-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QwHkQ5PBEK2UZI85nE+tlEtt0fdqwlZbe0QE/PkCflRuASXgOPuJuAFBHl8hGQGj Ws5Is1yQExWPUaUbdHa1vQ== 0000950144-94-001323.txt : 19940714 0000950144-94-001323.hdr.sgml : 19940714 ACCESSION NUMBER: 0000950144-94-001323 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940520 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19940712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARMIKE CINEMAS INC CENTRAL INDEX KEY: 0000799088 STANDARD INDUSTRIAL CLASSIFICATION: 7830 IRS NUMBER: 581469127 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-14993 FILM NUMBER: 94538598 BUSINESS ADDRESS: STREET 1: 1301 FIRST AVE CITY: COLUMBUS STATE: GA ZIP: 31901 BUSINESS PHONE: 4045763400 MAIL ADDRESS: STREET 1: P.O. BOX 391 CITY: COLUMBUS STATE: GA ZIP: 31994 8-K/A 1 CARMIKE CINEMA - 8-K AMENDMENT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) May 20, 1994 CARMIKE CINEMAS, INC. --------------------- (Exact name of registrant as specified in its charter) Delaware 0-14993 58-1469127 -------- ------- ---------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 1301 First Avenue, Columbus, Georgia 31901 ------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 706-576-3400 - - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 ITEM 7 Financial Statements and Exhibits (a) Financial Statements of Businesses Acquired The following audited financial statements of Cinema World Companies are included in Appendix A hereto and incorporated herein by reference: Report of Independent Auditors Combined Balance Sheet dated December 30, 1993 Combined Statements of Operations and Retained Earnings (Deficit) for the year ended December 30, 1993 Combined Statements of Cash Flows for the year ended December 30, 1993 Notes to Combined Financial Statements The following unaudited financial statements of Cinema World Companies are included in Appendix B hereto and incorporated herein by reference: Unaudited Combined Balance Sheet dated March 31, 1994 Unaudited Combined Statement of Operations and Retained Earnings (Deficit) for the three months ended March 31, 1994 Unaudited Combined Statement of Cash Flows for the three months ended March 31, 1994. Notes to Unaudited Combined Financial Statements (b) Pro Forma Financial Information The pro forma financial information is included in Appendix C hereto and incorporated herein by reference. (c) Exhibits 2(a) Agreement dated as of May 20, 1994 by and between Cinema World, Inc., C.W. Industries, Inc. and C. W. Advertising, Inc. and Carmike Cinemas, Inc. * ___________________ * Previously included in the Company's Current Report on Form 8-K filed with the Commission on June 2, 1994. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned hereunto duly authorized. Carmike Cinemas, Inc. -------------------------- Registrant /s/ John O. Barwick, III -------------------------- John O. Barwick, III Vice President-Finance and Chief Financial Officer Dated: July 12, 1994 4 Appendix A 5 Combined Audited Financial Statements Cinema World Companies Year ended December 30, 1993 with Report of Independent Auditors 6 Cinema World Companies Combined Audited Financial Statements Year ended December 30, 1993 CONTENTS Report of Independent Auditors 1 Combined Audited Financial Statements Combined Balance Sheet 2 Combined Statement of Operations and Retained Earnings (Deficit) 4 Combined Statement of Cash Flows 5 Notes to Combined Financial Statements 7 7 REPORT OF INDEPENDENT AUDITORS Board of Directors Cinema World Companies We have audited the accompanying combined balance sheet of the Cinema World Companies as of December 30, 1993, and the related statements of operations and retained earnings (deficit) and cash flows for the year then ended. These combined financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in Note 7 to the financial statements, the Company entered into an agreement for the sale of substantially all of its assets subsequent to December 30, 1993. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Cinema World Companies at December 30, 1993, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG March 18, 1994, except for Note 7 for which the date is May 27, 1994 -1- 8 Cinema World Companies Combined Balance Sheet December 30, 1993 ASSETS Current assets: Cash and cash equivalents $ 1,652,638 Accounts receivable 892,653 Prepaid expenses 63,533 Concession inventories 154,479 ------------ 2,763,303 Property and equipment: Buildings 5,055,973 Equipment 10,773,192 Leasehold and leasehold improvements 11,995,531 ------------ 27,824,696 Less accumulated depreciation and amortization (11,493,341) ------------ 16,331,355 Other assets: Officer receivable 229,445 Equipment not used in operations 364,822 Other 50,013 ------------ 644,280 ------------ Total assets $ 19,738,938 ============
