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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended DECEMBER 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
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Commission File Number 0-14993
CARMIKE CINEMAS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 58-1469127
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1301 First Avenue, Columbus, Georgia 31901
(Address of principal Executive Offices) (Zip Code)
</TABLE>
(706) 576-3400
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- ------------------------------------------
<S> <C>
Class A Common Stock, par value $.03 per share New York Stock Exchange, Inc.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K
As of March 17, 1998, 9,926,087 shares of Class A Common Stock, par value $.03
per share, were outstanding and the aggregate market value of the shares of
the Class A Common Stock held by non-affiliates of the registrant was
approximately $310,000,000.00.
As of March 17, 1998, 1,420,700 shares of Class B Common Stock, par value $.03
per share, were outstanding, all of which shares are held by affiliates of the
registrant.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Specified portions of Carmike Cinemas, Inc.'s Annual Report to
Shareholders for the fiscal year ended December 31, 1997 are incorporated
by reference into Part II and Part IV.
(2) Specified portions of Carmike Cinemas, Inc.'s Proxy Statement relating to
the 1998 Annual Meeting of Shareholders are incorporated by reference
into Part III.
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PART I
Item 1. Business
(a) General Development of Business
Carmike Cinemas, Inc. (herein referred to as the "Company" or "Carmike"), a
corporation organized under the laws of the State of Delaware, is engaged in
the motion picture exhibition business. The Company was incorporated in April
1982 in connection with the leveraged buy-out of the Company's predecessor, the
Martin Theatres circuit, by present management of the Company. The principal
executive offices of the Company are located at 1301 First Avenue, Columbus,
Georgia 31901-2109, and its telephone number at that location is (706)
576-3400.
The following are several of the more significant events which have taken
place since December 31, 1996:
(i) Acquisitions during 1997
During 1997, the Company acquired First International Theatres, which
operated 19 theatres with an aggregate of 104 screens in five states. The
total consideration of $16.8 million was a combination of cash and the issuance
of an aggregate of 128,986 shares of the Company's Class A Common Stock. The
excess of the purchase price over net assets of the business acquired was
approximately $6.1 million in 1997 and has been recorded as an intangible
asset.
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(ii) New Theatre Openings and Additions to Existing Theatres
During 1997, the Company opened or expanded the following theatres:
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THEATRE LOCATION SCREENS
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NEW COMPLEXES
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Parkplace 16 Morrisville, NC 16
Wynnsong 12 Birmingham, AL 12
Carmike 10 Lafayette, LA 10
Razorback 10 Little Rock, AR 10
Wynnsong 10 Montgomery, AL 10
Carmike 12 Provo, UT 12
Carmike 10 Midlothian, VA 10
Carmike 12 Snellville, GA 12
Carmike 12 Wilmington, NC 12
Wynnsong 12 Winston-Salem, NC 12
Hickory 8 Nashville, TN 8
Summitt 16 Birmingham, AL 16
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Total 140
HOLLYWOOD CONNECTIONS
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Hollywood Connection Columbus, GA 10
Hollywood Connection Goshen, IN 6
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Total 16
ADDITIONS TO EXISTING COMPLEXES
-------------------------------
Midco 9 Aberdeen, SD 4
Starlite 7 Chubbuck, ID 4
Blue Ridge 14 Raleigh, NC 4
Cinema 7 Washington, NC 4
Sikes 10 Wichita Falls, TX 4
Oakwood 12 Eau Claire, WI 6
Bordeaux 7 Fayetteville, NC 4
---
Total 30
---
Total New Screens 186
===
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(iii) Development of Entertainment Complexes
The Company opened its first "entertainment complex," which offers a
broad spectrum of entertainment in addition to movie exhibition, on May 23,
1997. Known as the "Hollywood Connection(R)", this complex encompasses
127,000 square feet on an 11 acre site in Columbus, Georgia. The complex
includes a 10-screen theatre equipped with Lucasfilm's THX(R) Digital surround
systems and stadium seating, an indoor roller skating rink, an 18-hole themed
putting golf course, a bumper car attraction, a state-of-the-art games arcade,
a restaurant and a laser tag arena.
The Company also entered into a joint venture agreement (the
"Agreement") with Wal-Mart in 1997 to open additional Hollywood Connections(R)
in locations vacated by Wal-Mart. Under the terms of this Agreement, the joint
venture will lease the facility from Wal-Mart on the same terms and conditions
that Wal-Mart is paying to its landlord. Carmike and Wal-Mart will then each
contribute 50% of the capital necessary to convert the location into a
Hollywood Connection(R) and Carmike will then manage the operations for a fee,
with net pretax profits to be shared equally. At present, one such Hollywood
Connection(R) has been opened by the joint venture in Goshen, Indiana and two
other locations are currently under construction - one in Valparaiso, Indiana,
which is scheduled to open in May, 1998, and the other in DeKalb, Illinois,
which is scheduled to open in July, 1998. The Company is currently working
with Wal-Mart to identify and construct additional locations.
