-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AJrDGf/mNtkjJ1JcwwAqnhhRzUm/EglSzS0Gu9jALL2iIzapR/gPC2fA3Z2HOYHC njoaIU8KDli1KV2iL4hGbA== 0000950144-97-005364.txt : 19970512 0000950144-97-005364.hdr.sgml : 19970512 ACCESSION NUMBER: 0000950144-97-005364 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARMIKE CINEMAS INC CENTRAL INDEX KEY: 0000799088 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE THEATERS [7830] IRS NUMBER: 581469127 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11604 FILM NUMBER: 97599362 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 10-Q 1 CARMIKE CINEMAS: 10-Q 1 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 MARCH 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the transition period from ________ to _________ Commission file number 0-14993 ------- CARMIKE CINEMAS, INC. (Exact name of registrant as specified in its charter) DELAWARE 58-1469127 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1301 FIRST AVENUE, COLUMBUS, GEORGIA 31901-2109 (Address of principal Executive Offices) (Zip Code) (706) 576-3400 (Registrant's telephone number, including area code) 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. Yes X No --- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class A Common Stock, $.03 par value -- 9,758,601 shares outstanding as of May 7, 1997 Class B Common Stock, $.03 par value -- 1,420,700 shares outstanding as of May 7, 1997 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements CARMIKE CINEMAS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1997 1996 ----------- ------------ (Unaudited) (000's omitted) ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,446 $ 5,569 Short-term investments 8,319 7,726 Recoverable construction allowances under capital leases 4,178 4,178 Accounts and notes receivable 2,217 644 Inventories 2,728 2,631 Prepaid expenses 7,856 5,363 -------- -------- TOTAL CURRENT ASSETS 30,744 26,111 OTHER ASSETS 15,544 12,749 PROPERTY AND EQUIPMENT - Net of accumulated depreciation and amortization - Notes B, C, and D 410,174 387,915 EXCESS OF COST OVER FAIR VALUE OF TANGIBLE ASSETS ACQUIRED -- Note D 62,190 62,608 -------- -------- $518,652 $489,383 ======== ========
2 3
March 31, December 31, 1997 1996 ----------- ------------ (Unaudited) (000's omitted) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 29,824 $ 21,432 Accrued expenses 18,388 17,240 Current maturities of long-term debt and capital lease obligations 15,017 15,026 -------- -------- TOTAL CURRENT LIABILITIES 63,229 53,698 LONG-TERM DEBT - less current maturities - Note C 148,432 124,476 SENIOR NOTES 86,688 93,831 CAPITAL LEASE OBLIGATIONS - less current maturities 31,140 31,351 CONVERTIBLE SUBORDINATED DEBT 3,645 3,575 DEFERRED INCOME TAXES 3,622 4,522 SHAREHOLDERS' EQUITY Class A Common Stock, $.03 par value, authorized 22,500,000 shares, issued and outstanding 9,758,601 and 9,745,101 shares, respectively 292 292 Class B Common Stock, $.03 par value, authorized 5,000,000 shares, issued and outstanding 1,420,700 shares 43 43 Paid-in capital 99,927 99,927 Retained earnings 81,634 77,668 -------- -------- 181,896 177,930 -------- -------- $518,652 $489,383 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 4 CARMIKE CINEMAS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, 1997 1996 -------- --------- (000's omitted except per share data) REVENUES Admissions $ 77,270 $ 63,944 Concessions and other 31,187 28,212 -------- --------- 108,457 92,156 COSTS AND EXPENSES Film exhibition costs 39,539 32,003 Concession costs 4,007 3,761 Other theatre operating costs 43,952 39,264 General and administrative 1,594 1,445 Depreciation and amortization 7,734 7,100 Impairment of long-lived assets (Note B) -0- 45,447 -------- --------- 96,826 129,020 -------- --------- OPERATING INCOME (LOSS) 11,631 (36,864) Interest expense 5,237 4,935 -------- --------- INCOME (LOSS) BEFORE INCOME TAXES 6,394 (41,799) Income tax expense (benefit) 2,429 (15,884) -------- --------- NET INCOME (LOSS) $ 3,965 $ (25,915) ======== ========= NET INCOME (LOSS) PER SHARE $ .35 $ (2.30) ======== =========
See accompanying notes to condensed consolidated financial statements. 4 5 CARMIKE CINEMAS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, 1997 1996 --------- --------- (000's omitted) OPERATING ACTIVITIES Net income (loss) $ 3,965 $ (25,915) Items which did not use cash: Depreciation and amortization 7,734 7,100 Impairment of long-lived assets -0- 45,447 Deferred income taxes -0- (16,870) Gain on sale of property and equipment (144) (389) Changes in operating assets and liabilities: Accounts and notes receivable and inventories (1,670) 3,140 Prepaid expenses (1,993) 285 Accounts payable 7,892 1,229 Accrued expenses 248 (4,332) --------- --------- NET CASH PROVIDED BY OPERATIONS 16,032 9,695 INVESTING ACTIVITIES Purchases of property and equipment (30,754) (12,279) Purchases of assets from other theatre operators -0- (23,075) Disposals of property and equipment 1,357 586 Decrease (increase) in: Short-term investments (593) (640) Other (2,828) 246 --------- --------- NET CASH USED IN INVESTING ACTIVITIES (32,818) (35,162) FINANCING ACTIVITIES Debt and other liabilities: Additional borrowings 437,000 179,500 Repayments (420,337) (161,822) --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 16,663 17,678 --------- --------- DECREASE IN CASH AND CASH EQUIVALENTS (123) (7,789) Cash and cash equivalents at beginning of period 5,569 11,345 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,446 $ 3,556 ========= =========
