<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, 1998
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
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CARMIKE CINEMAS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-1469127
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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 --
9,941,487 shares outstanding as of May 11, 1998
Class B Common Stock, $.03 par value --
1,420,700 shares outstanding as of May 11, 1998
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CARMIKE CINEMAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- ------------
(Unaudited)
(000's omitted)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,264 $ 16,545
Short-term investments 8,326 3,042
Recoverable construction allowances
under capital leases 2,100 2,100
Accounts and notes receivable 2,395 758
Inventories 3,527 3,082
Prepaid expenses 5,811 5,448
-------- --------
TOTAL CURRENT ASSETS 27,423 30,975
OTHER ASSETS 21,388 23,817
PROPERTY AND EQUIPMENT - Net of accumulated
depreciation and amortization - 512,855 497,056
EXCESS OF COST OVER FAIR
VALUE OF TANGIBLE ASSETS
ACQUIRED 67,690 68,149
-------- --------
$629,356 $619,997
======== ========
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- ------------
(Unaudited)
(000's omitted)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 30,553 $ 26,122
Accrued expenses 17,709 17,833
Current maturities of long-term debt
and capital lease obligations 19,169 19,077
-------- --------
TOTAL CURRENT LIABILITIES 67,431 63,032
LONG-TERM DEBT - less current maturities - Note B 229,676 222,242
SENIOR NOTES 72,727 79,870
CAPITAL LEASE OBLIGATIONS -
less current maturities 39,290 39,550
DEFERRED INCOME TAXES 13,431 12,431
SHAREHOLDERS' EQUITY
Class A Common Stock, $.03 par value, one vote per
share, authorized 22,500,000 shares, issued and
outstanding 9,941,287 and 9,918,587 shares, respectively 298 298
Class B Common Stock, $.03 par value, ten votes per share,
authorized 5,000,000 shares, issued and outstanding
1,420,700 shares 43 43
Paid-in capital 104,812 104,677
Retained earnings 101,648 97,854
-------- --------
206,801 202,872
-------- --------
$629,356 $619,997
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
CARMIKE CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
-------- --------
(000's omitted except
per share data)
<S> <C> <C>
REVENUES
Admissions $ 80,625 $ 77,270
Concessions and other 36,517 31,187
-------- --------
117,142 108,457
COSTS AND EXPENSES
Film exhibition costs 42,666 39,539
Concession costs 4,674 4,007
Other theatre operating costs 46,650 43,952
General and administrative 1,731 1,594
Depreciation and amortization 8,986 7,734
-------- --------
104,707 96,826
-------- --------
OPERATING INCOME 12,435 11,631
Interest expense 6,317 5,237
-------- --------
INCOME BEFORE INCOME TAXES 6,118 6,394
Income tax expense 2,324 2,429
-------- --------
NET INCOME $ 3,794 $ 3,965
======== ========
NET INCOME PER BASIC AND DILUTED SHARE $ .33 $ .35
======== ========
</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,
1998 1997
--------- ---------
(000's omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,794 $ 3,965
Items which did not use cash:
Depreciation and amortization 8,986 7,734
Deferred income taxes 1,000 -0-
Gain on sale of assets (424) (144)
Changes in operating assets and liabilities:
Accounts and notes receivable and inventories (2,082) (1,670)
Prepaid expenses (363) (1,993)
Accounts payable 3,432 7,892
Accrued expenses 876 248
--------- ---------
NET CASH PROVIDED
BY OPERATIONS 15,219 16,032
INVESTING ACTIVITIES
Purchases of property and equipment (24,261) (30,754)
Disposals of property and equipment -0- 1,357
Decrease (increase) in:
Short-term investments (5,284) (593)
Other 2,788 (2,828)
--------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (26,757) (32,818)
FINANCING ACTIVITIES
Debt and other liabilities:
Borrowings under revolving credit line 692,500 437,000
Repayments of revolving credit line (685,000) (413,000)
Payments of other long term borrowings (7,377) (7,337)
Issuance of Class A Common Stock 134 -0-
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 257 16,663
--------- ---------
DECREASE IN CASH
AND CASH EQUIVALENTS (11,281) (123)
Cash and cash equivalents at beginning of period 16,545 5,569
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 5,264 $ 5,446
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
CARMIKE CINEMAS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1998
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, 1998
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. 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, 1997.
