<PAGE> 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)
<PAGE> 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.
<PAGE> 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
<PAGE> 4
Appendix A
<PAGE> 5
Combined Audited Financial Statements
Cinema World Companies
Year ended December 30, 1993
with Report of Independent Auditors
<PAGE> 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
<PAGE> 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
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<PAGE> 8
Cinema World Companies
Combined Balance Sheet
December 30, 1993
<TABLE>
<S> <C>
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
============
</TABLE>
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<PAGE> 9
<TABLE>
<S> <C>
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
============
</TABLE>
See accompanying notes.
-3-
<PAGE> 10
Cinema World Companies
Combined Statement of Operations and Retained Earnings (Deficit)
Year ended December 30, 1993
<TABLE>
<S> <C>
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)
============
</TABLE>
See accompanying notes.
-4-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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:
<TABLE>
<CAPTION>
GIFT BOOK DISCOUNT
COUPONS TICKETS TOTAL
-----------------------------------------------------
<S> <C> <C> <C>
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
=====================================================
</TABLE>
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-
<PAGE> 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
<TABLE>
<S> <C>
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
===========
</TABLE>
-9-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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.
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<PAGE> 20
Appendix B
<PAGE> 21
Unaudited Combined Financial Statements
Cinema World Companies
Three months ended March 31, 1994
<PAGE> 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
<PAGE> 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-
<PAGE> 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-
<PAGE> 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.
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<PAGE> 26
Cinema World Companies
Unaudited Combined Statement of Cash Flows
Three months ended March 31, 1994
<TABLE>
<S> <C>
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
==========
</TABLE>
See accompanying notes.
-4-
<PAGE> 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-
<PAGE> 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-
<PAGE> 29
Appendix C
<PAGE> 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
<TABLE>
<S> <C>
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
=======
</TABLE>
<PAGE> 31
CARMIKE CINEMAS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
INCOME STATEMENTS AND BALANCE SHEET
NOTE A - PRO FORMA ADJUSTMENTS
<TABLE>
<S> <C>
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
=======
</TABLE>
<PAGE> 32
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
CARMIKE CINEMAS, INC.
AS OF MARCH 31, 1994
($000'S OMITTED)
<TABLE>
<CAPTION>
CINEMA
CARMIKE WORLD PRO FORMA ADJUSTED
CINEMAS, INC. COMPANIES ADJUSTMENTS PRO FORMA
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
====================================================================
</TABLE>
<PAGE> 33
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS
CARMIKE CINEMAS, INC.
QUARTER ENDED MARCH 31, 1994
($000'S OMITTED EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CINEMA
CARMIKE WORLD PRO FORMA ADJUSTED
CINEMAS, INC. COMPANIES ADJUSTMENTS PRO FORMA
----------------------------------------------------------------
<S> <C> <C> <C> <C>
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
================================================================
</TABLE>
See accompanying note.
<PAGE> 34
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS
CARMIKE CINEMAS, INC.
YEAR ENDED DECEMBER 31, 1993
($000'S OMITTED EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CINEMA
CARMIKE WORLD PRO FORMA ADJUSTED
CINEMAS, INC. COMPANIES ADJUSTMENTS PRO FORMA
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
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
=================================================================
</TABLE>
See accompanying note.