See accompanying notes to condensed consolidated financial statements. 5 6 CARMIKE CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1997 NOTE A -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. 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, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. NOTE B - IMPAIRMENT OF LONG-LIVED ASSETS The Company adopted Statement of Financial Accounting Standards 121 ("Statement 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", as of January 1, 1996. The Company reviews for impairment long-lived assets, and goodwill related to those assets, to be held and used in the business whenever events or changes in circumstances indicate that the carrying amount of an asset or a group of assets may not be recoverable. The Company considers a trend of operating results that are not in line with management's expectations to be its primary indicator of potential impairment. For purposes of Statement 121, assets are evaluated for impairment at the theatre level, which management believes is the lowest level for which there are identifiable cash flows. The Company deems a theatre to be impaired if a forecast of undiscounted future operating cash flows directly related to the theatre, including disposal value if any, is less than its carrying amount. If a theatre is determined to be impaired, the loss is measured as the amount by which the carrying amount of the theatre exceeds its fair value. Fair value is based on management's estimates which are based on using the best information available, including prices for similar theatres or the results of valuation techniques such as discounting estimated future cash flows as if the decision to continue to use the impaired theatres was a new investment decision. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates. Recoverability of other long-lived assets, primarily investments in unconsolidated affiliates and goodwill not identified with impaired theatres covered by the above paragraph, will continue to be evaluated on a recurring basis. The primary indicator of recoverability is the forecasted profitability over the estimated remaining life of these assets. If recoverability is unlikely based on the evaluation, the carrying amount is written down to the fair value. In the future, additional adjustments could be required. 6 7 CARMIKE CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1997 The initial non-cash charge upon the Company's adoption of Statement 121 recorded during the period ended March 31, 1996 was approximately $45.4 million ($28.2 million after tax or $2.50 per share) to reduce the carrying amount of 138 of the Company's theatres. This initial charge resulted from evaluating the recoverability of individual theatres, which is at a lower level of cash flow evaluation than under the Company's previous accounting policy for measuring impairment. Under the Company's previous policy, the Company's long-lived assets were evaluated on a market by market basis for impairment. As a result of the reduced carrying amount of the impaired assets, depreciation and amortization expense for 1996 was reduced by approximately $4.2 million ($2.6 million after tax or $.23 per share). Statement 121 also requires, among other provisions, that long-lived assets held for disposal and certain identified intangibles be reported at the lower of the asset's carrying amount or its fair value less costs to sell. The impact of adopting Statement 121 on assets held for disposal was not material. The Company's policy is to perform its impairment calculations and evaluations in the fourth quarter of each year. NOTE C --REVOLVING CREDIT FACILITY On April 23, 1996, the Company entered into an Amended and Restated Credit Agreement (the "Agreement") with four banks to provide a revolving line of credit of up to $175,000,000 for working capital, acquisitions and other general corporate purposes. The Agreement has a three year revolving credit period, extended upon the mutual consent of the Company and the banks for one year periods and will convert to a four year term loan at the end of the revolving credit period. The Company has the option to borrow at rates based on either the base rate of Wachovia Bank of Georgia, N.A. or LIBOR + .50% and is required to pay annual fees of .225% on the full amount of the facility. The interest rate and facility fees are subject to adjustment based upon the Company's ratio of total debt to defined cash flows. The Agreement contains certain restrictive provisions which, among other things, limit additional indebtedness of the Company, limit dividend and other restricted payments, require that certain debt to capitalization ratios be maintained and require minimum levels of cash flows. At March 31, 1997, the Company had $146,000,000 outstanding under this facility. Under the terms of this Agreement, no payments are due until after April 23, 1999, nor does the Company anticipate reducing the amount outstanding at March 31, 1997. Accordingly, no amounts outstanding under the Agreement have been classified as current maturities in the accompanying Condensed Consolidated Financial Statements. 