<PAGE> 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
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CARMIKE CINEMAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- ------------
(Unaudited)
(000's omitted)
<S> <C> <C>
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
======== ========
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- ------------
(Unaudited)
(000's omitted)
<S> <C> <C>
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
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
CARMIKE CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
-------- ---------
(000's omitted except
per share data)
<S> <C> <C>
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)
======== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
CARMIKE CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
--------- ---------
(000's omitted)
<S> <C> <C>
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
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Number of
Approximate -------------------
Seller Purchase Price Theatres Screens Effective Date
------ -------------- -------- ------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Maxi Saver Cinemas $ 3,975 2 18 January 5, 1996
Fox Theatres Corp. 19,100 12 61 February 16, 1996
------- -- --
$23,075 14 79
======= == ==
</TABLE>
8
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
($000's omitted, except for per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
------- --------
<S> <C> <C>
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)
======= ========
</TABLE>
Note: Fully diluted calculation is not presented because dilution is less than
3%.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1,000
<CASH> 5,446
<SECURITIES> 8,319
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,728
<CURRENT-ASSETS> 30,744
<PP&E> 536,445
<DEPRECIATION> 126,271
<TOTAL-ASSETS> 518,652
<CURRENT-LIABILITIES> 63,229
<BONDS> 0
0
0
<COMMON> 335
<OTHER-SE> 181,561
<TOTAL-LIABILITY-AND-EQUITY> 518,652
<SALES> 31,187
<TOTAL-REVENUES> 108,457
<CGS> 4,007
<TOTAL-COSTS> 87,498
<OTHER-EXPENSES> 9,328
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,237
<INCOME-PRETAX> 6,394
<INCOME-TAX> 2,429
<INCOME-CONTINUING> 3,965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,965
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
