) basedon years of service rendered and the employee’s age and salary at the date ofretirement.

The Company made its annual pension contribution of$1,400,000 during its second fiscal quarter of 2007.

The measurement date used to determine pension andother postretirement benefits is January 1 of the fiscal year for whichmeasurements are made.

Net periodic benefit cost recognized for the Company’splans during the thirteen weeks ended December 28, 2006 andDecember 29, 2005 consists of the following:

| ** **                                 | ** ** | **Pension Benefits**   | ** ** | **Other Benefits**     | ** ** |
|--------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **(In thousands)**                    | ** ** | **December 28,  2006** | ** ** | **December 29,  2005** | ** ** | **December 28,  2006** | ** ** | **December 29,  2005** | ** ** |
| Components of net  periodic benefit costs: |       |                        |       |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                               |       |                        | $          | 795                         |       |   |   | $ | 959 |   |   |   | $ | 228 |   |   |   | $ | 143 |   |   |
| Interest cost                              |       |                        | 1,314      |                        |       |   | 1,150 |   |   |   | 387 |   |   |   | 215 |   |   |
| Expected return on plan assets             |       |                        | (1,116     | )                           |       |   | (909 | ) |   |   | — |   |   |   | — |   |   |
| Curtailment gain                           |       |                        | (10,983    | )                           |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Net periodic benefit  cost                 |       |                        | $          | (9,990                      | )          |   |   | $ | 1,200 |   |   |   | $ | 615 |   |   |   | $ | 358 |   |   |

 

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Net periodic benefits cost recognized for the Company’splans during the thirty-nine weeks ended December 28, 2006 andDecember 29, 2005 consists of the following:

| ** **                                 | ** ** | **Pension Benefits**   | ** ** | **Other Benefits**     | ** ** |
|--------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **(In thousands)**                    | ** ** | **December 28,  2006** | ** ** | **December 29,  2005** | ** ** | **December 28,  2006** | ** ** | **December 29,  2005** | ** ** |
| Components of net  periodic benefit costs: |       |                        |       |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                               |       |                        | $          | 2,387                       |       |   |   | $ | 2,877 |   |   |   | $ | 684 |   |   |   | $ | 428 |   |   |
| Interest cost                              |       |                        | 3,943      |                        |       |   | 3,450 |   |   |   | 1,162 |   |   |   | 646 |   |   |
| Expected return on plan assets             |       |                        | (3,348     | )                           |       |   | (2,726 | ) |   |   | — |   |   |   | — |   |   |
| Curtailment gain                           |       |                        | (10,983    | )                           |       |   | — |   |   |   | — |   |   |   | (1,110 | ) |   |
| Net periodic benefit  cost                 |       |                        | $          | (8,001                      | )          |   |   | $ | 3,601 |   |   |   | $ | 1,846 |   |   |   | $ | (36 | ) |   |

 

On November 7, 2006, the Company’s Board of Directorsapproved an amendment to freeze the Company’s Defined Benefit Retirement IncomePlan, Supplemental Executive Retirement Plan and Retirement Enhancement Plan(the “Plans”) as of December 31, 2006. On December 20, 2006 the Company amendedand restated the Plans to implement the freeze as of December 31, 2006. As a resultof the freeze there will be no further benefits accrued after December 31,2006, but continued vesting for associates with less than five years of vestingservice. The Company will continue to fund existing benefit obligations andthere will be no new participants in the future. As a result of amending andrestating the Plans to implement the freeze, the Company has recognized acurtailment gain of $10,983,000 in its consolidated financial statements whichwas recorded within General and Administrative: Other.

The Company’sreorganization activities during fiscal 2005 and fiscal 2006 resulted in apartial curtailment of the Company’s postretirement deferred compensation planand, as such, curtailment gains of $1,110,000 were recognized during thethirty-nine weeks ended December 29, 2005.

**NOTE 13—OPERATING SEGMENTS**

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

| ** **                             | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-Nine Weeks Ended** | ** ** |
|----------------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| ** **                             | ** ** | **December 28,  2006**        | ** ** | **December 29  2005**            | ** ** | **December 28,  2006** | ** ** | **December 29,  2005** | ** ** |
| **Revenues**                           | ** ** |                               | ** ** | ** **                            |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| U.S. and Canada  theatrical exhibition |       |                               | $          | 554,491                               |       |   |   | $ | 390,065 |   |   |   | $ | 1,737,480 |   |   |   | $ | 1,160,415 |   |   |
| International theatrical  exhibition   |       |                               | 41,849     |                                  |       |   | 5,972 |   |   |   | 136,209 |   |   |   | 16,290 |   |   |
| Other                                  |       |                               | 16         |                                  |       |   | 2,471 |   |   |   | 52 |   |   |   | 13,024 |   |   |
| Total revenues                         |       |                               | $          | 596,356                               |       |   |   | $ | 398,508 |   |   |   | $ | 1,873,741 |   |   |   | $ | 1,189,729 |   |   |
| **Segment Adjusted EBITDA**            | ** ** |                               | ** ** | ** **                            |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| U.S. and Canada  theatrical exhibition |       |                               | $          | 103,242                               |       |   |   | $ | 70,110 |   |   |   | $ | 328,720 |   |   |   | $ | 200,062 |   |   |
| International theatrical  exhibition   |       |                               | 11,311     |                                  |       |   | (732 | ) |   |   | 39,087 |   |   |   | (3,604 | ) |   |
| Other                                  |       |                               | (221       | )                                     |       |   | (848 | ) |   |   | (1,131 | ) |   |   | (1,477 | ) |   |
| Segment Adjusted EBITDA                |       |                               | $          | 114,332                               |       |   |   | $ | 68,530 |   |   |   | $ | 366,676 |   |   |   | $ | 194,981 |   |   |

 

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Areconciliation of earnings from continuing operations before income taxes toSegment Adjusted EBITDA is as follows (in thousands):

| ** **                                            | ** ** | **Thirteen Weeks Ended**      | ** ** | **Thirty-Nine Weeks Ended**   | ** ** |
|-------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|
| ** **                                            | ** ** | **December 28,  2006  (restated)** | ** ** | **December 29,  2005  (restated)** | ** ** | **December 28,  2006** | ** ** | **December 29,  2005  (restated)** | ** ** |
| Loss from continuing  operations before income taxes  |       |                                    | $          | (15,746                                 | )          |   |   | $ | (13,168 | ) |   |   | $ | (47,001 | ) |   |   | $ | (49,118 | ) |   |
| Plus:                                                 |       |                                    |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                      |       |                                    | 59,199     |                                    |       |   | 31,044 |   |   |   | 174,517 |   |   |   | 93,799 |   |   |
| Depreciation and  amortization                        |       |                                    | 64,157     |                                    |       |   | 35,931 |   |   |   | 192,687 |   |   |   | 108,478 |   |   |
| Preopening  expense                                   |       |                                    | 3,698      |                                    |       |   | 3,515 |   |   |   | 6,827 |   |   |   | 4,251 |   |   |
| Theatre and other  closure expense                    |       |                                    | 611        |                                    |       |   | 410 |   |   |   | 8,321 |   |   |   | 1,390 |   |   |
| Restructuring  charges                                |       |                                    | —     |                                    |       |   | 27 |   |   |   | — |   |   |   | 3,935 |   |   |
| Disposition of  assets and other gains                |       |                                    | (5,334     | )                                       |       |   | (297 | ) |   |   | (11,184 | ) |   |   | (1,067 | ) |   |
| Investment expense  (income)(1)                       |       |                                    | (2,995     | )                                       |       |   | 2,541 |   |   |   | (6,600 | ) |   |   | 2,062 |   |   |
| Other (income)  expense(2)                            |       |                                    | —     |                                    |       |   | (2,686 | ) |   |   | — |   |   |   | (2,686 | ) |   |
| General and  administrative expense—unallocated: |       |                                    |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger and  acquisition costs                         |       |                                    | 3,537      |                                    |       |   | 281 |   |   |   | 9,363 |   |   |   | 2,926 |   |   |
| Management fee                                        |       |                                    | 1,250      |                                    |       |   | 500 |   |   |   | 3,750 |   |   |   | 1,500 |   |   |
| Other(3)                                              |       |                                    | 5,955      |                                    |       |   | 10,432 |   |   |   | 35,996 |   |   |   | 29,511 |   |   |
| Segment Adjusted EBITDA                               |       |                                    | $          | 114,332                                 |       |   |   | $ | 68,530 |   |   |   | $ | 366,676 |   |   |   | $ | 194,981 |   |   |

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(1)          Investment incomeincludes equity in losses from investments of $1,226,000 and $2,919,000 duringthe thirteen weeks ended December 28, 2006 and December 29, 2005,respectively. Investment income includes equity in losses from investments of $3,681,000and $3,578,000 during the thirty-nine weeks ended December 28, 2006 and December 29,2005, respectively.

(2)          Otherincome is comprised of net insurance recoveries for property losses related toHurricane Katrina.

(3)          Includingstock-based compensation expense of $4,160,000 and $961,000 for thethirteen weeks ended December 28, 2006 and December 29, 2005,respectively. Including stock-based compensation expense of $6,216,000 and $2,705,000for the thirty-nine weeks ended December 28, 2006 and December 29,2005, respectively.

**NOTE 14**—COMMITMENTS ANDCONTINGENCIES

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

*United States of Americav. AMC Entertainment Inc. and American Multi Cinema, Inc.*(No. 9901034 FMC (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 violatethe ADA and related regulations. The Department alleged that AMCE had failed toprovide persons in wheelchairs seating arrangements with lines of sightcomparable to the general public. The Department alleged various non-line ofsight violations as well. The Department sought declaratory and injunctive reliefregarding existing and future theatres with stadium style seating, compensatorydamages in the approximate amount of $75,000 and a civil penalty of $110,000.

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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.The trial court did not address specific changes that might be required ofAMCE’s existing 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 appropriate remedyin the line of sight aspects of this case. In its decision, the court issued acomprehensive order regarding line of sight and other related remedies whichcovers the remaining line of sight issues at the majority of the Company’s existingand all of its future construction stadium-style theatres nationwide, aswell as other related forms of relief sought by the United States 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 to theNinth Circuit Court of Appeals and both parties have filed their briefs.

As a result of the January 10,2006 order AMCE estimates the range of the loss to be between $349,000 and $444,000.Accordingly, AMCE has recorded the related liability of approximately $349,000.

On January 21, 2003,the trial court entered summary judgment in favor of the Department on non-lineof sight aspects of the case, which involve such matters as parking areas,signage, ramps, location of toilets, counter heights, ramp slopes, companionseating and the location and size of handrails. In its non-line of sightdecision, the trial court concluded that AMCE has violated numerous sections ofthe ADA and engaged in a pattern and practice of violating the ADA.

On December 5, 2003,the trial court entered a consent order and final judgment on non-line of sightissues under which AMCE agreed to remedy certain violations at twelve of itsstadium-style theatres and to survey and make required betterments forits patrons with disabilities at its stadium-style theatres and atcertain theatres it may open in the future. Currently AMCE estimates that thesebetterments will be required at approximately 140 stadium-style theatres.AMC estimates that the total cost of these betterments will be$47.5 million, which is expected to be incurred over the remaining term ofthe consent order of 2.0 years. Through December 28, 2006 AMCE hasincurred approximately $9.9 million of these costs. The estimate is basedon actual costs incurred on remediation work completed to date. The actualcosts of betterments may vary based on the results of surveys of the remainingtheatres.