(b) Narrative Description of Business
(i) Theatre Operations
The Company is currently the largest motion picture exhibitor
in the United States in terms of number of theatres and screens operated. As
of December 31, 1997, the Company operated 520 theatres with an aggregate of
2,720 screens located in 36 states. See "Competition" herein regarding recent
and proposed acquisitions and consolidations in the movie exhibition industry.
The Company's screens are located principally in communities where the Company
is the sole or leading exhibitor. For the year ended December 31, 1997,
aggregate attendance at the Company's theatres was approximately 75.3 million
people.
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The Company's theatres are located in the following states:
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STATE THEATRES SCREENS
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Alabama 29 188
Arkansas 13 96
Colorado 13 72
Delaware 2 12
Florida 28 146
Georgia 38 226
Idaho 10 28
Illinois 2 6
Indiana 1 6
Iowa 22 118
Kansas 3 13
Kentucky 11 53
Louisiana 4 27
Maryland 3 15
Michigan 2 10
Minnesota 13 54
Missouri 1 8
Montana 15 59
Nebraska 9 32
New Mexico 1 2
New York 1 8
North Carolina 68 357
North Dakota 9 45
Ohio 8 43
Oklahoma 15 68
Pennsylvania 42 205
South Carolina 27 149
South Dakota 8 50
Tennessee 44 257
Texas 25 112
Utah 13 60
Virginia 14 78
Washington 2 2
West Virginia 6 33
Wisconsin 11 60
Wyoming 7 22
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520 2,720
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The Company's theatre operations are under the supervision of its Vice
President - General Manager and are divided into four geographic divisions,
each of which is headed by a division manager. The division managers are
responsible for implementing Company operating policies and supervising the
Company's eighteen operating districts. Each operating district has a district
manager who is responsible for overseeing the day-to-day operations of the
Company's theatres. Corporate policy development, strategic planning, site
selection and lease negotiation, theatre design and construction, concession
purchasing, film licensing, advertising, and financial and accounting
activities are centralized at the corporate headquarters of the Company. See
"Film Licensing" with respect to the Company's film licensing operations.
Nearly all of the Company's 2,720 screens are located in multi-screen
theatres, with over 93% of the Company's screens being located in theatres
having three or more screens. The Company's average number of screens per
theatre is 5.2, and the Company intends to increase this ratio through the
construction of larger multi-plex theatres. Multi-plex theatres enable the
Company to present a variety of films appealing to several segments of the
movie-going public while serving patrons from common support facilities (such
as the box office, concession areas, restrooms and lobby). This strategy
enhances attendance, utilization of theatre capacity and operating efficiencies
(relating to theatre staffing, performance scheduling and space and equipment
utilization), and thereby enhances revenues and profitability. Staggered
scheduling of starting times minimizes staffing requirements for crowd control,
box office and concession services while reducing congestion at the concession
area. The Company's theatres are housed predominantly in modern facilities
equipped with quality projection and sound equipment.
From time to time, the Company converts marginally profitable theatres to
"Discount Theatres" for the exhibition of films that have previously been shown
on a first-run basis. Increased attendance at these theatres following these
conversions, combined with a lower film rental cost, normally improves such
theatres' operating profitability. The Company also operates certain theatres
for the exhibition of first-run films at a reduced admission price. These
theatres are typically in a smaller market where the Company is the only
exhibitor in the market. At present, the Company operates 132 of its theatres
(441 screens) as Discount Theatres.
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The Company also sells gift certificates and offers a discount ticket plan to
attract groups of patrons to its theatres.
The Company's revenues are generated primarily from box office receipts and
concession sales. Additional revenues, which are not material, are generated
from electronic video games installed in the lobbies of some of the Company's
theatres and on-screen advertising.
The Company relies upon advertisements and movie schedules published in
newspapers to inform its patrons of film selections and show times. Newspaper
advertisements are typically displayed in a single group for all the Company's
theatres located in the newspaper's circulation area. In addition, the Company
utilizes radio spots and promotions to further market its films. Major
distributors frequently share the cost of newspaper and radio advertising. The
Company also exhibits in its theatres previews of coming attractions and films
presently playing on the Company's other screens in the same market area.
