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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1996
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 333-1742
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AMC, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2201031
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
240 Peachtree St., N. W. Suite 2200 Atlanta, GA 30303
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(Address of principal executive offices) (Zip Code)
(404) 220-3000
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(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
61,962,751 shares of common stock, $1 par value as of November 30, 1996.
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30 AND AUGUST 31, 1996
(UNAUDITED)
ASSETS November 30 August 31
----------- ---------
Current assets:
Cash $ 3,615,577 1,052,082
Restricted cash 2,405,048 2,623,528
Restricted escrow deposits 953,851 739,779
Current maturities of notes receivable 1,050,632 1,050,632
Receivables:
Tenants 5,337,426 5,974,210
Affiliate 403,982 369,753
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5,741,408 6,343,963
Allowance for doubtful receivables (2,217,147) (2,205,797)
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Net receivables 3,524,261 4,138,166
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Deferred income taxes 1,819,528 1,819,528
Other assets 1,772,000 1,208,225
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Total current assets 15,140,897 12,631,940
Commercial property, at cost 324,735,862 321,708,239
Accumulated depreciation (126,372,987) (123,305,557)
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Net commercial property 198,362,875 198,402,682
Notes receivable, less current maturities 2,256,282 2,157,042
Deferred income taxes 20,067,611 20,368,611
Other assets 1,407,326 1,661,261
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$ 237,234,991 235,221,536
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LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities:
Revolving line of credit $ 3,600,000 --
Current installments of corporate notes payable:
Mart Bonds interest payments 12,000,000 12,000,000
AMM Escrow Bonds 507,391 512,703
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Total current installments of corporate notes payable 12,507,391 12,512,703
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Accounts payable:
Trade and other 4,845,260 6,253,639
Affiliate 57,285 30,000
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Total accounts payable 4,902,545 6,283,639
Accrued interest payable 714,881 698,617
Deferred revenue 5,441,728 2,226,144
Accrued loan extension fees 268,205 268,205
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Total current liabilities 27,434,750 21,989,308
Corporate notes payable, excluding current installments:
Mart Bonds (face amount of $160,000,000) 200,200,000 203,200,000
Antecedent Debt Bonds 7,303,273 7,303,273
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Total corporate notes payable, excluding current installments 207,503,273 210,503,273
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Mortgage loan payable 102,257,091 102,951,830
Security deposits 2,487,607 2,427,838
Accrued loan extension fees, excluding current installments 268,205 536,410
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Total liabilities 339,950,926 338,408,659
Stockholders' equity (deficit):
Common stock - $1 par value, 100,000,000 shares authorized and
61,962,751 shares issued and outstanding 61,962,751 61,962,751
Capital deficit (172,450,472) (172,450,472)
Retained earnings since formation 7,771,786 7,300,598
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Total stockholders' deficit (102,715,935) (103,187,123)
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$ 237,234,991 235,221,536
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See accompanying notes to consolidated financial statements.
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AMC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED
EARNINGS FOR THE QUARTERS ENDED NOVEMBER 30, 1996
AND 1995 (NOTE 1)
(UNAUDITED)
1996 1995
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Revenues (note 2):
Rental $ 11,898,690 11,658,776
Trade shows 1,366,015 1,507,946
Other 866,025 586,502
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Total revenues 14,130,730 13,753,224
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Operating expenses:
Building operations 1,876,125 1,950,383
Trade shows 427,350 542,915
Marketing 504,653 831,463
General and administrative 4,042,677 3,922,554
Bad debt 132,946 63,984
Property taxes 1,133,888 1,047,476
Depreciation and amortization 3,150,886 3,213,339
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Total operating expenses 11,268,525 11,572,114
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Operating income 2,862,205 2,181,110
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Other (income) expenses:
Interest expense 2,094,004 4,388,132
Interest income (123,804) (113,466)
Other 119,817 79,878
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Total other expenses, net 2,090,017 4,354,544
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Income (loss) before income taxes 772,188 (2,173,434)
Deferred income tax expense 301,000 27,000
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Net income (loss) 471,188 (2,200,434)
Retained earnings at beginning of period 7,300,598 ==========
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Retained earnings at end of period $ 7,771,786
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Net income per share - primary (note 4) $ .01
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Net income per share - fully diluted (note 4) $ .01
=============
See accompanying notes to consolidated financial statements.