*American MultiCinema, Inc. v. Midwest Drywall Company, Inc., Haskell Constructors,Ltd. etal.*(Case No. 00CV84908, Circuit Court ofPlatte County, Missouri) and *American MultiCinema, Inc. v. Bovis**Construction Corp. et al.* (Civil Action No. 0207139, Court of Common Pleas of Bucks County,Pennsylvania). AMCE is the plaintiff in these and related suits in which itseeks to recover damages from the construction manager, certain fireproofingapplicators and other parties to correct the defective application of certainfireproofing materials at 21 theatres. AMCE currently estimates its claim forrepair costs at these theatres will aggregate approximately $33.6 million ofwhich it has expended approximately $27.4 million through December 28,2006. The remainder is for projected costs of repairs yet to be performed. AMCEalso is seeking additional damages for lost profits, interest and legal andother expenses incurred.

AMCE has receivedsettlement payments from various parties in connection with this matter of $13,130,000,$935,000, $2,610,000 and $925,000 during fiscal 2007, 2006, 2005 and 2004,respectively. AMCE has entered into settlement agreements with various partiesproviding for additional settlement payments. Gain contingencies are recognizedupon receipt and recorded in disposition of assets and other gains in the ConsolidatedStatements of Operations.

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The Company is a party tovarious other legal proceedings in the ordinary course of business, none ofwhich is expected to have a material adverse effect on us.

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

In January 2004,Loew’s issued a corporate guaranty on behalf of Neue Filmpalast, its formerGerman partnership, for certain acquisition related costs that the partnershipwas required to pay. In April 2004, Loews made an additional contributionof $1.2 million to Neue Filmpalast, its German partnership, which the Companybelieves satisfied a significant portion of the guaranty. Additionally, a subsidiaryof Loews was guarantor of several of the theatre leases of Neue Filmpalast. Inconnection with the sale of Loews interest in the German operations toaffiliates of Onex and OCM Cinema, these affiliates have agreed to indemnifythe Company for any and all liabilities resulting from Loew’s indemnificationobligations.

Based upon the Company’shistorical experience and information known as of December 28, 2006, theCompany believes its potential liability related to its guarantees andindemnities is not material.

**NOTE 15**—NEW ACCOUNTINGPRONOUNCEMENTS

In November 2006, theEmerging Issues Task Force (“EITF”) reached a consensus on Issue No. 06-09,Reporting a Change in (or the Elimination of) a Previously Existing Differencebetween the Fiscal Year End of a Parent Company and That of a Consolidated Subsidiaryor an Equity Method Investee (“EITF 06-09”). EITF 06-09 concludesthat the parent entity should report the elimination of a lag in reporting thesubsidiary’s financial results in their consolidated financial statements as achange in accounting principle through retrospective application pursuant tothe provisions of FASB Statement No. 154,****Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 andFASB Statement No. 3, unless it is impractical to do so. This EITFshould be applied prospectively for all applicable changes, beginning in thefirst interim or annual period following final Board approval; early adoptionwill be permitted. If this consensus were finalized, the company would notexpect it to have an impact on the consolidated financial position, results ofoperations, or cash flows.

In October 2006, theFASB agreed to issue FSP No. 123(R)-6, *TechnicalCorrections of Statement 123(R),* which amends four paragraphs of SFAS 123(R).The first amendment exempts nonpublic entities from disclosing the aggregateintrinsic value of outstanding fully vested share options and share optionsexpected to vest. The second revises the computation of minimum compensationcosts to be recognized when using the “straight-line” attribution method. Thethird addresses Illustration 13(e), indicating that at the date the illustrativeawards were no longer probable of vesting, any previously recognized compensationcost should have been reversed. The fourth amends the definition of “short-terminducement” to exclude an offer to settle an award. The provisions of this FSPare required after October 20, 2006; early application is permitted forperiods for which financial statements have not yet been issued. The adoption 

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of FSP123(R)-6 did not have an impact on the consolidated financial position,results of operations, or cash flows.

In October 2006, theFASB agreed to issue FSP No. 123(R)-5, *Amendment ofFSP FAS 123(R)-1,* which addresses whether a modification of aninstrument in connection with an equity restructuring should be considered amodification for purposes of applying FSP FAS 123(R)-1, *“Classification and Measurement of Freestanding Financial InstrumentsOriginally Issued in Exchange for Employee Services Under FAS 123(R).”*ThisFSP indicates that if the modification was made solely to reflect an equityrestructuring that occurs when the holders are no longer employees, then nochange in the recognition or measurement will result if there is no increase infair value of the award and all holders of the same class of equity instrumentsare treated in the same manner. The provisions of this FSP are required after October 10,2006; early application is permitted for periods for which financial statementshave not yet been issued. The adoption of FSP 123(R)-5 did not have animpact on the consolidated financial position, results of operations, or cashflows.

In October 2006, theFASB released Statement of Financial Accounting Standards No. 158, Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans, anamendment of FASB Statements No. 87, 88, 106 and 132(R)(“SFAS 158”). SFAS 158 requires an entity to (1) recognize inits statement of financial position an asset for a defined benefit postretirementplan’s overfunded status or a liability for a plan’s underfunded status, (2) measurea defined benefit retirement plan’s assets and obligations that determine itsfunded status as of the end of the employer’s fiscal year, and (3) recognizechanges in the funded status of a defined benefit postretirement plan incomprehensive income in the year in which the changes occur. The requirement torecognize the funded status of a defined benefit postretirement plan and thedisclosure requirements are effective for fiscal years ending after December 15,2006, for public entities, or March 29, 2007 for the Company. Therequirement to measure plan assets and benefit obligations as of the date ofthe employer’s fiscal year-end statement of financial position is effective forfiscal years ending after December 15, 2008, or April 2, 2009 for theCompany. Earlier application of the recognition or measurement date provisionsis encouraged; however, early application must be for all of an employer’sbenefit plans. The Company believes that as of March 30, 2006, its mostrecent fiscal year-end, this standard would have resulted in decreasedliabilities and decreased accumulated other comprehensive loss of approximately$5,365,000.

In September 2006,the FASB released SFAS No. 157, *Fair Value Measurements*whichprovides enhanced guidance for using fair value to measure assets andliabilities. The standard applies whenever other standards require (or permit)assets or liabilities to be measured at fair value. It does not expand the useof fair value in any new circumstances. Under the standard, fair value refersto the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants in the marketin which the reporting entity transacts. It clarifies the principle that fairvalue should be based on the assumptions market participants would use whenpricing the asset or liability. SFAS No. 157 is effective for financialstatements issued for fiscal years beginning after November 15, 2007, andinterim periods within those fiscal years, or the first quarter of fiscal 2009for the Company. Early adoption is permitted. The Company does not anticipatethis standard having a material effect on its consolidated financialstatements.

In September 2006,the Securities and Exchange Commission (the “SEC”) issued Staff AccountingBulletin No. 108 (“SAB 108”), *Considering the Effects ofPrior Year Misstatements When Quantifying Misstatements in Current YearFinancial Statements*which provides interpretive guidance on theconsideration of the effects of prior year misstatements in quantifying currentyear misstatements for the purpose of a materiality assessment. SAB 108 iseffective for companies with fiscal years ending after November 15, 2006and is required to be adopted by the Company in its fiscal year ending March 29,2007. However, early application is encouraged in any report for an interimperiod of the first fiscal year ending after November 15, 2006, filedafter the publication of this guidance.

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In July 2006, theFASB released FASB Interpretation No. 48, *Accountingfor Uncertainty in Income Taxes*—*an Interpretation of FASB Statement 109* (“FIN48” or the “Interpretation”), which clarifies the accounting for uncertainty inincome taxes recognized in companies’ financial statements in accordance withFASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes arecognition threshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return. The evaluation of a tax position in accordance with FIN 48 is atwo-step process. The first step is recognition whereby companies mustdetermine whether it is more likely than not that a tax position will be sustainedupon examination. The second step is measurement whereby a tax position thatmeets the more-likely-than-not recognition threshold is measured to determinethe amount of benefit to recognize in the financial statements. Theinterpretation also provides guidance on derecognition of recognized taxbenefits, classification, interest and penalties, accounting in interimperiods, disclosure and transition. FIN 48 is effective for fiscal yearsbeginning after December 15, 2006. The Company expects to adopt the newrequirements in the first quarter of fiscal 2008 and is currently evaluatingthe impact that the adoption of FIN 48 will have on its consolidated financialstatements.

In February 2006, theFASB issued FSP No. 123(R)-4, Classification of Options and SimilarInstruments Issued as Employee Compensation That Allow for Cash Settlement uponthe Occurrence 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 SFAS 123(R), where the award requires or permits cashsettlement upon the contingent event. The FSP requires companies to classifyemployee stock options and similar instruments with contingent cash settlementfeatures as equity awards provided the contingent event that permits orrequires cash settlement is not considered probable of occurring.

**NOTE 16**—RELATED PARTY TRANSACTIONS

**Amended and Restated Fee Agreement**

In connection with theMergers, Holdings, AMCE and the Sponsors entered into an Amended and RestatedFee Agreement, which provides for an annual management fee of$5.0 million, payable quarterly and in advance to each Sponsor, on a prorata basis, for the twelve year duration of the agreement, as well asreimbursements for each Sponsor’s respective out-of-pocket expenses inconnection with the management services provided under the agreement. Inaddition, the fee agreement will provide for reimbursements by AMCE to theSponsors for their out-of-pocket expenses and to Holdings of up to$3.5 million for fees payable by Holdings in any single fiscal year inorder to maintain AMCE’s corporate existence, corporate overhead expenses andsalaries or other compensation of certain employees. The Company has recordedManagement fee expense of $1,250,000 and $3,750,000 during the thirteen andthirty-nine weeks ended December 28, 2006.

Upon the consummation of achange in control transaction or an IPO, each of the Sponsors will receive, inlieu of quarterly payments of the annual management fee, a fee equal to the netpresent value of the aggregate annual management fee that would have beenpayable to the Sponsors during the remainder of the term of the fee agreement(assuming a twelve year term from the date of the original fee agreement),calculated using the treasury rate having a final maturity date that is closestto the twelfth anniversary of the date of the original fee agreement date. OnJanuary 29, 2007 Marquee Holdings Inc., the parent company of AMCEntertainment Inc., filed an amendment to its registration statement onForm S-1 with the U.S. Securities and Exchange Commission inconnection with the proposed IPO of shares of Marquee Holdings’ common stock bycertain of its stockholders. The number of shares to be offered and the pricerange for the offering have not been determined. The Company has recordedexpenses in connection with the proposed IPO of approximately $775,000 duringthe thirteen weeks ended December 28, 2006. Upon consummation of the initialpublic offering, the Sponsors will receive an automatic fee equal to the netpresent value of the aggregate annual management fee that would have beenpayable to 

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theSponsors during the remainder of the term of the fee agreement. The Company estimatesthat its aggregate payment to the Sponsors would have been $40.1 million hadthe offering occurred on December 28, 2006.

The fee agreement alsoprovides that AMCE will indemnify the Sponsors against all losses, claims,damages and liabilities arising in connection with the management servicesprovided by the Sponsors under the fee agreement.