The Company's proprietary computer system, I.Q. Zero, which is presently
installed in approximately 100% of its theatres (representing approximately
100% of its screens), allows Carmike to centralize most theatre-level
administrative functions at its corporate headquarters, creating significant
operating leverage. I.Q. Zero allows corporate management to monitor ticket
and concession sales and box office and concession staffing on a daily basis.
The Company's integrated MIS, centered around I.Q. Zero, also coordinates
payroll, tracks theatre invoices and generates operating reports analyzing film
performance and theatre profitability. Accordingly, there is active
communication between the theatres and corporate headquarters, which allows
senior management to react to vital profit and staffing information on a daily
basis and perform the majority of the theatre-level administrative functions,
thereby enabling the theatre manager to focus on the day-to-day operations of
the theatre.
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(ii) Film Licensing
Carmike obtains licenses to exhibit films by directly negotiating
with or, in rare circumstances, submitting bids to film distributors. The
Company licenses films through its booking office located in Columbus, Georgia.
The Company's Vice President - Film, in consultation with the Company's
President, directs the Company's motion picture bookings.
Prior to negotiating or bidding for a film license, the Company's Vice
President - Film and film booking personnel evaluate the prospects for upcoming
films. The criteria considered for each film include cast, director, plot,
performance of similar films, estimated film rental costs and expected MPAA
rating. Successful licensing depends greatly upon the availability of
commercially popular motion pictures, knowledge of the tastes of residents in
markets served by each theatre and insight into the trends in those tastes.
The Company maintains a database that includes revenue information on films
previously exhibited in its markets. This historical information is then
utilized by the Company to match new films with particular markets so as to
maximize revenues.
Film licenses typically specify rental fees based on the higher of a
gross box office receipts formula or an adjusted gross box office receipts
formula. Under a gross box office receipts formula, the distributor receives a
specified percentage of box office receipts, with the percentage declining over
the term of the run. The Company's film rental fees typically begin at 60% of
admission revenues and gradually decline to as low as 30% over a period of four
to eight weeks. Under an adjusted gross box office receipts formula (commonly
known as a "90/10" clause), the distributor receives a specified percentage
(i.e., 90%) of the excess of box office receipts over a negotiated amount for
house expenses. In addition, the Company is occasionally required to pay
non-refundable guarantees of film rentals, to make advance payments of film
rentals, or both, in order to obtain a license for a film. Although not
specifically contemplated by the provisions of film licenses, the terms of film
licenses generally are adjusted or re-negotiated subsequent to exhibition of
the film in relation to its success.
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Film licensing zones are geographic areas (generally encompassing a
radius of three to five miles) established by film distributors where any given
film is allocated to only one theatre within that area. In film licensing
zones where the Company has little or no competition, the Company obtains film
licenses by selecting a film from among those offered and negotiating directly
with the distributor. In competitive film licensing zones, a distributor will
either require the exhibitors in the zone to bid for a film or will allocate
its films among the exhibitors in the zone. When films are licensed under the
allocation process, a distributor will choose which exhibitor is offered a
movie and then that exhibitor will negotiate film rental terms directly with
the distributor for the film. Over the past several years, distributors have
generally used the allocation rather than the bidding process to license their
films. When films are licensed through a bidding process, exhibitors compete
for licenses based upon economic terms. The Company currently does not bid for
films in any of its film licensing zones.
The Company predominantly licenses "first-run" films. If a film has
substantial remaining potential following its first-run, the Company may
license it for a subsequent run (a "sub-run"). Although average daily sub-run
attendance is often less than average daily first-run attendance, sub-run film
cost is generally less than first-run film cost. Additionally, sub-runs enable
the Company to exhibit a variety of films during periods in which there are few
new releases.
The Company's business is dependent upon the availability of
marketable pictures and its relationships with distributors. While there are
numerous distributors which provide quality first-run movies to the motion
picture exhibition industry, the following seven major distributors accounted
for approximately 91% of the Company's admission revenues during 1997 - Buena
Vista, Warner Brothers, Fox, Paramount, Universal, Sony and New Line. No
single distributor dominates the market. Disruption in the production of
motion pictures by the major studios and/or independent producers or poor
performance of motion pictures could have an adverse effect on the business of
the Company. The Company licenses films from a number of distributors and
believes that its relationships with distributors generally are satisfactory.