7 8 CARMIKE CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1997 The Company has entered into interest rate swap agreements to modify the interest characteristics of a portion of its outstanding debt. The agreements involve the exchange of amounts based on a variable interest rate for amounts based on a fixed interest rate over the life of the agreements without an exchange of the notional amount upon which the payments are based. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment of interest expense related to the debt (the accrual accounting method). The related amount payable to, or receivable from, counter-parties is included in other liabilities or assets. The fair value of the swap agreements is not recognized in the financial statements. In the event of the early extinguishment of a designated debt obligation, any realized or unrealized gain or loss from the swap would be recognized in income coincident with the extinguishment. Under one agreement, the Company has fixed $50 million of the Company's floating rate debt for seven years. The effective rate at March 31, 1997 was 6.205%, equal to a fixed rate of 5.705% plus the margin of .50% the Company presently pays over LIBOR. Under another agreement, the Company has fixed $20 million of its floating rate debt for five years at a fixed rate of 5.51% plus the margin the Company pays over LIBOR (presently .50%) for a total effective rate of 6.01%. NOTE D -- ACQUISITIONS The Company's acquisitions have been accounted for under the purchase method of accounting. Under the purchase method of accounting, the results of operations of the acquired businesses are included in the accompanying consolidated statements as of their respective acquisition dates. The assets and liabilities of acquired businesses in 1996 are included based on a preliminary allocation of the purchase price. In separate transactions in 1996, the Company acquired certain assets and businesses as follows:
Number of Approximate ------------------- Seller Purchase Price Theatres Screens Effective Date ------ -------------- -------- ------- -------------- (in thousands) Maxi Saver Cinemas $ 3,975 2 18 January 5, 1996 Fox Theatres Corp. 19,100 12 61 February 16, 1996 ------- -- -- $23,075 14 79 ======= == ==
8 9 CARMIKE CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1997 The excess of purchase prices over net assets of businesses acquired has been recorded as an intangible asset. Amounts recorded were approximately $17.0 million in 1996. Pro-forma results have not been presented for those acquisitions which were not significant during the periods presented. NOTE E - ACCOUNTING POLICY NOT YET ADOPTED In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in an increase in primary earnings per share for the first quarter ended March 31, 1997 and March 31, 1996 of $ -0- and $.02 per share, respectively. The impact of Statement 128 on the calculation of fully diluted earnings per share for these quarters is not expected to be material. 9 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of the Company's financial condition and results of operations should be read in conjunction with the financial information included herein and the Company's annual report on Form 10-K for the fiscal year ended December 31, 1996 (the "1996 Form 10-K") as filed with the Securities and Exchange Commission (the "SEC"). Except for the historical information contained herein, the following discussion contains forward-looking statements that involve a number of risks and uncertainties. Factors which could cause the Company's actual results in future periods to differ materially include, but are not limited to, the availability of suitable motion pictures for exhibition in the Company's markets, the availability of opportunities for expansion and competition with other forms of entertainment, as well as those discussed or identified from time to time in the Company's filings with the SEC, including, but not limited to, the Company's 1996 Form 10-K. RESULTS OF OPERATIONS Total revenues for the quarter ended March 31, 1997 increased 17.7% to $108,457,000 from $92,156,000 for the quarter ended March 31, 1996. This increase consists of a $13,326,000 increase in admissions and a $2,975,000 increase in concessions and