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

**Control Arrangement**

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

**Continuing Service Agreement**

In connection with thetermination of his current employment agreement with Loews, the Company ispaying Mr. Travis Reid severance of $87,500 per month for 18 monthsfollowing the closing of the Mergers, has paid him a lump sum payment of$1,575,000, and will provide outplacement assistance and automobile benefitsthrough December 31, 2006. In addition, in order to facilitate integrationfollowing the Mergers, the Company has entered into an agreement withMr. Reid, whereby Mr. Reid is providing certain transitionalconsulting services to the Company and reports to Mr. Peter C. Brown, theCompany’s Chief Executive Officer. Pursuant to the continuing serviceagreement, which may be terminated by Mr. Reid at any time or by theCompany after December 31, 2006, the Company has paid Mr. Reid a consultingfee for each month of service at the following rate: $50,000 for each of thefirst four months, $33,333 for each of the next four months and $16,667 for anymonth thereafter through December 31, 2006. Under certain circumstances,Mr. Reid will have the right to require Holdings to purchase, and Holdingswill have the right to require Mr. Reid to sell, on one occasion, allshares of common stock of Holdings that Mr. Reid received in the Merger inexchange for payment to him of his original purchase price for his shares ofLoews common stock of $600,000. The continuing service agreement is notintended to create an employment relationship between Mr. Reid and theCompany and his services are being provided on an independent contractor basis.

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(1)          Allpercentage ownerships are approximate.

**Option Grant to Travis Reid**

Pursuant to his ContinuingService Agreement, effective as of January 26, 2006, Holdings has grantedMr. Reid an option under the Holdings 2004 Stock Option Plan to acquireClass N Common Stock at an exercise price ($1,000 per share) not less thanthe fair market value (as determined by the Board of Directors of Holdings) onthe date of grant. The option is subject to other terms and conditions substantiallysimilar to the terms of Holdings options currently held by employees and isalso subject to the Manage

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mentStockholders Agreement. The option vests in three installments onDecember 23, 2006, 2007 and 2008, and vests in full upon a change ofcontrol of Holdings or AMCE.

**Cinemex**

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

**Market Making Transactions**

On August 18, 2004,Holdings sold $304,000,000 in aggregate principal amount at maturity of its 12%Senior Discount Notes due 2014 (the “Holdco Notes”). On the same date, Marqueesold $250,000,000 in aggregate principal amount of its 85¤8%Senior Notes due 2012 and $205,000,000 in aggregate principal amount of itsSenior Floating Notes due 2010 (Collectively, the “Senior Notes”). J.P. MorganSecurities Inc., an affiliate of JPMP which owns approximately 20.8% ofHoldings, was an initial purchaser of both the Holdco Notes and the SeniorNotes, which is equivalent to the role of an underwriter in a registeredsecurities offering.

On January 26, 2006AMCE sold $325,000,000 in aggregate principal amount of its 11% Senior SubordinatedNotes due 2016. JP Morgan Securities Inc., an affiliate of JPMP which ownsapproximately 20.8% of Holdings, was an initial purchaser of these notes, whichis equivalent to the role of an underwriter in a registered securitiesoffering. Credit Suisse Securities (USA) LLC, whose affiliates ownapproximately 1.6% of Holdings, was also an initial purchaser of these notes.JPMP does not hold any of the debt obligations discussed above. The debtobligations discussed above were offered in reliance on Rule 144A..

**Management Fee Agreement**

Prior to the Mergers; theCompany was required to pay the Marquee Sponsors an annual management fee of upto $2.0 million in the aggregate, payable quarterly, under a management feeagreement. In connection with the merger with Marquee, Holdings, Marquee andthe Marquee Sponsors entered into the management fee agreement pursuant towhich AMCE, as the surviving corporation in the merger with Marquee, paid toeach of JPMP and Apollo a one-time sponsorship fee of $10.0 million inconsideration of the completion of the merger with Marquee and thecapitalization of Holdings. The Company recorded the one-time sponsorship feespaid to JPMP and Apollo of $10 million each as General and administrative:Merger and acquisition costs for the Successor period from inception onJuly 16, 2004 through March 31, 2005. The management fee agreementalso provided for an annual management fee of $2.0 million in theaggregate; payable quarterly and in advance to each Marquee Sponsor for theduration of the agreement, as well as reimbursements for each Marquee sponsor’srespective out-of-pocket expenses in connection with the management servicesprovided under the agreement. In addition, the management fee agreementprovided for reimbursements of up to $3.5 million for fees payable byHoldings in any single fiscal year in order to maintain its corporateexistence, corporate overhead expenses and salaries or other compensation ofcertain employees. The Company has recorded Management fee expense of $500,000and $1,500,000 during the thirteen and thirty-nine weeks endedDecember 29, 2005.

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**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 ofthese terms or variations of them or similar terminology. Although we believethat the expectations 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) domestic and international political, social and economic conditions;(vii) demographic changes; (viii) increases in the demand for realestate; (ix) changes in real estate, zoning and tax laws;(x) unforeseen changes in operating requirements; (xi) our ability toidentify suitable acquisition candidates and successfully integrateacquisitions into our operations, including the integration of Loews CineplexEntertainment Corporation and the achievement of estimated cost savings andsynergies as a result of the Mergers (as defined below) on a timely basis;(xii) results of significant litigation; and (xiii) our ability toenter into various financing programs. Readers are urged to consider thesefactors carefully in evaluating the forward-looking statements. Forfurther information about these and other risks and uncertainties, see Item 1A.“Risk Factors” in our Annual Report on Form 10-K for the fiscal yearended March 30, 2006.

All subsequent written andoral forward-looking statements attributable to us or persons acting onour behalf are expressly qualified in their entirety by these cautionarystatements. The forward-looking statements included herein are made onlyas of the date of this Quarterly Report on Form 10-Q/A, and we donot undertake any obligation to release publicly any revisions to such forward-lookingstatements to reflect events or circumstances after the date hereof or toreflect the occurrence of unanticipated events.

**Overview**

We are one of the world’s leading theatricalexhibition companies. As of December 28, 2006, we owned, operated or hadinterests in 382 theatres and 5,340 screens with 87%, or 4,637 of our screensin the U.S. and Canada, and 13%, or 703 of our screens in Mexico, Argentina,Brazil, Chile, Uruguay, China (Hong Kong), France, and the United Kingdom.

Our principal directly owned subsidiaries are AMCEntertainment Inc., American Multi-Cinema, Inc. (“AMC”), GrupoCinemex, S.A. de C.V. (“Cinemex”) and AMC EntertainmentInternational, Inc. (“AMCEI”). We conduct our U.S. and Canada theatricalexhibition business through AMC and its subsidiaries and AMCEI and itssubsidiaries. We are operating theatres outside the United States primarilythrough Cinemex and AMCEI and its subsidiaries.

On March 29, 2005, AMC Entertainment, along withRegal Entertainment Group (“Regal”), combined our respective cinema screenadvertising businesses into a new joint venture company called NationalCineMedia, LLC (“NCM”). The new company engages in the marketing and sale ofcinema advertising and promotions products; business communications andtraining services; and the distribution of digital alternative content. Werecord our share of on-screen advertising revenues generated by our adver

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tising subsidiary,National Cinema Network, Inc. (“NCN”) and NCM in other theatre revenues.We contributed fixed assets and exhibitor agreements of our cinema screenadvertising subsidiary NCN to NCM. We also included goodwill (recorded inconnection with the merger with Marquee) in the cost assigned to our investmentin NCM. Additionally, we paid termination benefits related to the displacementof certain NCN associates. In consideration of the NCN contributions describedabove, NCM issued a 37% interest in its Class A units to NCN. Since thatdate, our interest in NCM has declined to 29% due to the entry of newinvestors. On February 7, 2007, National CineMedia, Inc., a newly-formedentity that will serve as the sole manager of National CineMedia, LLC,announced the pricing of its initial public offering (“IPO”) of 38,000,000shares of common stock at a price of $21.00 per share. Subsequent to the IPO,the Company holds a 18.6% interest in National CineMedia, LLC.

On June 20, 2005, Holdings entered into a mergeragreement with LCE Holdings, the parent of Loews, pursuant to which LCEHoldings merged with and into Holdings, with Holdings continuing as the holdingcompany for the merged businesses, and Loews merged with and into AMCEntertainment, with AMC Entertainment continuing after the Mergers. Thetransactions closed on January 26, 2006. Upon completion of the Mergers,JPMP, Apollo, JPMP’s and Apollo’s co-investors, affiliates of Bain, Carlyle,Spectrum and management held 100% of Holdings’ outstanding capital stock.

In conjunction with the Mergers, we entered into afinal judgment with the Antitrust Division of the United States Department ofJustice and judgments and consent decrees with various States. These judgmentsand decrees require us to hold separate and divest ourselves of certaintheatres. We sold six of these theatres during the thirty-nine weeks endedDecember 28, 2006 for an aggregate sales price of $64.3 million, exchangedtwo of these theatres with another theatrical exhibitor for two theatres fromthat exhibitor in different markets, retained one of the theatres pursuant toan agreement reached with the California Attorney General and closed oneremaining theatre during the third quarter of fiscal 2007.

In connection withthe Mergers, on January 26, 2006, the Company engaged in the followingfinancing transactions:

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

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

·       terminatedAMC Entertainment’s March 25, 2004 senior secured credit facility, underwhich no amounts were outstanding;

·       repaidall outstanding amounts under Loews’ existing senior secured credit facilityand the termination of all commitments thereunder (the “Loews Facility”); and

·       completeda tender offer and consent solicitation for all $315.0 million aggregateprincipal amount of Loews’ outstanding 9.0% senior subordinated notes due 2014.

The proceeds of the financing transactions were usedto repay amounts outstanding under the Loews Facility, to fund the tender offer,to pay related fees and expenses, and to pay fees and expenses related to theMergers.

In connection with the Mergers, we acquired Loews onJanuary 26, 2006, which significantly increased our size. In the Mergers,we acquired 112 theatres with 1,308 screens in the United States (included inour U.S. and Canada operating segment) and 40 theatres with 443 screens in Mexico(included in our International operating segment) that are included in ourconsolidated results of operations from January 26, 2006. Accordingly,results of operations for the fifty-two weeks ended March 30, 2006, whichinclude nine 

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weeks of operations of thebusinesses we acquired, are not comparable to our results for the fifty-twoweeks ended March 31, 2005 and the results of operations for the thirteenand thirty-nine weeks ended December 28, 2006, which include thirteen andthirty-nine weeks of operations of the business we acquired, are not comparableto our results for the thirteen and thirty-nine weeks ended December 29,2005.

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

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

In May 2006, AMCEI and its subsidiary, AMCEntertainment International Limited, sold their interests in AMC EntertainmentEspaña S.A., which owned and operated 4 theatres with 86 screens in Spain, andActividades Multi-Cinemas E Espectáculos, LDA, which owned and operated 1theatre with 20 screens in Portugal. These operations have been classified asdiscontinued operations as a result of our disposition of Yelmo Cineplex, S.L. (“Yelmo”)in December 2006.

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

During the thirty-nine weeks ended December 28,2006, we sold 4 wholly-owned theatres in Spain with 86 screens, sold onetheatre in Portugal with 20 screens, disposed of 8 theatres with 100 screens inthe U.S. and closed one theatre with six screens as required by and inconnection with the approval of the Mergers discussed below, closed13 theatres with 101 screens in the U.S., closed one managed theatrewith 6 screens in the U.S., opened six new theatres with 95 screens in theU.S., acquired two theatres, with 32 screens in the U.S., added6 screens to an existing theatre in the U.S., opened two new theatre with21 screens in Mexico, closed 4 screens on an existing theatre in HongKong, opened one theatre with 6 screens in Hong Kong, disposed of 28theatres with 318 screens with our joint-venture in Spain and disposed of onetheatre in Argentina with 8 screens resulting in a circuit total of 382theatres and 5,340 screens. As of December 28, 2006, we owned,operated or had interests in 382 theatres and 5,340 screens with 87%, or 4,637of our screens in the U.S. and Canada, and 13%, or 703 of our screens in Mexico,Argentina, Brazil, Chile, Uruguay, China (Hong Kong), France and the United Kingdom.