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AMC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE QUARTERS ENDED NOVEMBER 30, 1996 AND 1995 (NOTE 1)
(UNAUDITED)
1996 1995
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Net income (loss) $ 471,188 (2,200,434)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 3,270,703 3,293,217
Deferred income tax expense 301,000 27,000
Decrease in net receivables 613,905 253,348
Decrease (increase) in prepaid expenses and other assets (612,353) 21,416
Increase in accrued interest payable 16,264 61,961
Decrease in accounts payable, affiliate payables and other
accrued expenses (1,381,094) (2,726,591)
Increase in deferred revenue 3,275,353 3,534,009
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Net cash provided by operating activities 5,954,966 2,263,926
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Cash flows from investing activities:
Additions to commercial property (3,027,623) (2,172,468)
Decrease in restricted cash 218,480 321,826
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Net cash used in investing activities (2,809,143) (1,850,642)
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Cash flows from financing activities:
Decrease (increase) in restricted escrow deposits (214,072) 3,637,247
Decrease in accrued loan extension fees (268,205) --
Net increase in revolving line of credit 3,600,000 --
Principal payments of AMM Escrow Bonds (5,312) --
Mart Bond payments (3,000,000) --
Principal repayments of mortgage loan (694,739) (2,198,199)
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Net cash (used in) provided by financing activities (582,328) 1,439,048
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Increase in cash 2,563,495 1,852,332
Cash at beginning of period 1,052,082 1,557,327
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Cash at end of period $ 3,615,577 $ 3,409,659
============= =============
Noncash financing activities:
Principal repayment on AMM Escrow Bonds through
contribution from stockholder $ -- $ 13,567
============= =============
Supplemental disclosure - cash paid during the period for interest $ 2,077,740 $ 4,326,171
============= =============
See accompanying notes to consolidated financial statements.
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AMC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
(UNAUDITED)
(1) BASIS OF PRESENTATION
Except as noted below, the accompanying financial statements reflect the
consolidated accounts of AMC, Inc. and subsidiaries (the "Company"). The
financial statements for the quarter ended November 30, 1995 include the
combined accounts of the Atlanta Market Center Companies (the predecessor
companies of AMC, Inc.) from September 1, 1995 to the formation of AMC, Inc. on
October 2, 1995. The financial statements are unaudited; however, in the opinion
of management, all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the financial position at November 30 and
August 31, 1996, and the results of operations and cash flows for the quarters
ended November 30, 1996 and 1995 have been included.
(2) REVENUE RECOGNITION
Rental revenues are recorded monthly based on amounts billed to tenants. The
leases with the Company's tenants generally require equal monthly rents. The
effects of not recording rental income on a straight-line basis for the leases
that contain variable payment amounts during the terms of the leases do not
result in significant impact to the Company's consolidated financial statements.
Trade show revenues are generally collected in advance and initially recorded as
deferred revenue. Trade show revenues are recognized in the month the related
show occurs.
Management fee revenues are recorded as earned in accordance with the related
management agreements.
(3) MARKETING COSTS
The Company incurs costs for various marketing and advertising efforts. All
costs related to marketing and advertising are expensed in the period incurred
or, if directly related to specific trade shows, are expensed in the month the
related show occurs.
(4) INCOME PER SHARE
Weighted average shares outstanding for the quarter ended November 30, 1996 were
61,962,751. Primary net income per share has been calculated assuming no common
stock equivalents resulting from outstanding warrants since such warrants are
exercisable only upon certain conditions and such conditions have not yet
occurred. Even though the exercise price for the warrants is equal to the
assumed market price for a share of AMC, Inc. common stock, as a result of total
warrants exceeding 20% of current outstanding shares, fully diluted net income
per share has been calculated assuming 16,736,548 additional shares issuable and
outstanding and assuming earnings increases of approximately $205,000 for the
quarter ended November 30, 1996. Such assumed earnings increase has been
determined using a tax-effected interest rate of 4.9%, applied to the proceeds
that would have been received from the additional 16,736,548 shares assumed to
be issued. For the period from October 2, 1995 (the date of the formation of
AMC, Inc.) through November 30, 1995, primary and fully diluted income per share
approximated $0.01.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
The Company was formed in conjunction with a series of transactions in 1995
which involved the exchange of certain assets, debt and equity and the debt
restructuring of Mr. John C. Portman, Jr. and a group of affiliated entities
with their creditors. As a result of these transactions, the initial assets of
the Company included the Atlanta Merchandise Mart (the "Merchandise Mart"), the
Atlanta Apparel Mart (the "Apparel Mart"), the Atlanta Gift Mart (the "Gift
Mart"); (the Merchandise Mart, the Apparel Mart and the Gift Mart hereinafter
collectively, AmericasMart), and the assets of Atlanta Market Center Management
Company, Inc., a Georgia corporation ("AMCMC") which operated AmericasMart and
was merged into the Company.