NOTE B -- REVOLVING CREDIT FACILITY
On October 17, 1997, the Company entered into a credit agreement (the "1997
Credit Agreement") with a consortium of twelve banks to provide a revolving line
of credit of up to $275 million for working capital, acquisitions and other
general corporate purposes. The revolving line of credit under the 1997 Credit
Agreement is available for a five-year period. The Company has the option to
borrow at rates based on either the base rate of Wachovia Bank, 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 defined funded debt to defined cash flows.
At December 31, 1997, the Company had $55.0 million available for borrowings
under this facility. The Company has classified all amounts outstanding under
the 1997 Credit Agreement as long-term in the accompanying Consolidated Balance
Sheets because management intends that at least that amount would remain
outstanding during 1998.
INTEREST RATE SWAPS: 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 amounts upon which the payments are based.
The interest rate swap agreements changed floating interest rate expense on
amounts outstanding under the 1997 Credit Agreement. Under one interest rate
swap agreement, the Company has fixed $50.0 million of its floating rate debt
through February 7, 2003. The effective rate at March 31, 1998 was 6.205%, equal
to a fixed rate of 5.705% plus the margin of .50% the Company presently pays
over LIBOR. Under another interest rate swap agreement, the Company has fixed
$20.0 million of its floating rate debt through February 7, 2001 at a fixed rate
of 5.51% plus the margin the Company pays over LIBOR (.50% at March 31, 1998)
for a total effective rate of 6.01%.
6
<PAGE> 7
CARMIKE CINEMAS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1998
The Company is exposed to credit losses in the event of non-performance by
counter-parties on interest rate swap agreements. The Company does not believe
there is a significant risk of non-performance by any of the counter-parties to
these instruments and the Company monitors the financial stability of such
parties on a periodic basis.
NOTE C -- EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
------- -------
<S> <C> <C>
Weighted average shares outstanding:
Basic 11,341 11,180
Effect of dilutive securities - Employee stock options 84 93
------- -------
Diluted 11,425 11,273
======= =======
NET INCOME $ 3,794 $ 3,965
======= =======
Earnings per common share:
Basic $ .33 $ .35
======= =======
Diluted $ .33 $ .35
======= =======
</TABLE>
7
<PAGE> 8
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, 1997 (the "1997 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, the
effect of consolidations in the movie exhibition industry 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 1997 Form 10-K.
RESULTS OF OPERATIONS
Total revenues for the quarter ended March 31, 1998 increased 8.0% to $117.1
million from $108.5 million for the quarter ended March 31, 1997. This increase
consists of a $3.4 million increase in admissions and a $5.3 million increase in
concessions and other. The increases are attributed to additional revenues
generated by the increased number of screens in operation, increases in
admission prices and additional revenues from the Company's new family
entertainment center, The Hollywood Connection(R). These increases were
partially offset by a 4.2% decline in attendance per average screen. For the
quarter ended March 31, 1998, the Company's average admission price was $4.30,
its average concession sale per patron was $1.78 and revenue per average screen
was $43,210. For the quarter ended March 31, 1997, the Company's average
admission price was $4.25, its average concession sale per patron was $1.61 and
revenue per average screen was $43,021.
Cost of operations (film exhibition costs, concession costs and other theatre
operating costs) increased 7.4% to $94.0 million in the quarter ended March 31,
1998 from $87.5 million in the quarter ended March 31, 1997. 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 80.2% of total
revenues from 80.7%. 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 $1.6 million to $1.7 million,
reflecting additional general and administrative costs incurred in connection
with the additional screens added in 1997 and 1998. As a percentage of total
revenues, general and administrative costs remained the same at 1.4%.
Depreciation and amortization increased 16.2% from $7.7 million for the quarter
ended March 31, 1997 to $9.0 million for the quarter ended March 31, 1998 due to
the increased screens in operation.
Interest expense for the quarter ended March 31, 1998 increased 20.6% to $6.3
million from $5.2 million in the comparable quarter of 1997, due to the increase
in the average amount of outstanding debt.
8
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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.
On October 17, 1997, the Company entered into a new credit agreement (the "1997
Credit Agreement") with a consortium of twelve banks to provide a revolving line
of credit of up to $275 million for working capital, acquisitions and other
general corporate purposes. The revolving line of credit under the 1997 Credit
Agreement is available for a five year period. The Company has the option to
borrow at interest rates based on either the bank base rate or LIBOR plus .50%
and is required to pay annual commitment fees of .225% on the full amount of the
facility. The interest rate, facility fees and commitment fees are subject to
adjustment based upon the Company's ratio of total debt to defined cash flows.