other. The increases are attributed to an 8.7% increase in attendance combined with an 11.2% increase in the average admission price per patron plus a 1.7% increase in the average concession sale per patron. Revenues per average screen increased 14.1% in the quarter ended March 31, 1997 as compared to the quarter ended March 31, 1996. Cost of operations (film exhibition costs, concession costs and other theatre operating costs) increased 16.6% to $87,498,000 in the quarter ended March 31, 1997 from $75,028,000 in the quarter ended March 31, 1996. This dollar increase is due to additional film rentals paid on the increased admissions plus an increase in expenses due to the increased number of screens in operation. As a percentage of total revenues, cost of operations decreased to 80.7% of total revenues from 81.4%. This percentage decrease is due primarily to the level of fixed costs, such as occupancy costs, managers salaries and utilities, included in this cost category that do not vary with changes in revenues and attendance levels. General and administrative costs increased from $1,445,000 to $1,594,000 and decreased as a percentage of total revenues from 1.6% to 1.5%. The dollar increase is due to increased salary costs whereas the percentage decrease is due to the increase in attendance and revenues discussed above. Depreciation and amortization increased 8.9% from $7,100,000 for the quarter ended March 31, 1996 to $7,734,000 for the quarter ended March 31, 1997 due to the increased screens in operation. As a percentage of total revenues depreciation and amortization decreased from 7.7% to 7.1% due to increases in revenues partially offset by additional depreciation and amortization from the acquisitions and expansions in 1996 and due to the fixed nature of the costs. Interest expense for the quarter ended March 31, 1997 increased 6.1% to $5,237,000 from $4,935,000 in the comparable quarter of 1996, due to the increase in the average amount of outstanding debt. (See Note C of Notes to Condensed Consolidated Financial Statements). 10 11 LIQUIDITY AND CAPITAL RESOURCES The Company's revenues are collected in cash, principally through box office admissions and theatre concessions. Because its revenues are received in cash prior to the payment of related expenses, the Company has an operating "float" which partially finances its operations. The Company's capital requirements arise principally in connection with new theatre openings and acquisitions of existing theatres and theatre circuits. New theatre openings and acquisitions typically have been financed with internally generated cash and by debt financings, including borrowings under the Company's revolving credit facility. The Company believes that its capital needs for theatre construction and possible acquisitions should be satisfied by internally generated cash flow, cash and cash equivalents and short-term investments on hand, borrowings under its revolving credit line (see Note C of the Notes to Condensed Consolidated Financial Statements (unaudited) herein), additional sale of debt and/or equity securities, additional bank financing and other forms of long-term debt and, where appropriate, future lease financing. On May 7, 1997, the Company had approximately $9,900,000 in cash and short-term investments on hand and approximately $12,000,000 was available under the Company's revolving credit facility. 11 12 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits 11 - Statement re: computation of earnings per share 27 - Financial Data Schedule (b) Reports on Form 8-K None 12 13 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. CARMIKE CINEMAS, INC. (Registrant) Date: May 9, 1997 By: /s/ Michael W. Patrick ------------------------- -------------------------------- Michael W. Patrick - President (Chief Executive Officer) Date: May 9, 1997 By: /s/ John O. Barwick, III ------------------------- -------------------------------- John O. Barwick, III - Vice President Finance (Chief Accounting and Financial Officer) 13 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE ($000's omitted, except for per share data)
Three Months Ended March 31, 1997 1996 ------- -------- Average shares outstanding 11,180 11,166 Net effect of dilutive stock options based on the treasury stock method using average market price 93 106 ------- -------- TOTALS 11,273 11,272 ======= ======== NET INCOME (LOSS) $ 3,965 $(25,915) ======= ======== NET INCOME (LOSS) PER SHARE $ .35 $ (2.30) ======= ========
Note: Fully diluted calculation is not presented because dilution is less than 3%. 14 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q OF CARMIKE CINEMAS, INC., FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. U.S. DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1,000 5,446 8,319 0 0 2,728 30,744 536,445 126,271 518,652 63,229 0 0 0 335 181,561 518,652 31,187 108,457 4,007 87,498 9,328 0 5,237 6,394 2,429 3,965 0 0 0 3,965 .35 .35
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