This restructuring has been accounted for as a troubled debt restructuring in
accordance with Statement of Financial Accounting Standards No. 15, "Accounting
by Debtors and Creditors for Troubled Debt Restructurings" (SFAS 15). As a
result of this troubled debt restructuring in which the existing debt exceeded
the fair value of the equity interests issued and the total future principal and
interest payments called for under the Company's notes, these notes have been
initially recorded at an amount equal to the total future cash payments,
including interest, specified by their terms in accordance with SFAS 15. All
future cash payments will be accounted for as a reduction of the carrying amount
of the notes, and no interest expense will be recognized.
The Company's primary business is the operation of AmericasMart and the
management of trade shows in conjunction with such Marts. Additionally, the
Company manages trade shows on behalf of third parties at other locations.
RESULTS OF OPERATIONS
The Company's principal sources of revenues are rental revenues from the lease
of showroom and exhibition space in AmericasMart and trade show revenues, which
relate to specific shows staged for related industries. The Company leases
showroom space over terms ranging from one to five years (on average three
years) with rent payable monthly over the term of the lease. In addition, the
Company rents exhibition space for short terms thereby affording manufacturers
an opportunity to exhibit merchandise during a specific trade show.
Quarter Ended November 30, 1996 Compared to Quarter Ended November 30, 1995
Rental revenues increased approximately $240,000 during the quarter ended
November 30, 1996 as compared to the quarter ended November 30, 1995. Rental
revenues increased approximately $174,000 in the Gift Mart due to an increase in
rental rates of approximately $255,000, partially offset by a decrease due to
decreased occupancy of approximately $81,000. Rental revenues decreased
approximately $21,000 in the Merchandise Mart, reflecting a decrease of
approximately $451,000 due to occupancy, partially offset by an increase in
rental rates of approximately $430,000. Rental revenues in the Apparel Mart
increased approximately $87,000, reflecting an approximate increase of $166,000
in rental rates, partially offset by a decrease in occupancy of approximately
$79,000.
Trade show revenues decreased approximately $142,000 for the quarter ended
November 30, 1996, compared to the quarter ended November 30, 1995. This
decrease was due to a decrease in food services revenue.
Other revenues increased approximately $280,000 for the quarter ended November
30, 1996, compared to the quarter ended November 30, 1995 due to an increase in
management fees earned from independent trade shows.
Building operations expenses decreased approximately $74,000 for the quarter
ended November 30, 1996 as compared to the quarter ended November 30, 1995 due
to a decrease in electricity costs, partially offset by an increase in security
costs.
Trade show expenses decreased approximately $116,000 for the quarter ended
November 30, 1996 as compared to the quarter ended November 30, 1995 due to a
decrease in buyer accommodation expenses.
Marketing expenses decreased approximately $327,000 for the quarter ended
November 30, 1996 as compared to the quarter ended November 30, 1995. This
decrease was the result of the timing of marketing expenditures during the
quarter ended November 30, 1995.
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General and administrative expenses increased approximately $120,000 for the
quarter ended November 30, 1996 as compared to the quarter ended November 30,
1995. This increase was due to an increase in insurance costs and a decrease in
certain reimbursed costs received from independent trade shows.
Bad debt expense increased approximately $69,000 for the quarter ended November
30, 1996 as compared to the quarter ended November 30, 1995. This increase was
due to certain recoveries during 1995 of amounts previously reserved.
Property taxes increased approximately $86,000 for the quarter ended November
30, 1996 compared to the quarter ended November 30, 1995 due to an anticipated
increase in property tax assessments for 1997.
Depreciation expense remained relatively stable for the quarter ended November
30, 1996 as compared to the quarter ended November 30, 1995.
The resulting operating income was approximately $2,862,000 for the quarter
ended November 30, 1996 as compared to $2,181,000 for the quarter ended
November 30, 1995. This increase in operating income was primarily due to the
increase in revenues and decrease in marketing expenses.
Interest expense decreased approximately $2,294,000 during the quarter ended
November 30, 1996 as compared to the quarter ended November 30, 1995. This
decrease in interest expense was due to the fact that, subsequent to the
formation of the Company, interest on the Company's Mart Bonds is charged
against their carrying value and no interest expense is recognized on the Mart
Bonds.
Income tax expense increased approximately $274,000 for the quarter ended
November 30, 1996 as compared to the quarter ended November 30, 1995 due to the
fact that prior to the formation of the Company, the predecessor companies were
partnerships and S corporations, and any liability for income taxes was that of
the partners and stockholders and not that of the Company.