For financial reporting purposes we have threesegments, (1) U.S. and Canada theatrical exhibition (formerly, North Americantheatrical exhibition), (2) International theatrical exhibition and (3) Other,with the most significant activity in Other related to on-screen advertising.

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

Box office admissions are our largest source ofrevenue. We predominantly license “first-run” motion pictures from distributorsowned by major film production companies and from independent distributors.

We license films on a film-by-film andtheatre-by-theatre basis. Film exhibition costs are accrued based on theapplicable admissions revenues and estimates of the final settlement pursuantto our film licenses. Licenses that we enter into typically state that rentalfees are based on either aggregate terms 

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

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

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

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

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

We continually upgrade thequality of our theatre circuit by adding new screens through new builds (includingexpansions) and acquisitions and by disposing of older screens through closuresand sales. We believe our introduction of the megaplex concept in 1995 has ledto the current industry replacement cycle, which has accelerated theobsolescence of older, smaller theatres by setting new standards formoviegoers. From 1995 through March 30, 2006, AMC Entertainment and Loewsadded 191 theatres with 3,475 new screens, acquired 431 theatres with 3,007screens and disposed of 666 theatres with 4,018 screens. As of December 28,2006, approximately 72% of our screens in the U.S. and Canada were located inmegaplex theatres.

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**Operating Results**

Setforth in the table below is a summary of revenues, costs and expensesattributable to the Company’s U.S. and Canada and International theatricalexhibition operations and Other businesses. Reference is made to Note 13—OperatingSegments for additional information about our operations by operating segment.

| ** **                             | ** ** | **Thirteen Weeks Ended**                                         | ** ** | **Thirty-Nine Weeks Ended**                                      | ** ** |
|----------------------------------------|------------|----------------------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|
| ** **                             | ** ** | **December 28,   2006  (restated)**(2)                           | ** ** | ** December 29,   2005  (restated)**(2)                     | ** ** | ** % Change ** | ** ** | **December 28,  2006** | ** ** | **December 29,  2005  (restated)**(2) | ** ** | **% Change** | ** ** |
| ** **                             | ** ** | **(thousands of dollars, except operating data)** | ** ** | **(thousands of dollars, except operating data)** | ** ** |
| **Revenues**                           | ** ** |                                                                       | ** ** | ** **                                                                 |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| U.S. and Canada  theatrical exhibition |       |                                                                       |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                             |       |                                                                       | $          | 378,625                                                                    |       |   |   | $ | 263,378 |   |   |   | 43.8 | % |   |   | $ | 1,186,054 |   |   |   | $ | 788,018 |   |   |   | 50.5 | % |   |
| Concessions                            |       |                                                                       | 149,991    |                                                                       |       |   | 104,256 |   |   |   | 43.9 | % |   |   | 475,740 |   |   |   | 313,971 |   |   |   | 51.5 | % |   |
| Other theatre                          |       |                                                                       | 25,875     |                                                                       |       |   | 22,431 |   |   |   | 15.4 | % |   |   | 75,686 |   |   |   | 58,426 |   |   |   | 29.5 | % |   |
|                                   |       |                                                                       | 554,491    |                                                                       |       |   | 390,065 |   |   |   | 42.2 | % |   |   | 1,737,480 |   |   |   | 1,160,415 |   |   |   | 49.7 | % |   |
| International theatrical  exhibition   |       |                                                                       |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Admissions                             |       |                                                                       | 21,148     |                                                                       |       |   | 4,305 |   |   |   | * |   |   |   | 71,932 |   |   |   | 11,842 |   |   |   | * |   |   |
| Concessions                            |       |                                                                       | 12,684     |                                                                       |       |   | 1,297 |   |   |   | * |   |   |   | 44,724 |   |   |   | 3,481 |   |   |   | * |   |   |
| Other theatre                          |       |                                                                       | 8,017      |                                                                       |       |   | 370 |   |   |   | * |   |   |   | 19,553 |   |   |   | 967 |   |   |   | * |   |   |
|                                   |       |                                                                       | 41,849     |                                                                       |       |   | 5,972 |   |   |   | * |   |   |   | 136,209 |   |   |   | 16,290 |   |   |   | * |   |   |
| Other                                  |       |                                                                       | 16         |                                                                       |       |   | 2,471 |   |   |   | (99.4 | )% |   |   | 52 |   |   |   | 13,024 |   |   |   | (99.6 | )% |   |
| Total revenues                         |       |                                                                       | $          | 596,356                                                                    |       |   |   | $ | 398,508 |   |   |   | 49.6 | % |   |   | $ | 1,873,741 |   |   |   | $ | 1,189,729 |   |   |   | 57.5 | % |   |
| **Cost of Operations**                 | ** ** |                                                                       | ** ** | ** **                                                                 |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| U.S. and Canada  theatrical exhibition |       |                                                                       |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Film exhibition costs                  |       |                                                                       | $          | 195,110                                                                    |       |   |   | $ | 138,298 |   |   |   | 41.1 | % |   |   | $ | 620,137 |   |   |   | $ | 422,886 |   |   |   | 46.6 | % |   |
| Concession costs                       |       |                                                                       | 15,037     |                                                                       |       |   | 11,166 |   |   |   | 34.7 | % |   |   | 50,091 |   |   |   | 33,604 |   |   |   | 49.1 | % |   |
| Theatre operating expense              |       |                                                                       | 139,250    |                                                                       |       |   | 98,063 |   |   |   | 42.0 | % |   |   | 433,550 |   |   |   | 291,462 |   |   |   | 48.8 | % |   |
| Rent                                   |       |                                                                       | 103,819    |                                                                       |       |   | 75,661 |   |   |   | 37.2 | % |   |   | 314,383 |   |   |   | 221,681 |   |   |   | 41.8 | % |   |
| Preopening expense                     |       |                                                                       | 2,931      |                                                                       |       |   | 3,515 |   |   |   | (16.6 | )% |   |   | 5,121 |   |   |   | 4,251 |   |   |   | 20.5 | % |   |
| Theatre and other closure  expense     |       |                                                                       | 595        |                                                                       |       |   | 386 |   |   |   | 54.1 | % |   |   | 8,285 |   |   |   | 1,317 |   |   |   | * |   |   |
|                                   |       |                                                                       | 456,742    |                                                                       |       |   | 327,089 |   |   |   | 39.6 | % |   |   | 1,431,567 |   |   |   | 975,201 |   |   |   | 46.8 | % |   |
| International theatrical  exhibition   |       |                                                                       |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Film exhibition costs                  |       |                                                                       | 8,921      |                                                                       |       |   | 2,036 |   |   |   | * |   |   |   | 31,065 |   |   |   | 5,566 |   |   |   | * |   |   |
| Concession costs                       |       |                                                                       | 3,042      |                                                                       |       |   | 276 |   |   |   | * |   |   |   | 10,780 |   |   |   | 742 |   |   |   | * |   |   |
| Theatre operating expense              |       |                                                                       | 12,050     |                                                                       |       |   | 2,000 |   |   |   | * |   |   |   | 35,244 |   |   |   | 6,230 |   |   |   | * |   |   |
| Rent                                   |       |                                                                       | 6,525      |                                                                       |       |   | 2,392 |   |   |   | * |   |   |   | 20,033 |   |   |   | 7,356 |   |   |   | * |   |   |
| Preopening expense                     |       |                                                                       | 767        |                                                                       |       |   | — |   |   |   | * |   |   |   | 1,706 |   |   |   | — |   |   |   | * |   |   |
| Theatre closure                        |       |                                                                       | 16         |                                                                       |       |   | 24 |   |   |   | (33.3 | )% |   |   | 36 |   |   |   | 73 |   |   |   | (50.7 | )% |   |
|                                   |       |                                                                       | 31,321     |                                                                       |       |   | 6,728 |   |   |   | * |   |   |   | 98,864 |   |   |   | 19,967 |   |   |   | * |   |   |
| Other                                  |       |                                                                       | 237        |                                                                       |       |   | 3,319 |   |   |   | (92.9 | )% |   |   | 1,183 |   |   |   | 14,501 |   |   |   | (91.8 | )% |   |
| General and  administrative expense:   |       |                                                                       |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger and Acquisition  costs          |       |                                                                       | 3,537      |                                                                       |       |   | 281 |   |   |   | * |   |   |   | 9,363 |   |   |   | 2,926 |   |   |   | * |   |   |
| Management Fee                         |       |                                                                       | 1,250      |                                                                       |       |   | 500 |   |   |   | * |   |   |   | 3,750 |   |   |   | 1,500 |   |   |   | * |   |   |
| Other                                  |       |                                                                       | 5,955      |                                                                       |       |   | 10,432 |   |   |   | (42.9 | )% |   |   | 35,996 |   |   |   | 29,511 |   |   |   | 22.0 | % |   |
| Restructuring charge                   |       |                                                                       | —     |                                                                       |       |   | 27 |   |   |   | (100.0 | )% |   |   | — |   |   |   | 3,935 |   |   |   | (100.0 | )% |   |
| Depreciation and  amortization         |       |                                                                       | 64,157     |                                                                       |       |   | 35,931 |   |   |   | 78.6 | % |   |   | 192,687 |   |   |   | 108,478 |   |   |   | 77.6 | % |   |
| Disposition of assets and  other gains |       |                                                                       | (5,334     | )                                                                          |       |   | (297 | ) |   |   | * |   |   |   | (11,184 | ) |   |   | (1,067 | ) |   |   | * |   |   |
| Total costs and expenses               |       |                                                                       | $          | 557,865                                                                    |       |   |   | $ | 384,010 |   |   |   | 45.3 | % |   |   | $ | 1,762,226 |   |   |   | $ | 1,154,952 |   |   |   | 52.6 | % |   |

 

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| ** **                                               | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-Nine Weeks Ended** | ** ** |
|----------------------------------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| ** **                                               | ** ** | **December 28,  2006**        | ** ** | **December 29,  2005**           | ** ** | **December 28,  2006** | ** ** | **December 29,  2005** | ** ** |
| **Operating  Data (at period end):**                     |       |                               |       |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Screen additions                                         |       |                               | 80         |                                  |       |   | 76 |   |   |   | 128 |   |   |   | 92 |   |   |
| Screen acquisitions                                      |       |                               | —     |                                  |       |   | — |   |   |   | 32 |   |   |   | — |   |   |
| Screen dispositions                                      |       |                               | 371        |                                  |       |   | 29 |   |   |   | 649 |   |   |   | 116 |   |   |
| Average screens—continuing operations(1)            |       |                               | 5,092      |                                  |       |   | 3,366 |   |   |   | 5,111 |   |   |   | 3,350 |   |   |
| Number of screens operated                               |       |                               |       |                                  |       |   |   |   |   |   | 5,340 |   |   |   | 3,690 |   |   |
| Number of theatres operated                              |       |                               |       |                                  |       |   |   |   |   |   | 382 |   |   |   | 244 |   |   |
| Screens per theatre                                      |       |                               |       |                                  |       |   |   |   |   |   | 14.0 |   |   |   | 15.1 |   |   |
| Attendance—continuing  operations(1) (in thousands) |       |                               | 56,888     |                                  |       |   | 38,592 |   |   |   | 184,207 |   |   |   | 115,662 |   |   |

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(1)          Includes consolidatedtheatres only.

(2)          We restated ourfinancial statements for management-purchased shares and stock option awards.See Note 1 to our consolidated financial statements.