The Company's credit facilities contain certain restrictive provisions which,
among other things, limit additional indebtedness of the Company, limit the
payment of dividends and other defined restricted payments, require that certain
debt to capitalization ratios be maintained and require minimum levels of cash
flows.
The Company's capital expenditures arise principally in connection with theatre
acquisitions, renovation and expansion of existing theatres and the development
of new theatres. During the first three months of 1998, such capital
expenditures totaled $24.3 million. The Company estimates that total capital
expenditures for 1998 will be approximately $150.0 million.
The Company believes that its presently anticipated capital needs for theatre
construction and possible acquisitions will be satisfied by the cash and cash
equivalents and short-term investments on hand, borrowing under the revolving
credit lines (see Note B of the Notes to Condensed Consolidated Financial
Statements (Unaudited) herein), additional sale of debt and/or equity
securities, additional bank financings and other forms of long-term debt,
internally generated cash flow and, where appropriate, future lease financings.
On May 11, 1998, the Company had approximately $15.7 million in cash and short
term investments on hand and approximately $29.5 million was available under the
Company's revolving credit facility.
Cash from operating activities was $15.2 million for the three months ended
March 31, 1998, compared to $16.0 million for the three months ended March 31,
1997. The decrease in cash flow from operating activities was primarily due to
the decrease in accounts payable. Net cash used in investing activities was
$26.8 million for the three months ended March 31, 1998 as compared to $32.8
million in the prior year period. This decrease in cash used in investing
activities was primarily due to the decreased level of capital expenditures. For
the three month periods ended March 31, 1998 and 1997, cash provided by
financing activities was $.3 million and $16.7 million, respectively. The
decrease in cash provided by financing activities was due to a decreased level
of borrowings under the Company's revolving credit line.
9
<PAGE> 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company has initiated an internal review of its systems to ensure that Year
2000 issues do not have a material adverse effect on the Company's core business
operations or transactions with customers, suppliers and financial institutions.
Based on this review, which was substantially completed at December 31, 1997,
the Company has determined that it will need to modify or replace portions of
its IQ-Zero software so that it will properly generate reports and manage
certain operations properly after December 31, 1999. In connection with its
review, the Company will also discuss the Year 2000 issues with its significant
suppliers and financial institutions to ensure that their systems are fully Year
2000 compliant relative to how their systems interface with the Company's
systems or otherwise impact the Company's operations. The Company will evaluate
alternatives should such suppliers and financial institutions fail to remediate
their Year 2000 problems. The Company believes that its review is adequate to
address its Year 2000 concerns and that the cost of its Year 2000 initiatives
has not had, and are not expected to have, a material adverse effect on the
Company's operating results or financial condition. However, there can be no
assurance that the Company's systems nor the systems of other companies with
whom the Company conducts business will be Year 2000 complaint prior to December
31, 1999 or that the failure of any such system will not have a material adverse
effect on the Company's business, operating results and financial condition.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 - Financial Data Schedules (for SEC use only).
(b) Reports on Form 8-K
None
11
<PAGE> 12
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: March 14, 1998 By: /s/ Michael W. Patrick
----------------------------------
Michael W. Patrick - President
(Chief Executive Officer)
Date: March 14, 1998 By: /s/ John O. Barwick, III
----------------------------------
John O. Barwick, III - Senior
President - Finance
(Chief Accounting and
Financial Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM,
10-Q OF CARMIKE CINEMAS, INC. FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,264
<SECURITIES> 8,326
<RECEIVABLES> 4,495
<ALLOWANCES> 0
<INVENTORY> 3,527
<CURRENT-ASSETS> 27,423
<PP&E> 668,486
<DEPRECIATION> 155,631
<TOTAL-ASSETS> 629,356
<CURRENT-LIABILITIES> 68,431
<BONDS> 0
0
0
<COMMON> 341
<OTHER-SE> 206,460
<TOTAL-LIABILITY-AND-EQUITY> 629,356
<SALES> 36,517
<TOTAL-REVENUES> 117,142
<CGS> 4,674
<TOTAL-COSTS> 93,990
<OTHER-EXPENSES> 10,717
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,317
<INCOME-PRETAX> 6,118
<INCOME-TAX> 2,324
<INCOME-CONTINUING> 3,794
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,794
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