Net income was approximately $471,000 for the quarter ended November 30, 1996 as
compared to a net loss of approximately $2,200,000 for the quarter ended
November 30, 1995. This increase in net income is due to the fact that interest
expense relating to the Mart Bonds is charged against principal and no interest
expense is recognized on such debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of cash is internally generated funds from
operations. The availability of cash flows generated by the Gift Mart are
limited by the terms of its financing. Net income from operations less capital
improvements of the Gift Mart must be used to repay principal outstanding on the
Gift Mart financing and cannot be used to fund operations or capital
improvements of other properties of the Company. Principal payments on the Gift
Mart financing totaled approximately $0.7 million for the quarter ended November
30, 1996, and $2.2 million for the quarter ended November 30, 1995.
The Company has entered into a line of credit agreement (the Revolver) with a
bank for up to $10 million which may be used to fund operations and capital
improvements and for acquisition and start-up costs for new trade shows in an
amount not to exceed $2.5 million. At November 30, 1996, the Company had $6.4
million available under the Revolver.
Cash flows from operations were approximately $6.0 million during the quarter
ended November 30, 1996, and $2.3 million during the quarter ended November 30,
1995. Cash flows from operations have been positive during the past several
years, despite the net losses of the Company, primarily due to the fact that net
income is negatively impacted by depreciation expense, which is a non-cash
charge to earnings and also, all interest expense incurred over the past several
years has not been paid. Under the terms of its indebtedness, the Company is
required to use certain portions of its cash flows to repay its indebtedness.
The terms of such debt limit the Company's ability to make required capital
improvements.
Significant capital expenditures were incurred during the past several years and
ongoing capital expenditures will be necessary to adequately maintain the
Company's properties. Total capital expenditures were approximately $3.0 million
during the quarter ended November 30, 1996, and $2.2 million during the quarter
ended November 30, 1995. Management expects that capital expenditures, including
tenant improvements, of approximately $8.0 million to $10.0 million will be
needed to improve and maintain the buildings during the year ending August 31,
1997. There can be no assurance, however, that changes in the competitive
environment, governmental regulations or unforeseen loss or damage will not
cause capital expenditures to exceed management's estimate.
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Debt repayments totaled approximately $3.7 million in the quarter ended November
30, 1996, and $2.2 million in the quarter ended November 30, 1995. During 1997,
the Company will be required to repay approximately $0.5 million of the
principal amount of its indebtedness under the AMM Escrow Bonds. Principal
payments to reduce the indebtedness under the Gift Mart financing and the Mart
Bonds will be determined based upon cash flows of the Gift Mart and of the
Company, respectively.
Management expects that cash flows from operations and borrowings under the
Revolver will be sufficient to fund planned capital expenditures and interest
and principal payments on the Company's indebtedness during the 1997 fiscal
year. Over the longer term, management anticipates that internally generated
funds will be sufficient to fund required capital expenditures and scheduled
debt service prior to the maturity date for the Gift Mart financing, provided
the Company can maintain its operating revenues and expenses at current levels.
There can be no assurance that the Company can maintain current revenue levels
which are affected by changing economic conditions in the specific industries
represented at its Marts and trade shows. In addition, there can be no assurance
that the overall level of capital expenditures will not increase as the Marts
age. In the event that internally generated funds and borrowings under the
Revolver are insufficient, the Company would be required to seek financing;
however, the Company's ability to do so is limited under the terms of the
Revolver.
The remaining principal balance on the Gift Mart financing is due on July 31,
1998, with an option to extend the maturity date for one year, if specified
performance levels are achieved. The Company's Mart Bonds are due and payable on
July 31, 2000. The Company will not generate sufficient cash to repay such
indebtedness and intends to refinance both of these debt obligations at maturity
by extending their maturity dates or securing other financing. There can be no
assurance that the Company will be able to extend the maturity dates of any of
its indebtedness or secure alternative financing to fund the repayment thereof.
INFLATION
The Company deals with the effects of inflation by adjusting rental rates on new
leases and renewal leases. In times of higher inflation, the Company's operating
results are negatively impacted due to the fact that most lease terms are from
one to five years while the term of most service contracts is one year or less.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
11. Computation of Earnings Per Common Share
27. Financial Data Schedule (for SEC use only)
(b) The Company has not filed any reports on Form 8-K during the
quarter ended November 30, 1996 or subsequent to that date but prior to the
filing date of this Form 10-Q.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMC INC.
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(Registrant)
1/13/97 /s/ John M. Ryan
- ------------------------ ------------------------, President
Date (Signature)
1/13/97 /s/ Henry M. Almquist, Jr.
- ------------------------ ------------------------, Principal Financial and
Date (Signature) Accounting Officer
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