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(iii) Competition
The Company's operations are subject to varying degrees of competition
with respect to licensing films, attracting patrons, obtaining new theatre
sites or acquiring theatre circuits. In markets where it is not the sole
exhibitor, the Company competes against regional and independent operators as
well as the larger theatre circuit operators. A number of significant
acquisitions and consolidations in the movie exhibition industry have been
announced or proposed in recent months. For example, according to press
reports, the proposed merger of Sony's Loews theatres with Cineplex Odeon,
which was announced in September 1997, is expected to result in a combined
company with over 2,700 screens in 450 locations. In December 1997, the firm
of Kohlberg Kravis Roberts & Co. ("KKR") consummated its acquisition of Act III
Theatres. In early 1998, KKR and Hicks, Muse, Tate & Furst, Inc. ("Hicks
Muse") announced a joint agreement to acquire Regal Cinemas and to subsequently
combine Regal Cinemas with Act III and with United Artists, which Hicks Muse
had proposed to acquire. Hicks Muse subsequently withdrew its offer to acquire
United Artists; however, a combination of Regal Cinemas with Act III Theatres
would result in a combined company with approximately 3,175 screens in 390
locations. The Company cannot predict what impact such consolidations may have
on the Company's future results of operations.
The Company believes that the principal competitive factors with
respect to film licensing include licensing terms, seating capacity, location
and prestige of an exhibitor's theatres, quality of projection and sound at the
theatres and the exhibitor's ability and willingness to promote the films. The
competition for patrons is dependent upon factors such as the availability of
popular films, location of the theatres, patron comfort, quality of projection
and sound and the ticket prices. The Company believes that its admission
prices are competitive with admission prices of competing theatres.
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The Company's theatres face competition from a number of motion
picture exhibition delivery systems, such as pay television, pay-per-view and
home video systems. The impact of such delivery systems on the motion picture
exhibition industry is difficult to determine precisely, and there can be no
assurance that existing or future delivery systems will not have an adverse
impact on attendance. The Company believes that its strongest competition is
from other forms of entertainment competing for the public's outside-the-home
leisure time and disposable income.
(iv) Seasonality
The major film distributors generally release during the summer and
holiday seasons, primarily Thanksgiving and Christmas, those films which they
anticipate to be the most successful. Consequently, the Company has
historically generated higher revenues during such periods.
(v) Regulatory Environment
The distribution of motion pictures is in large part regulated by
federal and state antitrust laws and has been the subject of numerous antitrust
cases. Certain consent decrees resulting from such cases bind certain major
motion picture distributors and require the motion pictures of such
distributors to be offered and licensed to exhibitors, including the Company,
on a theatre-by-theatre basis. Consequently, exhibitors such as the Company
cannot assure themselves of a supply of motion pictures by entering into
long-term arrangements with major distributors but must compete for licenses on
a film-by-film and theatre-by-theatre basis.
The Federal Americans With Disabilities Act (the "ADA"), which became
effective in 1992, prohibits discrimination on the basis of disability in
public accommodations and employment. The Company constructs new theatres to
be accessible to the disabled and believes that it is otherwise in substantial
compliance with all applicable regulations relating to accommodating the needs
of the disabled. The Company does not currently anticipate that ongoing
compliance with the ADA and the regulations thereunder will require the Company
to expend substantial funds.
(vi) Employees
At December 31, 1997, the Company had approximately 10,500 employees,
of which 71 are covered by collective bargaining agreements. The Company
considers its relations with its employees to be good.
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(c) Cautionary Notice Regarding Forward-Looking Statements
With the exception of historical information, certain statements in this
Annual Report on Form 10-K and in documents incorporated by reference herein,
including matters discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations," may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include, without
limitation, statements that may predict, forecast, indicate or imply future
results, performance or achievements by the Company, and may include words such
as "expect," "anticipate," "intend," "plan," "believe," "estimate" and words or
phrases of similar meaning. Such forward-looking statements are not guarantees
of future performance and are subject to assumptions, risks, uncertainties and
other factors that may cause actual results of the Company to differ materially
from historical results or from any results expressed or implied by such
forward-looking statements. Many of such factors are beyond the Company's
ability to control or predict, and readers are cautioned not to put undue
reliance on such forward-looking statements. The Company disclaims any
obligation to update or revise any forward-looking statements contained in this
Report, whether as a result of new information, future events or otherwise.
Factors That May Affect Future Performance
In addition to other factors and matters discussed elsewhere herein,
factors that, in the view of the Company, could cause actual results to differ
materially from those discussed in forward-looking statements are set forth
below.
(i) Expansion Plans
Theatre acquisitions and new theatre openings have greatly expanded
the Company's operations in the past, and the Company intends to continue to
pursue a strategy of expansion that will involve the development of new
theatres, potential acquisitions of existing theatres and theatre circuits, and
expansion of existing facilities. There is significant competition for
potential site locations and existing theatre and theatre circuit acquisition
opportunities. As a result of such competition, the Company may be unable to
acquire attractive site locations or existing theatres or theatre circuits on
terms the Company considers acceptable. The development of new theatres
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involves certain risks, including the possibility of construction cost overruns
and delays, uncertainty of site acquisition costs and availability,
uncertainties as to market potential, zoning and tax law considerations, market
deterioration and the emergence of market competition from unexpected sources.