-2- 9 LIABILITIES AND DEFICIENCY IN NET ASSETS Current liabilities: Accounts payable $ 1,326,967 Accrued film rental 2,424,456 Interest and bank fees payable 402,722 Current portion of long-term obligations 2,259,278 Accrued payroll 322,200 Deferred revenues 381,858 Other accrued expenses 1,084,614 ------------ 8,202,095 Long-term obligations: Notes payable--revolving credit facility 24,000,000 Note payable--other 2,684 ------------ 24,002,684 Closed theater liability 1,313,498 Deferred rent 365,639 Deficiency in net assets: Common stock, $.01 par value, 100,000 shares authorized, 915 shares issued and outstanding 9 Additional paid-in capital 731,991 Retained earnings (deficit) (14,876,978) ------------ Total deficiency in net assets (14,144,978) ------------ Total liabilities and deficiency in net assets $ 19,738,938 ============
See accompanying notes. -3- 10 Cinema World Companies Combined Statement of Operations and Retained Earnings (Deficit) Year ended December 30, 1993 Revenues: Box office admissions $ 25,781,266 Concession 7,771,558 Advertising 2,987,940 Other 497,018 ------------ Total revenues 37,037,782 Expenses: Film rentals 12,984,545 Concession costs 1,127,832 Other operating costs 17,077,484 General and administrative 1,619,202 Depreciation and amortization 2,231,786 Interest and fees 1,892,193 Provision for theater closing, termination costs, and loss on disposal of assets 242,190 ------------ Total expenses 37,175,232 ------------ Net loss (137,450) Retained earnings (deficit), beginning of year (14,739,528) ------------ Retained earnings (deficit), end of year $(14,876,978) ============
See accompanying notes. -4- 11 Cinema World Companies Combined Statement of Cash Flows Year ended December 30, 1993 OPERATING ACTIVITIES Net loss $ (137,450) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 2,231,786 Loss on disposal of assets 262,472 Changes in operating assets and liabilities: Increase in accounts receivable (216,963) Decrease in inventories 25,237 Decrease in prepaid expenses 36,529 Increase in other assets (34,033) Decrease in accounts payable and accrued expenses (4,558) Increase in accrued film rental 64,941 Decrease in provision for theater closing (703,270) Increase in deferred revenues and deferred rent 105,090 ------------ Net cash provided by operating activities 1,629,781 INVESTING ACTIVITIES Purchases of property and equipment (1,657,438) Proceeds from the sale of assets 4,900 ------------ Net cash used in investing activities (1,652,538) FINANCING ACTIVITIES Proceeds from revolving line of credit and long-term borrowings 28,000,000 Principal payments on revolving line of credit and other long-term obligations (27,831,303) ------------ Net cash provided by financing activities 168,697 ------------ Increase in cash and cash equivalents 145,940 Cash and cash equivalents at beginning of year 1,506,698 ------------ Cash and cash equivalents at end of year $ 1,652,638 ============ The Company paid $2,260,644 of interest in 1993. See accompanying notes. -5- 12 Cinema World Companies Notes to Combined Financial Statements December 30, 1993 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES COMBINATION The combined financial statements include the accounts of Cinema World, Inc., CW Advertising, Inc., and CW Industries, Inc. (collectively referred to herein as the "Company"). These organizations are affiliated through operations and certain common ownership interests. A parent/subsidiary relationship does not exist. Cinema World, Inc. operates motion picture theaters which are owned or leased under long-term leases. CW Advertising, Inc. is an advertising agency which places advertising on behalf of both Cinema World, Inc. and others on a commission basis. CW Industries, Inc. is inactive. Intercompany accounts and transactions have been eliminated in combination. OPERATIONS Although the Company operated near the break-even point in 1993 and had a $14,144,978 deficiency in net assets as of December 30, 1993, they continue to meet their current and long-term obligations through December 30, 1993 on a timely basis from operating cash flows and support from an affiliate of certain stockholders (Note 3). The Company's anticipated cash flows for 1994 are expected to be sufficient to fund operations and capital commitments. Additionally, an affiliate of certain stockholders has provided specific guarantees relating to the Company's obligations under the credit facility agreement. Reference is made to Note 7, Subsequent Events, regarding the sale of substantially all of the assets of the Company and repayment of long-term obligations. FISCAL YEAR The Company maintains the accounting records on a 52-53 week fiscal year ending on the last Thursday in December. CASH EQUIVALENTS Cash equivalents consist of certificates of deposit and repurchase agreements with banks with a maturity of ninety days or less. -6- 13 Cinema World Companies Notes to Combined Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORIES Inventories consist primarily of concession related items which are stated at the lower of cost (first-in, first-out (FIFO) basis) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Provisions for depreciation have been computed by the straight-line method based upon estimated useful lives of the assets. Buildings are depreciated over their estimated useful lives of twenty years or the lease term, whichever is less, and equipment is depreciated over periods from five to ten year. Leaseholds and leasehold improvements are amortized over the shorter of the lease term plus those renewal period options that were reasonably expected to be exercised at the acquisition date or the estimated useful life of the improvement. Equipment not used in operations consists of both new and used theater seats, projection and concession equipment, carpeting, and other theater related items, which will be placed in service as replacement equipment in existing theaters or new equipment in theaters under construction. The carrying value of the equipment is either cost, for new equipment, or remaining book value, for equipment removed from an existing theater. Loss reserves are provided when it becomes known that an existing theater property will be abandoned in connection with the construction of a new facility, or it is anticipated that a theater will be closed in the next year. DEFERRED REVENUES The Company sells gift book coupons and discount admission tickets which expire twelve months from date of sale. The gift book coupons are sold to customers and can be redeemed at either the box office or the concession stand. The discount admission tickets are sold in quantities to various groups and organizations and cannot be resold except at the original price. Revenue and the related expense is recognized when and if the coupons and discount tickets are -7- 14 Cinema World Companies Notes to Combined Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DEFERRED REVENUES (CONTINUED) presented for use at the box office or concession stand. During the year, discount tickets and gift book coupons expired in an aggregate amount of approximately $119,700 which was recorded as revenue. The deferred revenue account is comprised of the following:
GIFT BOOK DISCOUNT COUPONS TICKETS TOTAL ----------------------------------------------------- Balance at December 31, 1992 $ 216,165 $ 151,950 $ 368,115 Sales 366,992 235,817 602,809 Redemptions (273,953) (195,440) (469,393) Expired coupons/tickets not redeemed (60,898) (58,775) (119,673) ----------------------------------------------------- Balance at December 30, 1993 $ 248,306 $ 133,552 $ 381,858 =====================================================
DEFERRED RENT The Company enters into lease agreements for theaters which occasionally include fixed escalation provisions in later years. The accompanying financial statements include recognition of rent expense (including fixed escalation provisions) on a straight-line basis over the term of the lease. Included in rent expense is approximately $55,000, which represents the excess of rent expense recognized over cash payments made to landlords. CLOSED THEATER LIABILITY The Company provides for costs associated with closing theaters at the time the decision is made to close the theater. These costs include disposal of equipment, remaining noncancelable lease obligations, real estate taxes and other miscellaneous costs. The closed theater liability is reduced as payments are made. CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and accounts receivable. -8- 15 Cinema World Companies Notes to Combined Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CONCENTRATIONS OF CREDIT RISK (CONTINUED) The Company places its temporary cash investments with a high credit quality financial institution for periods generally less than 30 days. Repurchase agreements and deposits in excess of $100,000 which are not specifically collateralized are not insured. The Company performs advertising services for the major distributors of its film products. It is the industry practice to offset the accounts receivable for such advertising services against film rental costs at the time of payment of the film rental. At December 30, 1993, the Company had accounts receivable of approximately $308,400 which were not subject to this settlement practice. The Company evaluates the creditworthiness of these companies and does not require collateral. Credit losses have consistently been within management's expectations. ADVERTISING COSTS It is the Company's policy to expense advertising costs in the period that they are incurred. Advertising costs for the period ending December 30, 1993 were approximately $1,099,000. 2. RELATED PARTY TRANSACTIONS The Company incurred certain expenses in connection with the guarantee by an affiliate of certain stockholders of the Company's indebtedness to the bank and former owners. Amounts incurred for providing the guarantee in 1993 were $134,682. 3. LONG-TERM OBLIGATIONS Notes payable--credit facility $26,250,000 Installment notes payable to banks and other institutions at interest rates of 9.6% to 10.9% 11,962 ----------- 26,261,962 Less current portion 2,259,278 ----------- Long-term portion $24,002,684 ===========