*                    Percentagechange in excess of 100%

**Thirteen weeksEnded December 28, 2006 and December 29, 2005**

**Revenues.****  **Total revenues increased 49.6%, or$197,848,000, during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005. This increaseincluded approximately $180,083,000 of additional admission and concessionsrevenues resulting from the Merger.

U.S. and Canada theatrical exhibition revenues increased42.2%, or $164,426,000, during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005. Admissionsrevenues increased 43.8%, or $115,247,000, during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005, due to a33.3% increase in total attendance, including the increased attendance andadmissions revenues of $110,043,000 due to the Merger, and a 7.9% increase inaverage ticket prices. Admissions revenues at comparable theatres (theatresopened on or before the third quarter of fiscal 2006) increased 0.4% during thethirteen weeks ended December 28, 2006 over the comparable period lastyear primarily due to higher average ticket prices partially offset by a 5.2%decrease in attendance at comparable theatres. The increase in average ticketprice was primarily due to our practice of periodically reviewing ticket pricesand the discounts we offer and making selective adjustments based upon suchfactors as general inflationary trends and conditions in local markets. Basedupon available industry sources, box office revenues of our comparable theatres(including comparable theatres acquired in the Merger) performed in line withoverall performance of industry comparable theatres in the markets where we operate.Concessions revenues increased 43.9%, or $45,735,000, during the thirteen weeksended December 28, 2006 compared to the thirteen weeks ended December 29, 2005due to the increase in attendance and an 8.0% increase in average concessionsper patron related primarily to price increases. Concession revenues increasedby $40,686,000 due to the Merger. Other theatre revenues increased 15.4%, or$3,444,000, during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005. Included inother theatre revenues are our share of on-screen advertising revenuesgenerated by NCN and NCM. The increase in other theatre revenues was primarilydue to increases in on-screen advertising revenues as a result of the Merger.

International theatrical exhibition revenues increased$35,877,000 during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005. Admissionsrevenues increased by $17,935,000 due to the theatres acquired in Mexico in theMerger. Overall, admissions revenues increased $16,843,000 during the thirteenweeks ended December 28, 2006 compared to the thirteen weeks ended December 29, 2005primarily due to the theatres acquired in Mexico. Concessions revenues in

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creased $11,419,000 due tothe theatres acquired in Mexico in the Merger. Overall, concession revenuesincreased $11,387,000 during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005 due primarily tothe theatres acquired in Mexico.

Revenues from Other decreased99.4%, or $2,455,000, during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005 due to thecontribution of NCN’s net assets to NCM on March 29, 2005 and the relatedrun-off of customer contracts. The revenues of NCN during fiscal 2006 and2007 are comprised 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 45.3%,or $173,855,000, during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005. The effect ofthe Merger was an increase in total costs and expenses of approximately $162,299,000.

U.S. and Canada theatricalexhibition costs and expenses increased 39.6%, or $129,653,000, during thethirteen weeks ended December 28, 2006 compared to the thirteen weeksended December 29, 2005. Film exhibition costs increased 41.1%, or$56,812,000, during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005 due to theincrease in admissions revenues, offset by a decrease in the percentage ofadmissions paid to film distributors. As a percentage of admissions revenues,film exhibition costs were 51.5% in the current period as compared with 52.5%in the prior period due to more favorable film rental terms primarily fromtheatres acquired in the Merger. Concession costs increased 34.7%, or$3,871,000, during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005 due to theincrease in concessions revenues partially offset by a decrease in concessioncosts as a percentage of concessions revenues. As a percentage of concessionsrevenues, concession costs were 10.0% in the current period compared with 10.7%in the prior period. As a percentage of revenues, theatre operating expense was25.1% in the current period as compared to 25.1% in the prior period. Rentexpense increased 37.2%, or $28,158,000, during the thirteen weeks ended December 28,2006 compared to the thirteen weeks ended December 29, 2005 primarilydue to the Merger, which increased rent expense by approximately $25,852,000.During the thirteen weeks ended December 28, 2006, we recognized$595,000 of theatre and other closure expense due primarily to accretion of theclosure liability related to theatres closed during prior periods. During thethirteen weeks ended December 29, 2005, we recognized $386,000 oftheatre and other closure expense related primarily to accretion of the closureliability related to theatres closed during prior periods.

International theatricalexhibition costs and expenses increased $24,593,000 during the thirteen weeksended December 28, 2006 compared to the thirteen weeks year ended December 29, 2005.Film exhibition costs increased $6,885,000 during the thirteen weeks ended December 28, 2006compared to the thirteen weeks ended December 29, 2005 due to theincrease in admissions revenues. Overall, film exhibition costs increased$7,385,000 during the thirteen weeks ended December 28, 2006 compared tothe thirteen weeks ended December 29, 2005 due primarily to the theatres acquiredin Mexico. Concession costs increased $2,766,000 during the thirteen weeksended December 28, 2006 compared to the thirteen weeks ended December 29, 2005due to the increase in concession revenues. Overall, concession costs increased$2,760,000 during the thirteen weeks ended December 28, 2006 compared tothe thirteen weeks ended December 29, 2005 due primarily to the theatresacquired in Mexico. As a percentage of revenues, theatre operating expense was28.8% in the current period compared to 33.5% in the prior period. Theatreoperating expense as a percentage of revenues in Mexico was 27.6% in thecurrent period. Rent expense increased 172.8%, or $4,133,000, during thethirteen weeks ended December 28, 2006 compared to the thirteen weeksended December 29, 2005, primarily as a result of the theatresacquired in Mexico. We continually monitor the performance of our internationaltheatres, and factors such as changing consumer preferences for filmedentertainment in international markets and our inability to sublease vacantretail space could negatively impact operating results and result in futureclosures, sales, dispositions and theatre closure charges prior to expirationof underlying lease agreements.

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Costsand expenses from Other decreased 92.9%, or $3,082,000, during the thirteenweeks ended December 28, 2006 compared to the thirteen weeks endedDecember 29, 2005 due to the contribution of net assets by NCN to NCMand run-off of customer contracts.

**General and Administrative Expense:**

**Merger and acquisitioncosts.****  **Mergerand acquisition costs increased $3,256,000 from $281,000 to $3,537,000 duringthe thirteen weeks ended December 28, 2006 compared to the thirteenweeks ended December 29, 2005. Current year costs are primarilycomprised of professional and consulting, repairs and maintenance to updatecertain of the Loews theatres and salaries costs related to the Merger andother potential divestiture activities.

**Management fees.****  **Management fees increased $750,000 duringthe current period. For fiscal 2007, management fees of $1,250,000 will be paidquarterly, in advance, to our Sponsors in exchange for consulting and otherservices.

**Other.****  **Other general and administrative expensedecreased 42.9%, or $4,477,000, during the thirteen weeks endedDecember 28, 2006 compared to the thirteen weeks endedDecember 29, 2005, due primarily to a curtailment gain of $10,983,000related to our defined benefit pension plan (see Note 13—Employee BenefitPlans) partially offset by expense at Cinemex of $2,071,000, increases in othersalaries of $898,000 and additional increased professional and consulting feesof $663,000, primarily related to the Merger. Additionally, stock compensationexpense increased $3,199,000 based on the increase in estimated fair value foroutstanding options (see Note 8—Stockholder’s Equity).

**Restructuring Charges.****  **Restructuring charges were $0 during thethirteen weeks ended December 28, 2006 as compared to $27,000 duringthe thirteen weeks ended December 29, 2005. The prior period expensesare primarily related to one-time termination benefits and other costs relatedto the displacement of approximately 200 associates related to anorganizational restructuring, which was completed to create a simplifiedorganizational structure and contribution of assets by NCN to NCM.

**Depreciation andAmortization.****  **Depreciationand amortization increased 78.6%, or $28,226,000, compared to the prior period,due primarily to increased asset values associated with the Merger.

**Disposition of Assets andOther Gains.****  **Dispositionof assets and other gains were $5,334,000 in the current period compared to$297,000 in the prior period. The current and prior periods include $5,250,000and $260,000, respectively, of settlements received related to fireproofing litigationrecoveries at various theatres (see Note 14—Commitments andContingencies). The current period includes a gain on U.S. dispositions oftheatres as required by and in connection with the Mergers of approximately $84,000.

**Other Income.****  **Other income includes $1,967,000 and$1,265,000 of income related to the derecognition of stored value cardliabilities where we believe future redemption to be remote, during thethirteen weeks ended December 28, 2006 and December 29, 2005,respectively. Other income also includes insurance recoveries related toHurricane Katrina of $3,032,000 for property losses related to HurricaneKatrina, net of disposition losses of $346,000 and $1,968,000 for business interruptionduring the thirteen weeks ended December 29, 2005.

**Interest Expense.****  **Interest expense increased 90.7%, or $28,155,000,primarily due to increased borrowings.

On January 26, 2006,we issued $325,000,000 of the Notes due 2016 and entered into the New CreditFacility for $850,000,000, of which $645,125,000 is currently outstanding as avariable rate term note. We also incurred interest expense related to debt heldby Cinemex of $3,150,000 during the thirteen weeks ended December 28,2006.

**Investment Income.****  **Investment income was $2,995,000 for thethirteen weeks ended December 28, 2006 compared to an investment lossof $2,541,000 for the thirteen weeks ended 

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December 29, 2005.Interest income increased $3,428,000 from the prior period due primarily to largeramounts of cash and equivalents available for investment. Equity in losses ofnon-consolidated entities were $1,226,000 in the current period compared to$2,919,000 in the prior period. Equity in earnings (losses) related to our investmentin Hoyts General Cinemas South America (“HGCSA”) and Yelmo for the thirteenweeks ended December 28, 2006 were ($2,031,000) and $1,094,000, respectively.

**Income Tax Benefit.****  **The benefit for income taxes fromcontinuing operations was $1,500,000 for the thirteen weeks ended December 28, 2006compared to $4,900,000 for the thirteen weeks ended December 29, 2005.See Note 11—Income Taxes to the Consolidated Financial Statements.

**Loss from DiscontinuedOperations, Net.****  **OnMay 11, 2006, we sold AMC Entertainment España S.A. and ActividadesMulti-Cinemeas E Espectaculos, LDA (collectively “Iberia”), including 4theatres with 86 screens in Spain and 1 theatre with 20 screens inPortugal.  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 inYelmo. In December 2006, we disposed of our investment in Yelmo, including 27theatres with 310 screens in Spain, and the results of the operations in Iberiahave now been classified as discontinued operations.  On June 30, 2005, we sold Japan AMC Theatres,Inc., including four theatres in Japan with 63 screens, and classified itsoperations as discontinued operations. The information presented for all fiscal 2007 and 2006 reflects the newclassifications.  See Note 3—DiscontinuedOperations for the components of the loss from discontinued operations.

**Net Loss.****  **Net loss was $14,287,000 and $8,090,000 forthe thirteen weeks ended December 28, 2006 and December 29, 2005,respectively.

**Thirty-nine weeks Ended December 28, 2006 and December 29,2005**

**Revenues.****  **Total revenues increased 57.5%, or$684,012,000, during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005. Thisincrease included approximately $564,713,000 of additional admission andconcessions revenues resulting from the Merger.