-9- 16 Cinema World Companies Notes to Combined Financial Statements (continued) 3. LONG-TERM OBLIGATIONS (CONTINUED) NOTE PAYABLE--CREDIT FACILITY In connection with the original acquisition of certain assets of the Company, a credit facility agreement ("Facility") with a bank ("Bank") was entered into in the amount of $21,000,000. In November 1990, the amount of the Facility was increased to $22,500,000. Interest was payable at the prime rate plus 1% or LIBOR plus 2% rate, at the option of the borrower. The Facility was collateralized by substantially all of the assets of the Company. In addition, to the extent the Company did not attain a certain ratio of total debt to operating cash flow, an affiliate of certain stockholders of the Company provided a guarantee for the excess amount. On May 4, 1993, the Facility was replaced with a credit facility from another bank in the amount of $27,000,000. The new facility was scheduled to mature on August 4, 1993, and was subsequently amended to mature on September 4, 1993. The facility was fully guaranteed by an affiliate of certain stockholders of the Company. On August 30, 1993, the Company entered into a permanent credit facility with this bank. The permanent credit facility consists of a $26,000,000 term loan and a $1,000,000 revolving credit agreement. The outstanding balance on the revolving credit agreement as of December 30, 1993 was $250,000. Interest is payable at the prime rate or LIBOR plus .625% rate, at the option of the borrower (4% at December 30, 1993 for the term loan and 6% for the revolving credit agreement). The permanent credit facility is collateralized by the guarantee of an affiliate of certain stockholders. The guarantor must maintain a certain level of tangible net worth and a certain liquidity ratio, both of which are defined in the guarantee document. The permanent credit facility matures on December 31, 1988, and has an annual commitment fee of $33,750. In connection with the financing, the Company incurred certain costs associated with terminating the outstanding interest rate swap transactions. These costs totaling $443,700 are included in interest expense. SUBORDINATED DEBT At December 31, 1992, the Company had outstanding debt of $3,573,240 payable to affiliates of certain stockholders. Payment of the indebtedness was subordinated to the obligations of the Company under the Facility as agreed upon by all parties. Interest was payable on a quarterly basis at the prime rate plus 2%. The amounts outstanding were repaid with the proceeds of the new facility on May 4, 1993. -10- 17 Cinema World Companies Notes to Combined Financial Statements (continued) 3. LONG-TERM OBLIGATIONS (CONTINUED) Long-term obligations, including the current portion due, are payable as follows during the Company's fiscal years ending: REVOLVING CREDIT CREDIT FACILITY AGREEMENT TERM LOAN OTHER TOTAL ---------------------------------------------------------- December 29, 1994 $ - $ 2,250,000 $ 9,278 $ 2,259,278 December 28, 1995 - 2,700,000 2,684 2,702,684 December 26, 1996 - 3,150,000 - 3,150,000 December 25, 1997 - 3,600,000 - 3,600,000 December 31, 1998 250,000 14,300,000 - 14,550,000 ---------------------------------------------------------- $250,000 $26,000,000 $11,962 $26,261,962 ========================================================== Reference is made to Note 7, Subsequent Events, regarding the sale of substantially all of the assets of the Company and repayment of long-term obligations. 4. COMMITMENTS AND CONTINGENCIES Total rental expense for the office, theaters, and equipment amounted to $3,963,130, including contingent rentals of $234,504 based on gross revenues in excess of specified minimums, for the year ended December 30, 1993. The minimum rental commitments payable under noncancelable leases for theaters, excluding options to renew for periods ranging from five to thirty years, aggregate as follows: OPERATING CLOSED THEATERS THEATERS TOTAL ------------------------------------------ 1994 $ 3,942,809 $ 134,250 $ 4,077,059 1995 3,872,709 134,250 4,006,959 1996 3,735,554 103,000 3,838,554 1997 3,441,293 90,200 3,531,493 1998 2,811,157 110,000 2,921,157 1999 and thereafter 17,550,697 440,000 17,990,697 ------------------------------------------ $35,354,219 $1,011,700 $36,365,919 ========================================== -11- 18 Cinema World Companies Notes to Combined Financial Statements (continued) 5. INCOME TAXES The shareholders of the Company included in the combination elected under Subchapter S of the Internal Revenue Code to include the Company's loss in their own income for federal and state income tax purposes. Accordingly, the Company is not subject to federal and state income taxes. 6. STOCK OPTIONS In 1989, employment agreements were signed with two executives of the Company. The agreements provide for the payment of certain levels of base pay, bonuses, and certain fringe benefits. Nonqualified stock options were also granted to each of the executives, permitting each the purchase of 74 shares of common stock at a price per share of $6,585. The options may be exercised in whole or in part at any time until the earliest of December 31, 1997, 90 days after termination of employment or a change of control in the Company (as defined by the employment agreements). The agreements also provide that the executives may "put" the stock back to the Company or the Company may "call" the stock in the event of death or disability, involuntary termination, or expiration of the employment agreement of the executive, or a change in control of the Company. On or about January 6, 1994, a former executive of the Company exercised 74 options representing all his outstanding options and expressed his intention to put the common shares to the Company for a price per share equal to the fair market value of a share of common stock. This former executive filed a claim against the Company for $650,000 representing the former executive's opinion of the value of the stock (net of the option price) plus additional compensation alleged to be due him. This former executive further advised the Company that as a result of an oral agreement, he was not obligated to pay the option price per share. This matter has been tentatively settled. It is anticipated, in conjunction with the asset sale described in Note 7, the executive holding the remaining 74 options will exercise the options and put his 74 shares of common stock to the Company for their fair market value under the change of control provisions of the employment agreements. The payments associated with the stock put arrangements if executed as described above will be treated as compensation expense when it becomes probable that the payments will be made. -12- 19 Cinema World Companies Notes to Combined Financial Statements (continued) 7. SUBSEQUENT EVENTS On May 20, 1994, the Company entered into an agreement for the sale of substantially all its assets to Carmike Cinemas, Inc. (Carmike) for $38,100,000. The assets sold include, but are not limited to, the theater buildings, equipment, leasehold and leasehold improvements, concession inventories, and related contracts. Carmike subsequently advised the Company on May 27, 1994 that, under the terms of the agreement, Carmike was asserting a claim of approximately $905,000 against the Company for breach of certain representations and warranties contained in the Purchase and Sale Agreement. The Company has filed a timely response to the claim disputing substantially all of the claim and intends to vigorously defend against the claim. On May 20, 1994, the Company utilized a portion of the proceeds from the sale to repay the outstanding notes payable--revolving credit facility. Four closed theaters and one operating theater were not included in the sale of assets. Equipment and leaseholds for these theaters had a net book value at December 30, 1993 of $369,874. In a transaction not directly related to the sale, the Company entered into a separate agreement on May 16, 1994 which transferred the Company's interest in the equipment and lease of the remaining operating theater, in settlement of their future lease obligation on one of the closed theaters. The future lease obligation of the closed theater included in this transaction was $1,056,212 and is included in the closed theater liability. The net book value of the equipment as of December 30, 1993 included in the exchange was $282,048. -13- 20 Appendix B 21 Unaudited Combined Financial Statements Cinema World Companies Three months ended March 31, 1994 22 Cinema World Companies Unaudited Combined Financial Statements Three months ended March 31, 1994 CONTENTS Unaudited Combined Balance Sheet 1 Unaudited Combined Statement of Operations and Retained Earnings (Deficit) 3 Unaudited Combined Statement of Cash Flows 4 Notes to Unaudited Combined Financial Statements 5 23 Cinema World Companies Unaudited Combined Balance Sheets March 31, 1994 ASSETS Current assets: Cash and cash equivalents $ 1,290,848 Accounts receivable 863,938 Prepaid expenses 141,908 Concession inventories 165,680 ------------ 2,462,374 Property and equipment: Buildings 5,055,973 Equipment 10,839,193 Leasehold and leasehold improvements 11,999,030 Construction in progress 83,908 ------------ 27,978,104 Less accumulated depreciation and amortization (12,069,281) ------------ 15,908,823 Other assets: Officer receivable 274,181 Equipment not used in operations 326,164 Other 50,214 ------------ 650,559 ------------ Total assets $ 19,021,756 ============ -1- 24 LIABILITIES AND DEFICIENCY IN NET ASSETS Current liabilities: Accounts payable $ 1,096,927 Accrued film rental 2,118,767 Interest and bank fees payable 184,226 Current portion of note payable -- other 2,257,058 Accrued payroll 322,157 Deferred revenues 319,967 Accrued real estate taxes 369,120 Other accrued expenses 696,465 ------------ 7,364,687 Long-term obligations: Notes payable -- revolving credit facility 23,750,000 Note payable -- other 2,877 ------------ 23,752,877 Closed theater liability 1,263,470 Deferred rent 378,554 Deficiency in net assets: Common stock, $.01 par value, 100,000 shares authorized, 915 shares issued and outstanding 9 Additional paid-in capital 731,991 Retained earnings (deficit) (14,469,832) ------------ Total deficiency in net assets (13,737,832) ------------ Total liabilities and deficiency in net assets $ 19,021,756 ============ See accompanying notes. -2- 25 Cinema World Companies Unaudited Combined Statement of Operations and Retained Earnings (Deficit) Three months ended March 31, 1994 Revenues: Box office admissions $ 6,640,179 Concession 2,016,937 Advertising 783,093 Other 98,371 ------------ Total revenues 9,538,580 Expenses: Film rentals 3,150,186 Concession costs 287,432 Other operating costs 4,390,493 General and administrative 364,581 Depreciation and amortization 575,940 Interest and fees 335,707 Provision for theater closing and termination costs 27,095 ------------ Total expenses 9,131,434 ------------ Net income 407,146 Retained earnings (deficit), beginning of year (14,876,978) ------------ Retained earnings (deficit), end of year $(14,469,832) ============ See accompanying notes. -3- 26 Cinema World Companies Unaudited Combined Statement of Cash Flows Three months ended March 31, 1994 OPERATING ACTIVITIES Net income $ 407,146 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 575,940 Changes in operating assets and liabilities: Decrease in accounts receivable 28,715 Increase in inventories (11,201) Increase in prepaid expenses (78,375) Increase in other assets (6,279) Decrease in accounts payable and accrued expenses (467,608) Decrease in accrued film rental (305,689) Decrease in provision for theater closing (50,028) Decrease in deferred revenues and deferred rent (48,976) ---------- Net cash provided by operating activities 43,645 INVESTING ACTIVITIES Purchases of property and equipment (153,408) ---------- Net cash used in investing activities (153,408) FINANCING ACTIVITIES Principal payments on revolving line of credit and other long-term obligations (252,027) ---------- Net cash used by financing activities (252,027) ---------- Decrease in cash and cash equivalents (361,790) Cash and cash equivalents at beginning of year 1,652,638 ---------- Cash and cash equivalents at end of year $1,290,848 ==========
See accompanying notes. -4- 27 Cinema World Companies Notes to Unaudited Combined Financial Statements March 31, 1994 1. BASIS OF PRESENTATION The accompanying unaudited combined financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 1994 are not necessarily indicative of the results that may be expected for the year ended December 29, 1994. For further information, refer to Cinema World Companies' combined financial statements and footnotes thereto for the year ended December 30, 1993. 2. CONTINGENCIES On or about January 6, 1994, a former executive of the Company exercised 74 options representing all his outstanding options and expressed his intention to put the common shares to the Company for a price per share equal to the fair market value of a share of common stock. This former executive filed a claim against the Company for $650,000 representing the former executive's opinion of the value of the stock (net of the option price) plus additional compensation alleged to be due him. This former executive further advised the Company that as a result of an oral agreement, he was not obligated to pay the option price per share. This matter has been tentatively settled. 3. ASSET SALE On May 20, 1994, the Company entered in an agreement for the sale of substantially all its assets to Carmike Cinemas, Inc. (Carmike) for $38,100,000. The assets sold include, but are not limited to, the theater buildings, equipment, leasehold and leasehold improvements, concession inventories, and related contracts. Carmike subsequently advised the Company on May 27, 1994 that, under the terms of the agreement, Carmike was asserting a claim of approximately $905,000 against the Company for breach of certain representations and warranties contained in the Purchase and Sale Agreement. The Company has filed a timely response to the claim disputing substantially all of the claim and intends to vigorously defend against the claim. On May 