U.S. and Canada theatrical exhibition revenuesincreased 49.7%, or $577,065,000, during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005. Admissionsrevenues increased 50.5%, or $398,036,000, during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005, due to a41.6% increase in total attendance, including the increased attendance andadmissions revenues of $334,369,000 due to the Merger, and a 6.3% increase inaverage ticket prices. Admissions revenues at comparable theatres (theatresopened on or before the first quarter of fiscal 2006) increased 4.2% during thethirty-nine weeks ended December 28, 2006 over the comparable periodlast year, primarily due to a 4.1% increase in average ticket price and a 0.1%increase in attendance at comparable theatres. The increase in average ticketprice was primarily due to our practice of periodically reviewing ticket pricesand the discounts we offer and making selective adjustments based upon suchfactors as general inflationary trends and conditions in local markets. Basedupon available industry sources, box office revenues of our comparable theatres(including comparable theatres acquired in the Merger) performed in line with overallperformance of industry comparable theatres in the markets where we operate.Concessions revenues increased 51.5%, or $161,769,000, during the thirty-nineweeks ended December 28, 2006 compared to the thirty-nine weeks endedDecember 29, 2005 due to the increase in attendance and a 7.0%increase in average concessions per patron related primarily to priceincreases. Concession revenues increased by $126,013,000 due to the Merger.Other theatre revenues increased 29.5%, or $17,260,000, during the thirty-nineweeks ended December 28, 2006 compared to the thirty-nine weeks endedDecember 29, 2005. Included in other theatre revenues are our shareof on-screen advertising revenues generated by NCN and NCM. The increase inother theatre revenues was primarily due to increases in on-screen advertisingrevenues as a result of the Merger.

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International theatricalexhibition revenues increased $119,919,000 during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005. Admissionsrevenues increased by $63,125,000 due to the theatres acquired in Mexico in theMerger. Overall, admissions revenues increased $60,090,000 during thethirty-nine weeks ended December 28, 2006 compared to the thirty-nineweeks ended December 29, 2005. Concessions revenues increased$41,205,000 due to the theatres acquired in Mexico in the Merger. Overall,concession revenues increased $41,243,000 during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005.

Revenuesfrom Other decreased 99.6%, or $12,972,000, during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005 due to thecontribution of NCN’s net assets to NCM on March 29, 2005 and the relatedrun-off of customer contracts. The revenues of NCN during fiscal 2006 and 2007are comprised of customer contracts entered into prior to March 29, 2005.Our share of advertising revenues generated by NCM are included in U.S. andCanada Other theatre revenues.

**Costs and expenses.****  **Total costs and expenses increased 52.6%,or $607,274,000, during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005. The effectof the Merger was an increase in total costs and expenses of approximately$508,192,000.

U.S. and Canada theatrical exhibition costs andexpenses increased 46.8%, or $456,366,000, during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005. Filmexhibition costs increased 46.6%, or $197,251,000, during the thirty-nine weeksended December 28, 2006 compared to the thirty-nine weeks ended December 29, 2005due 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 52.3% in the current period ascompared with 53.7% in the prior period due to more favorable film rental termsprimarily from theatres acquired in the Merger. Concession costs increased49.1%, or $16,487,000, during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005 due to theincrease in concessions revenues and an increase in concession costs as apercentage of concessions revenues. As a percentage of concessions revenues,concession costs were 10.5% in the current period compared with 10.7% in theprior period. As a percentage of revenues, theatre operating expense was 25.0%in the current period as compared to 25.1% in the prior period. Rent expenseincreased 41.8%, or $92,702,000, during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005 primarilydue to the Merger, which increased rent expense by $76,007,000. During thethirty-nine weeks ended December 28, 2006, we recognized $8,285,000of theatre and other closure expense due primarily to the closure of 23 theatreswith 227 screens and to accretion of the closure liability related to theatres closedduring prior periods. During the thirty-nine weeks ended December 29, 2005,we recognized $1,317,000 of theatre and other closure expense related primarilyto accretion of the closure liability related to theatres closed during priorperiods.

Internationaltheatrical exhibition costs and expenses increased $78,897,000 during thethirty-nine weeks ended December 28, 2006 compared to the thirty-nineweeks ended December 29, 2005. Film exhibition costs increased$25,499,000 during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005 due to theincrease in admissions revenues. Overall, film exhibition costs increased$26,945,000 during the thirty-nine weeks ended December 28, 2006 compared tothe thirty-nine weeks ended December 29, 2005 due to the theatres acquired inMexico. Concession costs increased $10,038,000 during the thirty-nine weeksended December 28, 2006 compared to the thirty-nine weeks ended December 29, 2005due to the increase in concession revenues. Overall, concession costs increased$10,004,000 during the thirty-nine weeks ended December 28, 2006 compared tothe thirty-nine weeks ended December 29, 2005 due primarily to the theatresacquired in Mexico. As a percentage of revenues, theatre operating expense was25.9% in the current period compared to 38.2% in the prior period. Theatreoperating expense as a percentage of revenues in Mexico were 24.2% in thecurrent period. Rent expense increased $12,677,000, during the thirty-nineweeks ended December 28, 2006 

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compared to the thirty-nine weeks ended December 29, 2005primarily as a result of the theatres acquired in Mexico. We continuallymonitor the performance of our international theatres, and factors such aschanging consumer preferences for filmed entertainment in international marketsand our inability to sublease vacant retail space could negatively impactoperating results and result in future closures, sales, dispositions andtheatre closure charges prior to expiration of underlying lease agreements.

Costs and expenses fromOther decreased 91.8%, or $13,318,000, during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005 due to thecontribution of net assets by NCN to NCM and run-off of customer contracts.

**General and Administrative Expense:**

**Merger and acquisitioncosts.****  **Mergerand acquisition costs increased $6,437,000 from $2,926,000 to $9,363,000 duringthe thirty-nine weeks ended December 28, 2006 compared to thethirty-nine weeks ended December 29, 2005. Current year costs areprimarily comprised of professional and consulting, repairs and maintenance toupdate certain of the Loews theatres and salaries costs related to the Mergerand other potential divestiture activities.

**Management fees.****  **Management fees increased $2,250,000 duringthe thirty-nine weeks ended December 28, 2006. For fiscal 2007, managementfees of $1,250,000 will be paid quarterly, in advance, to our Sponsors in exchangefor consulting and other services.

**Other.****  **Other general and administrative expenseincreased 22.0%, or $6,485,000, during the thirty-nine weeks ended December 28, 2006compared to the thirty-nine weeks ended December 29, 2005. Weincurred expense at Cinemex of $7,189,000, incentive-based compensationincreased $2,405,000 due to improvements in operating results and weexperienced increases in other salaries of $1,759,000 and professional servicesand consulting of $1,011,000 primarily related to the Merger. Additionally,stock compensation expense increased $3,511,000 based on the increase in estimatedfair value for outstanding options (see Note 8—Stockholders’ Equity). These increaseswere partially offset by a curtailment gain of $10,983,000 related to ourdefined benefit pension plan (see Note 12—Employee Benefit Plans), and a decreasein charitable contributions of $1,187,000 due primarily to contributionsrelated to Hurricane Katrina in the prior year.

**Restructuring Charges.****  **Restructuring charges were $0 during thethirty-nine weeks ended December 28, 2006 as compared to $3,935,000during the thirty-nine weeks ended December 29, 2005. The priorperiod expenses are primarily related to one-time termination benefits andother costs related to the displacement of approximately 200 associates relatedto an organizational restructuring, which was completed to create a simplifiedorganizational structure and contribution of assets by NCN to NCM.

**Depreciation andAmortization.****  **Depreciationand amortization increased 77.6%, or $84,209,000, compared to the prior period,due primarily to increased asset values recorded as a result of the Merger.

**Disposition of Assets andOther Gains.****  **Disposition of assets and other gains were$11,184,000 in the current period compared to $1,067,000 in the prior period.The current and prior periods include $13,130,000 and $935,000, respectively,of settlements received related to fireproofing litigation recoveries atvarious theatres (see Note 14—Commitments and Contingencies). The currentperiod includes a loss on the U.S. dispositions of theatres as required by andin connection with the Mergers of $1,946,000.

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**OtherIncome.****  **Other income includes $9,401,000 and$7,312,000 of income related to the derecognition of stored value card liabilitieswhere we believe future redemption to be remote, during the thirty-nine weeksended December 28, 2006 and December 29, 2005,respectively. Other income also includes insurance recoveries related toHurricane Katrina of $3,032,000 for property losses related to HurricaneKatrina, net of disposition losses of $346,000 and $1,968,000 for business interruptionduring the thirty-nine weeks ended December 29, 2005.

**InterestExpense.****  **Interestexpense increased 86.1%, or $80,718,000, primarily due to increased borrowings.

On January 26, 2006, we issued $325,000,000 ofthe Notes due 2016 and entered into the New Credit Facility for $850,000,000,of which $645,125,000 is currently outstanding as a variable rate term note. Wealso incurred interest expense related to debt held by Cinemex of $9,182,000during fiscal 2007.

**Investment Income.****  **Investment income was $6,600,000 for thethirty-nine weeks ended December 28, 2006 compared to a loss of $2,062,000for the thirty-nine weeks ended December 29, 2005. Interest incomeincreased $8,754,000 from the prior period due primarily to larger amounts ofcash and equivalents available for investment. Equity in losses ofnon-consolidated entities were $3,681,000 in the current period compared tolosses of $3,578,000 in the prior period. Equity in losses related to ourinvestment in HGCSA and National CineMedia LLC for the thirty-nine weeks endedDecember 28, 2006 were $2,136,000 and $2,976,000, respectively.

**IncomeTax Provision (Benefit).****  **Theprovision for income taxes from continuing operations was $700,000 for thethirty-nine weeks ended December 28, 2006 compared to a benefit of $20,200,000for the thirty-nine weeks ended December 29, 2005. See Note 11—IncomeTaxes.

**Lossfrom Discontinued Operations, Net.****  **OnMay 11, 2006, we sold our operations in Iberia, including 4 theatres with 86screens in Spain and 1 theatre with 20 screens in Portugal. At the date of thesale these operations did not meet the criteria for discontinued operationsbecause of continuing involvement in the region through an equity methodinvestment in Yelmo. In December 2006, we disposed of our investment in Yelmo,including 27 theatres with 310 screens in Spain, and the results of theoperations in Iberia have now been classified as discontinued operations. OnJune 30, 2005, we sold Japan AMC Theatres, Inc., including four theatres inJapan with 63 screens, and classified its operations as discontinuedoperations. The information presented for all fiscal 2007 and 2006 reflects thenew classifications. See Note 3—Discontinued Operations for the components ofthe loss from discontinued operations.

**Net Loss.****  **Net loss was $45,302,000 and $53,777,000for the thirty-nine weeks ended December 28, 2006 and December 29,2005, respectively.

**LIQUIDITY ANDCAPITAL RESOURCES**

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

**Cash Flows fromOperating Activities**

Cash flows provided byoperating activities, as reflected in the Consolidated Statements of CashFlows, were $205,351,000 and $91,500,000 during the thirty-nine weeks endedDecember 28, 2006 and December 29, 2005, respectively. The increasein operating cash flows during the thirty-nine weeks ended 

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December 28,2006 is primarily due to increases in attendance and improvement in operatingresults, including amounts related to the Merger. We had a working capitalsurplus and (deficit) as of December 28, 2006 and March 30, 2006 of $99,014,000and $(115,995,000), respectively. We received litigation settlement checksrelated to fireproofing claims totaling $13,130,000 during the thirty-nineweeks ended December 28, 2006. We have the ability to borrow against ourcredit facility to meet obligations as they come due (subject to limitations onthe incurrence of indebtedness in our various debt instruments) and hadapproximately $131,000,000 and $90,000,000 available on our credit facility tomeet these obligations for the periods ended December 28, 2006 andMarch 30, 2006, respectively.