20, 1994, the Company utilized a portion of the proceeds from the sale to repay the outstanding notes payable -- revolving credit facility. -5- 28 Cinema World Companies Notes to Unaudited Combined Financial Statements (continued) 3. ASSET SALE (CONTINUED) Four closed theaters and one operating theater were not included in the sale of assets. Equipment and leaseholds for these theaters had a net book value at December 30, 1993 of $369,874. In a transaction not directly related to the sale, the Company entered into a separate agreement on May 16, 1994 which transferred the Company's interest in the equipment and lease of the remaining operating theater, in settlement of their future lease obligation on one of the closed theaters. The future lease obligation of the closed theater included in this transaction was $1,056,212 and is included in the closed theater liability. The net book value of the equipment as of December 30, 1993 included in the exchange was $282,048. -6- 29 Appendix C 30 CARMIKE CINEMAS, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS AND BALANCE SHEET NOTE A -- PRO FORMA ADJUSTMENTS On May 20, 1994, Carmike Cinemas, Inc. (the "Company" or "Carmike") purchased substantially all of the assets of Cinema World, Inc. ("Cinema World") (such purchase hereinafter referred to as the "Transaction") pursuant to an Agreement dated as of the same date by and between the Company and Cinema World, C.W. Industries, Inc. and C.W. Advertising, Inc. (collectively the "Cinema World Companies"). Cinema World was engaged in the motion picture exhibition business and its assets consist of theatre properties located primarily in Pennsylvania, Ohio and West Virginia. The Company paid $38.1 million to Cinema World for assets consisting primarily of 38 theatres comprising 176 screens and one warehouse. Funds for the Transaction were provided under the Company's $100 million Revolving Credit Facility. The Transaction was effective for accounting purposes on May 20, 1994. An unaudited pro forma balance sheet as of March 31, 1994 and the unaudited pro forma income statements for the year ended December 31, 1993 and for the three months ended March 31, 1994 are presented herein and assume that the Transaction occurred on January 1, 1993. These pro forma unaudited condensed consolidated financial statements do not purport to represent what the Company's actual results of operations would have been had such Transaction occurred on January 1, 1993 and should not serve as a forecast of the Company's operating results for any future periods. The pro forma adjustments are based upon currently available information and upon certain assumptions that management believes are reasonable under the circumstances. These pro forma unaudited financial statements should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto for the year ended December 31, 1993 (as filed on Form 10-K) and for the three months ended March 31, 1994 (as filed on Form 10-Q). The pro forma adjustments to reflect the Transaction are as follows (in 000's): BALANCE SHEET -- AS OF MARCH 31, 1994 A. To eliminate assets and liabilities of the Cinema World Companies which were not included in the Transaction. B. To write up property and equipment to fair market value based on preliminary appraisals $ 9,652 ======= C. To record a preliminary allocation of excess of purchase price over net assets of businesses acquired in the Transaction $12,524 ======= D. To reflect total borrowings of $38.1 million to fund the Transaction $14,397 =======
31 CARMIKE CINEMAS, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS AND BALANCE SHEET NOTE A - PRO FORMA ADJUSTMENTS STATEMENT OF INCOME -- THREE MONTHS ENDED MARCH 31, 1994 A. To reflect estimated incremental managerial costs $ 19 ======= B. To eliminate Cinema World's general and administrative costs net of incremental general and administrative costs estimated to be incurred by Carmike to manage the acquired theatres $ 335 ======= C. To recognize increased depreciation and amortization relative to balance sheet adjustments "B" and "C" above $ 13 ======= D. To recognize interest expense on monies borrowed to fund the Transaction $ 141 ======= E. To record tax effect of entries "A" through "D" above $ 228 ======= STATEMENT OF INCOME -- YEAR ENDED DECEMBER 31, 1993 A. To reflect estimated incremental managerial costs $ 75 ======= B. To eliminate Cinema World's general and administrative costs net of incremental general and administrative costs estimated to be incurred by Carmike to manage the acquired theatres ($1,500) ======= C. To recognize increased depreciation and amortization relative to balance sheet adjustments "B" and "C" above $ 126 ======= D. To recognize interest expense on monies borrowed to fund the Transaction ($ 175) ======= E. To record tax effect of entries "A" through "D" above $ 535 =======