During the thirty-nineweeks ended December 28, 2006, we sold 4 wholly-owned theatres in Spainwith 86 screens, sold one theatre in Portugal with 20 screens, disposed of 8theatres with 100 screens in the U.S. and closed one theatre with six screensin the U.S. as required by and in connection with the approval of the Mergers,closed 13 theatres with 101 screens in the U.S., closed one managedtheatre with 6 screens in the U.S., opened six new theatres with 95screens in the U.S., acquired two theatres with 32 screens in the U.S.,added 6 screens to an existing theatre in the U.S., opened two new theatreswith 21 screens in Mexico, closed 4 screens on an existing theatre in HongKong, opened one theatre with 6 screens in Hong Kong, disposed of 28 theatreswith 318 screens related to our joint-venture in Spain and disposed of onetheatre in Argentina with 8 screens resulting in a circuit total of 382theatres and 5,340 screens.

**Cash Flows fromInvesting Activities**

Cash provided by (used in)investing activities, as reflected in the Consolidated Statements of Cash Flowswere $50,412,000 and $(26,590,000), during the thirty-nine weeks endedDecember 28, 2006 and December 29, 2005, respectively. As ofDecember 28, 2006, we had construction in progress of $25,364,000. We hadone U.S. theatre with a total of 16 screens under construction onDecember 28, 2006 that we expect to open in fiscal 2007. Cash outflowsfrom investing activities include capital expenditures of $100,836,000 and$77,336,000 during the thirty-nine weeks ended December 28, 2006 and December 29,2005, respectively. We expect that our gross capital expenditures in fiscal2007 will be approximately $143,000,000.

In December 2006, we disposed of our investmentin Yelmo which owned and operated 27 theatres and 310 screens in Spain as ofthe date sold for proceeds of $52,137,000.

In May 2006, AMCEI and its subsidiary AMCEntertainment International Limited sold its interests in AMC EntertainmentEspaña S.A., which owned and operated 4 theatres with 86 screens in Spain, andActividades Multi-Cinemas E Espectáculos, LDA, which owned and operated 1theatre with 20 screens in Portugal for a net sales price of approximately$35,446,000.

During the thirty-nine weeks ended December 28,2006, we sold six theatres with 68 screens, exchanged two theatres with 32 screens,and closed one theatre with six screens in the U.S. as required by and inconnection with the approval of the Mergers for an aggregate sales price of$64,302,000.

On June 30, 2005, wedisposed of Japan AMC Theatres, Inc., including four of our five theatresin Japan, for a cash sales price of $44,861,000 and on September 1, 2005,sold our remaining Japan theatre for a cash sales price of $8,595,000.

We fund the costs of constructing new theatres usingexisting cash balances, cash generated from operations or borrowed funds, asnecessary. We generally lease our theatres pursuant to long-term non-cancelableoperating leases which may require the developer, who owns the property, toreimburse us for a portion of the construction costs. However, we may decide toown the real estate assets of new theatres and, following construction, selland leaseback the real estate assets pursuant to long-term non-cancelableoperating leases.

**Historically, we have either paidfor or leased the equipment used in a theatre**

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On February 13, 2007, National CineMedia, Inc., anewly-formed entity that will serve as the sole manager of National CineMedia,LLC, completed its initial public offering (“IPO”) of 42,000,000 shares ofcommon stock at a price of $21.00 per share. Net proceeds from the IPO wereused to acquire newly issued equity interests from National CineMedia, LLC, andNational CineMedia, LLC distributed the net proceeds to each of AmericanMulti-Cinema, Inc. (“AMC”), Cinemark and Regal on a pro rata basisin connection with modifying payment obligations for access to our theatres. Inconnection with the completion of the IPO, National CineMedia entered into a$725 million term loan facility the net proceeds of which were used to redeempreferred units held by each of AMC, Cinemark and Regal on a pro rata basispursuant to a recapitalization of National CineMedia, LLC. AMC received net IPOand debt proceeds upon completion of such transactions of $517.1 million.AMC is currently exploring alternatives for using the IPO and debt proceeds,and may use some or all of the proceeds to reduce debt or other discretionarytransactions.

Inconnection with the completion of the IPO, AMC amended and restated itsexisting services agreement with National CineMedia, LLC whereby in exchangefor our pro rata share of the IPO proceeds, AMC agreed to a modification ofNational CineMedia, LLC’s payment obligation under the existing agreement. Themodification extended the term of the agreement to 30 years, provided NationalCineMedia, LLC with a five year right of first refusal beginning one year priorto the end of the term and changed the basis upon which AMC is paid by NationalCineMedia, LLC from a percentage of revenues associated with advertisingcontracts entered into by National CineMedia, LLC to a monthly theatre accessfee. The theatre access fee would be composed of a fixed payment per patron anda fixed payment per digital screen, which would increase by 8% every five yearsstarting at the end of fiscal 2011 for payments per patron and by 5% annuallystarting at the end of fiscal 2007 for payments per digital screen.Additionally, AMC entered into the Loews Screen Integration Agreement withNational CineMedia, LLC pursuant to which AMC will pay National CineMedia, LLCan amount that approximates the EBITDA that National CineMedia, LLC wouldgenerate if it were able to sell advertising in the Loews theatre chain on anexclusive basis commencing upon the completion of the IPO, and NationalCineMedia, LLC issued to AMC common membership units in National CineMedia, LLCincreasing its ownership interest to approximately 33.7%; such Loews paymentswill be made quarterly until May 2008 and are estimated to total between$15 million and $20 million in the aggregate. Also, with respect toany on-screen advertising time provided to our beverage concessionaire, AMCwould be required to purchase such time from National CineMedia, LLC at anegotiated rate. In addition, after completion of the IPO, AMC expects toreceive mandatory quarterly distributions of excess cash from NationalCineMedia, LLC. Subsequent to the IPO, we hold a 18.6% interest in NationalCineMedia, LLC.

**Cash Flows fromFinancing Activities**

Cash flows used in financing activities, as reflectedin the Consolidated Statement of Cash Flows, were $14,095,000 and $1,749,000during the thirty-nine weeks ended December 28, 2006 and December 29,2005, respectively.

Reference is made to Management’s Discussion andAnalysis of Financial Condition and Results of Operations—Liquidity and CapitalResources in our Annual Report on Form 10-K/A for the fiscal yearended March 30, 2006 for certain information about our New CreditFacility, the Cinemex Credit Facility, our Notes due 2011, Notes due 2012,Notes due 2014, Notes due 2016, Fixed Notes due 2012, Floating Notes due 2010and Discount Notes due 2014.

In December 2006, Cinemex amended its senior securedrevolving credit facility to extend it for an additional year, now maturingDecember 19, 2007. In December 2006, Cinemex also modified the terms of itssenior secured credit facility term loan. The Cinemex term loan will mature onAugust 16, 2011 and will amortize beginning on February 16, 2009 ininstallments ranging from 10% to 30% of the principal balance per annum overthe five-year period. Additionally, the applicable margin for the rate ofinterest has been 

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modified to be based on aratio of Net Debt to EBITDA. The applicable margin will now be 200 basis pointsfor a ratio of 2.50 times to 3.00 times, 175 basis points for a ratio of 2.01times to 2.50 times, 150 basis points for a ratio of 1.51 times to 2.00 timesand 125 basis points for a ratio at or below 1.50 times.

The New Credit Facility is with a syndicate of banksand other financial institutions and provides financing of up to $850,000,000,consisting of a $650,000,000 term loan facility with a maturity of seven yearsand a $200,000,000 revolving credit facility with a maturity of six years. Therevolving credit facility includes borrowing capacity available for Mexicanpeso-denominated revolving loans, for letters of credit and for swinglineborrowings on same-day notice. As of December 28, 2006, we had noborrowings under the revolving credit facility and $645,125,000 was outstandingunder the term loan facility.

Borrowings under the NewCredit Facility bear interest at a rate equal to an applicable margin plus, atour option, either a base rate or LIBOR. The initial applicable margin forborrowings under the revolving credit facility is 0.75% with respect to baserate borrowings and 1.75% with respect to LIBOR borrowings, and the initialapplicable margin for borrowings under the term loan facility is 1.50% withrespect to base rate borrowings and 2.125% with respect to LIBOR borrowings.The applicable margin for such borrowings may be reduced, subject to AMCEattaining 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, through September 30, 2012,with any remaining balance due on January 26, 2013.

As a result of thecompletion on February 13, 2007 of the National CineMedia, Inc. (“NCM”) initialpublic offering, we received proceeds of $517.1 million. Such proceeds alongwith up to $135 million of cash on hand is expected to be used for therepayment of our indebtedness, all or a portion of which may include callingcertain subordinated debt issues, which would constitute restricted paymentsunder our senior secured credit facility. Because our current restrictedpayment basket amount, after giving pro forma effect for an increase resultingfrom the NCM transaction, would be insufficient to accommodate this debtrepayment, we are requesting the lender group to provide an amendment to thecredit agreement to allow for up to $600 million in subordinated debt repaymentsto be carved out of the restricted payments basket. This carve out is expectedto be available for redemptions/repayments through April 30, 2007.

The indentures relating toour outstanding notes allow us to incur all permitted indebtedness (as definedtherein) without restriction, which includes all amounts borrowed under ourcredit facility. The indentures also allow us to incur any amount of additionaldebt as long as we can satisfy the coverage ratio of each indenture, both atthe time of the event (under the indenture for the 91¤2% SeniorSubordinated Notes due 2011 (“Notes due 2011”)) and after giving effect theretoon a pro forma basis (under the indentures for the Notes due 2011, 97¤8%Senior Subordinated Notes due 2012 (“Notes due 2012”), 85¤8% Senior FixedRate Notes due 2012 (“Fixed Notes due 2012”), Senior Floating Rate Notes due2010 (“Floating Notes due 2010”), 8% Senior Subordinated Notes due 2014 (“Notesdue 2014”), 11% Senior Suborindated Notes due 2016 (“Notes due 2016”) and 12%Senior Discount Notes due 2014 (“Discount Notes due 2014”)). Under theindentures relating to the Notes due 2012, Notes due 2014 and Notes due 2016,the most restrictive of the indentures, we could borrow approximately $101,000,000and $6,300,000 in addition to permitted indebtedness (assuming an interest rateof 10% per annum on the additional borrowings) as of December 28, 2006 andMarch 30, 2006, respectively. If we cannot satisfy the coverage ratios ofthe indentures, generally we can incur, in addition to amounts borrowed underthe credit facility, no more than $100,000,000 of new “permitted indebtedness”under the terms of the indentures relating to the 2011, 2012, 2014, 2016 notesand the Discount Notes due 2014.

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The indentures relating to the above-describednotes also contain covenants limiting dividends, purchases or redemptions ofstock, transactions with affiliates, and mergers and sales of assets, andrequire us to make an offer to purchase the notes upon the occurrence of achange in control, as defined in the indentures. Upon a change of control (asdefined in the indentures), we would be required to make offers to repurchaseall of the outstanding notes at a price equal to 101% of the principal amountthereof plus accrued and unpaid interest to the date of repurchase.

As of December 28, 2006, we were in compliancewith all financial covenants relating to the New Credit Facility, the CinemexCredit Facility, the Notes due 2016, the Notes due 2011, the Notes due 2012,Notes due 2014, the Fixed Notes due 2012, the Floating Notes due 2010 and theDiscount Notes due 2014.

We believe that cashgenerated from operations and existing cash and equivalents will be sufficientto fund operations and planned capital expenditures for at least the nexttwelve months and enable us to maintain compliance with covenants related tothe New Credit Facility. We are considering various options with respect to theutilization of cash and equivalents in excess of our anticipated operatingneeds. Such options might include, but are not limited to, acquisitions oftheatres or theatre companies, repayment of corporate borrowings, includingthrough open market purchases of our debt securities from time to time, andpayments of dividends to stockholders.

**Amended andRestated Fee Agreement**

Pursuant to the Amendedand Restated Fee Agreement as described in Note 16—Related Party Transactions,upon consummation of the initial public offering, the Sponsors will receive anautomatic fee equal to the net present value of the aggregate annual managementfee that would have been payable to the Sponsors during the remainder of theterm of the fee agreement. We estimate that our aggregate payment to theSponsors would have been $40.1 million had the offering occurred on December28, 2006.

**NEW ACCOUNTINGPRONOUNCEMENTS**

In November 2006, the Emerging Issues Task Force(“EITF”) reached a preliminary consensus on Issue No. 06-09, *Reporting a Change in (or the Elimination of) a Previously ExistingDifference between the Fiscal Year End of a Parent Company and That of aConsolidated Subsidiary or an Equity Method Investee* (“EITF 06-09”).EITF 06-09 concludes that the parent entity should report the eliminationof a lag in reporting the subsidiary’s financial results in their consolidatedfinancial statements as a change in accounting principle through retrospectiveapplication pursuant to the provisions of FASB Statement No. 154,*****Accounting Changes and Error Corrections—areplacement of APB Opinion No. 20 and FASB Statement No. 3**,* unless it is impractical to do so. This EITF should beapplied prospectively for all applicable changes, beginning in the firstinterim or annual period following final Board approval, and early adoptionwill be permitted. If this consensus were finalized, we would not expect it tohave an impact on our consolidated financial position, results of operations,or cash flows.

In October 2006, the FASB agreed to issue FSPNo. 123(R)-6, *Technical Corrections ofStatement 123(R),* which amends four paragraphs of FASBStatement No. 123(R), *Share-Based Payment*(“SFAS 123(R)”). The first amendment exempts nonpublic entities fromdisclosing the aggregate intrinsic value of outstanding fully vested shareoptions and share options expected to vest. The second revises the computationof minimum compensation costs to be recognized when using the “straight-line”attribution method. The third addresses Illustration 13(e), indicating that atthe date the illustrative awards were no longer probable of vesting, anypreviously recognized compensation cost should have been reversed. The fourthamends the definition of “short-term inducement” to exclude an offer to settlean award. The provisions of this FSP are required after October 20, 2006,and early application is permitted for periods for which financial statementshave not yet been issued. The adoption of FSP 123(R)-6 did not have animpact on our consolidated financial position, results of operations, or cashflows.

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In October 2006, the FASB agreed to issue FSPNo. 123(R)-5, *Amendment of FSP FAS123(R)-1,* which addresses whether a modification of aninstrument in connection with an equity restructuring should be considered amodification for purposes of applying FSP FAS 123(R)-1, *Classification and Measurement of Freestanding Financial InstrumentsOriginally Issued in Exchange for Employee Services Under FAS 123(R).*ThisFSP indicates that if the modification was made solely to reflect an equityrestructuring that occurs when the holders are no longer employees, then nochange in the recognition or measurement will result if there is no increase infair value of the award and all holders of the same class of equity instrumentsare treated in the same manner. The provisions of this FSP are required afterOctober 10, 2006, and early application is permitted for periods for whichfinancial statements have not yet been issued. The adoption of FSP 123(R)-5did not have an impact on our consolidated financial position, results of operations,or cash flows.

In October 2006, the Financial Accounting StandardsBoard (“FASB”) released Statement of Financial Accounting StandardsNo. 158, *Employers’ Accounting for Defined BenefitPension and Other Postretirement Plans, an amendment of FASB StatementsNo. 87, 88, 106 and 132(R)*(“SFAS 158”). SFAS No. 158requires an entity to (1) recognize in its statement of financial positionan asset for a defined benefit postretirement plan’s overfunded status or aliability for a plan’s underfunded status, (2) measure a defined benefitretirement plan’s assets and obligations that determine its funded status as ofthe end of the employer’s fiscal year, and (3) recognize changes in thefunded status of a defined benefit postretirement plan in comprehensive incomein the year in which the changes occur. The requirement to recognize the fundedstatus of a defined benefit postretirement plan and the disclosure requirementsare effective for fiscal years ending after December 15, 2006, for publicentities, or March 29, 2007 for AMCE. The requirement to measure planassets and benefit obligations as of the date of the employer’s fiscal year-endstatement of financial position is effective for fiscal years ending afterDecember 15, 2008, or April 2, 2009 for AMCE. Earlier application ofthe recognition or measurement date provisions is encouraged; however, earlyapplication must be for all of an employer’s benefit plans. We believe that asof March 30, 2006, our most recent fiscal year-end, this standard wouldhave resulted in decreased liabilities and decreased accumulated other comprehensiveloss of approximately $5,365,000.

In September 2006, the FASB released SFASNo. 157, *Fair Value Measurements*(“SFAS 157”)**which provides enhanced guidance for using fair value tomeasure assets and liabilities. The standard applies whenever other standards require(or permit) assets or liabilities to be measured at fair value. It does notexpand the use of fair value in any new circumstances. Under the standard, fairvalue refers to the price that would be received to sell an asset or paid totransfer a liability in an orderly transaction between market participants inthe market in which the reporting entity transacts. It clarifies the principlethat fair value should be based on the assumptions market participants woulduse when pricing the asset or liability. SFAS 157 is effective forfinancial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years, or the first quarter offiscal 2009 for AMCE. Early adoption is permitted.

In September 2006, the Securities and ExchangeCommission (the “SEC”) issued Staff Accounting Bulletin No. 108 (“SAB108”), *Considering the Effects of Prior Year MisstatementsWhen Quantifying Misstatements in Current Year Financial Statements*which provides interpretive guidance on the consideration of the effects ofprior year misstatements in quantifying current year misstatements for thepurpose of a materiality assessment. SAB 108 is effective for companies withfiscal years ending after November 15, 2006 and is required to be adoptedby us in our fiscal year ending March 29, 2007. However, early applicationis encouraged in any report for an interim period of the first fiscal yearending after November 15, 2006, filed after the publication of thisguidance.

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 

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with FASB StatementNo. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognitionthreshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return.The evaluation of a tax position in accordance with FIN 48 is a two-stepprocess. The first step is recognition whereby companies must determine whetherit is more likely than not that a tax position will be sustained uponexamination. The second step is measurement whereby a tax position that meetsthe more-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 afterDecember 15, 2006. We expect to adopt the new requirements in the firstquarter of fiscal 2008 and are currently evaluating the impact that theadoption of FIN 48 will have on our consolidated financial statements.

In February 2006, the FASB agreed to issue FASBStaff Position (“FSP”) No. 123(R)-4, *Classificationof Options and Similar Instruments Issued as Employee Compensation That Allowfor Cash Settlement upon the Occurrence of a Contingent Event,* whichrequires companies to consider the probability of the occurrence of acontingent event that is outside the employees’ control (i.e., change incontrol, or death or disability) in determining the classification of anemployee stock option or similar instrument under FASB StatementNo. 123(R), *Share-Based Payment,* wherethe award requires or permits cash settlement upon the contingent event. TheFSP requires companies to classify employee stock options and similar instrumentswith contingent cash settlement features as equity awards provided thecontingent event that permits or requires cash settlement is not consideredprobable of occurring.

**Item4.        Controls and Procedures.**

(a)   Evaluation of disclosure controls and procedures.

***Disclosure Controls and Procedures***

Our senior management is responsible for establishingand maintaining disclosure controls and procedures (as defined in Rule 13a-15(e)and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act)designed to ensure that information required to be disclosed by MarqueeHoldings Inc. in the reports that it files or submits under the Exchange Act isrecorded, processed, summarized and reported, within the time periods specifiedin the Securities and Exchange Commission’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed by an issuer inthe reports that it files or submits under the Exchange Act is accumulated andcommunicated to the issuer’s management, including its principal executive officeror officers and principal financial officer or officers, or persons performingsimilar functions, as appropriate to allow timely decisions regarding requireddisclosure.

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 December 28, 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 December 28, 2006.

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

A material weaknessis a control deficiency, or combination of control deficiencies, that resultsin more than a remote likelihood that a material misstatement of the annual orinterim financial statements will not be prevented or detected. As of December 28,2006, we identified the following material weakness in our internal controlover financial reporting:

·       The Company did notmaintain effective internal controls to ensure that its stock-based compensationawards and management-purchased shares are appropriately recorded in itsfinancial statements in accordance with generally accepted accountingprinciples. Specifically, the Company did not appropriately and timely identifythe relevant characteristic of certain put rights which resulted in the Company’sfailure to properly identify the appropriate financial statement classificationof certain options and shares as a component of equity (as opposed toliabilities) which resulted in the inappropriate application of mark-to-marketaccounting and incorrect expense recognition in the income statement. Thiscontrol deficiency resulted in misstatements in the consolidated financialstatements for the annual and interim periods between September 29, 2005and December 28, 2006. Additionally, this control deficiency could resultin material misstatements to annual or interim financial statements that wouldnot be prevented or detected.

***Remediation of Material Weaknesses***

The Company has taken actions to remediate thematerial weakness in our internal control over financial reporting surroundingthe application of generally accepted accounting principles with respect tostock-based compensation and management-purchased shares for the reportingperiod ending March 29, 2007. Specifically, the Company has made improvementswith respect to the design, precision and rigor of review controls over theapplication of stock-based compensation and management-purchased shares accountingin that appropriate levels of management and legal counsel now review proposedaccounting for all newly issued stock-based compensation awards andmanagement-purchased shares. Further, management will consider using aqualified independent third-party advisor, as deemed appropriate, with respectto more complex stock-based compensation transactions. In addition, the putrights associated with the stock options and underlying shares which resultedin previous awards being inappropriately classified as liabilities and subjectto mark-to-mark accounting in the income statement were cancelled and terminatedduring the period ended March 29, 2007.

(b)   Changes ininternal controls.

There has been no changein internal control over financial reporting during the thirteen andthirty-nine week periods ended December 28, 2006 that has materiallyaffected, or is reasonably likely to materially affect our internal controlover financial reporting.

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**PART II—OTHERINFORMATION**

**Item 6.        Exhibits.**

**EXHIBITINDEX**

| EXHIBIT NUMBER | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | ** ** | **DESCRIPTION** | ** ** | ** ** |
|----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|------------|------------|
| 2.1            |       | Modified First  Amended Joint Plan of Reorganization of Debtors and Official Committee of  Unsecured Creditors for GC Companies, Inc. and its Jointly Administered  Subsidiaries filed on March 1, 2002 with the United States Bankruptcy  Court for the District of Delaware (incorporated by reference from  Exhibit 2.2 to Form 8-K filed March 7, 2002).                                                                                                                                                                                                                                     |
| *2.2.2         |       | 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).                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.3            |       | Purchase and Sale  Agreement, dated as of March 9, 2002, by and among G.S. Theaters,  L.L.C., a Louisiana limited liability Company, Westbank Theatres, L.L.C., a  Louisiana limited liability company, Clearview Theatres, L.L.C., a Louisiana  limited liability company, Houma Theater, L.L.C., a Louisiana limited  liability company, Hammond Theatres, L.L.C., a Louisiana limited liability  company, and American Multi- Cinema, Inc. together with Form of  Indemnification Agreement (Appendix J) (incorporated by reference from  Exhibit 2.1 to Form 8-K filed March 13, 2002). |
| *3.1           |       | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                      |

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*                    Previouslyfiled

**             Filed herewith

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**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         |

 

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