32 PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET CARMIKE CINEMAS, INC. AS OF MARCH 31, 1994 ($000'S OMITTED)
CINEMA CARMIKE WORLD PRO FORMA ADJUSTED CINEMAS, INC. COMPANIES ADJUSTMENTS PRO FORMA ----------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 19,797 $ 1,291 ($1,291) (A) $ 19,797 Short-term investments 3,616 0 0 3,616 Accounts and notes receivable 3,221 864 (864) (A) 3,221 Inventories 1,562 165 (100) (A) 1,627 Prepaid expenses 3,487 142 (142) (A) 3,487 -------------------------------------------------------------------- 31,683 2,462 (2,397) 31,748 OTHER ASSETS 5,226 651 (651) (A) 5,226 PROPERTY & EQUIPMENT -- NET 254,738 15,909 9,652 (B) 280,299 EXCESS OF PURCHASE PRICE OVER NET ASSETS OF BUSINESSES ACQUIRED 32,859 0 12,524 (C) 45,383 -------------------------------------------------------------------- $324,506 $19,022 $19,128 $362,656 ==================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 19,299 $ 1,097 ($1,097) (A) $ 19,299 Employee compensation 664 322 (322) (A) 664 Accrued expenses 6,711 3,689 (3,689) (A) 6,711 Current maturities of long-term debt and capital lease obligations 7,842 2,257 (2,257) (D) 7,842 -------------------------------------------------------------------- 34,516 7,365 (7,365) 34,516 OTHER LONG-TERM LIABILITIES 0 1,642 (1,642) (A) 0 LONG-TERM DEBT -- less current maturities 33,767 23,753 14,397 (D) 71,917 SENIOR NOTES 125,000 0 0 125,000 CAPITAL LEASE OBLIGATIONS -- less current maturities 17,283 0 0 17,283 CONVERTIBLE SUBORDINATED DEBT 2,875 0 0 2,875 DEFERRED INCOME TAXES 15,554 0 0 15,554 SHAREHOLDERS' EQUITY 95,511 (13,738) 13,738 (A) 95,511 -------------------------------------------------------------------- $324,506 $19,022 $19,128 $362,656 ====================================================================
33 PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS CARMIKE CINEMAS, INC. QUARTER ENDED MARCH 31, 1994 ($000'S OMITTED EXCEPT PER SHARE DATA)
CINEMA CARMIKE WORLD PRO FORMA ADJUSTED CINEMAS, INC. COMPANIES ADJUSTMENTS PRO FORMA ---------------------------------------------------------------- REVENUES Admissions $47,652 $6,640 $ 0 $54,292 Concessions & Other 19,780 2,898 0 22,678 ---------------------------------------------------------------- 67,432 9,538 0 76,970 COSTS & EXPENSES Film rentals 22,577 3,150 0 25,727 Concessions 2,812 287 0 3,099 Other theatre costs 28,849 4,390 19 (A) 33,258 General & administrative 1,081 365 (335) (B) 1,111 Depreciation & amortization 5,343 576 13 (C) 5,932 Provision for theatre closings 0 27 0 27 ---------------------------------------------------------------- 60,662 8,795 (303) 69,154 ---------------------------------------------------------------- OPERATING INCOME 6,770 743 303 7,816 Interest expense 4,012 336 141 (D) 4,489 ---------------------------------------------------------------- INCOME(LOSS) BEFORE INCOME TAXES 2,758 407 162 3,327 Income taxes 1,103 0 228 (E) 1,331 ---------------------------------------------------------------- NET INCOME $ 1,655 $ 407 ($66) $ 1,996 ================================================================ Shares outstanding 8,157 8,157 ================================================================ Earnings per share $ 0.20 $ 0.24 ================================================================
See accompanying note. 34 PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS CARMIKE CINEMAS, INC. YEAR ENDED DECEMBER 31, 1993 ($000'S OMITTED EXCEPT PER SHARE DATA)
CINEMA CARMIKE WORLD PRO FORMA ADJUSTED CINEMAS, INC. COMPANIES ADJUSTMENTS PRO FORMA ----------------------------------------------------------------- REVENUES Admissions $167,294 $25,781 $ 0 $193,075 Concessions & Other 74,504 11,257 0 85,761 ----------------------------------------------------------------- 241,798 37,038 0 278,836 COSTS & EXPENSES Film rentals 83,635 12,985 0 96,620 Concessions 9,406 1,128 0 10,534 Other theatre costs 93,737 17,077 75 (A) 110,889 General & administrative 4,710 1,619 (1,500) (B) 4,829 Depreciation & amortization 16,255 2,232 126 (C) 18,613 Provision for theatre closings 0 242 0 242 ----------------------------------------------------------------- 207,743 35,283 (1,299) 241,727 ----------------------------------------------------------------- OPERATING INCOME 34,055 1,755 1,299 37,109 Interest expense 14,282 1,892 (175) (D) 15,999 ----------------------------------------------------------------- INCOME(LOSS) BEFORE INCOME TAXES 19,773 (137) 1,474 21,110 Income taxes 7,912 535 (E) 8,447 ----------------------------------------------------------------- NET INCOME $ 11,861 ($137) $ 939 $ 12,663 ================================================================= Shares outstanding 7,917 7,917 ================================================================= Earnings per share $ 1.50 $ 1.60 =================================================================
See accompanying note. -----END PRIVACY-ENHANCED MESSAGE-----