Additionally, expansion of the Company's operations, whether through theatre
development or acquisitions, involves the risk that the Company might not
effectively manage such growth as effectively as it has in the past.
(ii) Dependence upon Motion Picture Production and Performance
The Company's business is dependent both upon the availability of
suitable motion pictures for exhibition in its theatres and the performance of
such pictures in the Company's markets. Accordingly, the Company's results of
operations will vary from period to period based upon the quantity and quality
of the motion pictures it exhibits. A disruption in the production of motion
pictures or lack of motion pictures could have a material adverse effect on the
Company's business.
(iii) Seasonality
The Company's revenues have been seasonal, coinciding with the timing
of major releases of motion pictures by the major distributors. Generally, the
most marketable motion pictures have been released during the summer and the
Thanksgiving through year-end holiday season, and motion picture exhibitors
have had proportionately higher revenues during such periods. The seasonality
of motion picture exhibition revenue has become less pronounced in recent years
as studios have begun to release major motion pictures more evenly throughout
the year, and the unexpected emergence of a hit film during other periods can
also alter the traditional trend. The timing of motion picture releases can
have a significant impact on the Company's results of operations, and the
results of one quarter are not necessarily indicative of results for the next
quarter. During fiscal year 1997, the percentages of the Company's total box
office revenue by quarter were as follows: first quarter 24.2%; second quarter
23.7%; third quarter 27.8%; and fourth quarter 24.3%.
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(iv) Dependence Upon Senior Management
The Company's success depends in part on the continued contribution of
its senior management, including Michael W. Patrick, the Company's President,
and John O. Barwick, III, Senior Vice President-Finance. The loss of the
services of one or more members of the Company's senior management could have a
material adverse effect upon the Company's business and development. The
Company has an employment agreement with Michael W. Patrick.
(v) Competition
The Company's operations are subject to varying degrees of competition
with respect to licensing films, attracting patrons, obtaining new theatre
sites and acquiring theatre circuits. There have been a number of recent
consolidations in the movie exhibition industry, and the impact of such
consolidations could have an adverse effect on the Company's business. In
addition, the Company's theatres face competition from a number of motion
picture exhibition delivery systems, such as pay television, pay-per-view and
home video systems. While the impact of such delivery systems on the motion
picture industry is difficult to determine precisely, there can be no assurance
that they will not have an adverse impact on attendance. Movie theatres also
face competition from other forms of entertainment competing for the public's
leisure time and disposable income.
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Item 2. Properties
At December 31, 1997, 87 of the Company's 520 theatres were owned by the
Company, 366 were leased pursuant to building leases, 60 were leased pursuant
to ground leases, and 7 were subject to shared ownership or shared leasehold
interests with various unrelated third parties.
The Company's leases are generally entered into on a long-term basis. See
Note E of Notes to Consolidated Financial Statements incorporated by reference
in Item 8 herein for information with respect to the Company's lease
commitments.
The Company owns its headquarters building in Columbus, Georgia. The
Company occupies all of this modern five-story office building, which has
approximately 48,500 square feet. The Company's interest in the building is
encumbered by a Deed to Secure Debt and Security Agreement in favor of the
Downtown Development Authority of Columbus, Georgia.
Item 3. Legal Proceedings
From time to time, the Company is involved in routine litigation and legal
proceedings in the ordinary course of its business, such as personal injury
claims, employment matters and contractual disputes. Currently, the Company
does not have pending any litigation or proceedings that management believes
will have a material adverse effect, either individually or in the aggregate,
upon the Company.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
last quarter of the year ended December 31, 1997.
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Executive Officers of the Registrant
[Included pursuant to Regulation S-K,
Item 401(b), Instruction 3]
The following sets forth certain information regarding the executive
officers of the Company. For purposes of this section, references to the
Company include the Company's predecessor, Martin Theatres, Inc.
C. L. Patrick, age 79, who has served as Chairman of the Board of Directors
of the Company since April 1982, joined the Company in 1945, became its General
Manager in 1948 and served as President of the Company from 1969 to 1970. He
served as President of Fuqua Industries, Inc. ("Fuqua") from 1970 to 1978, and
as Vice Chairman of the Board of Directors of Fuqua from 1978 to 1982. Mr.
Patrick is a director emeritus of Columbus Bank & Trust Company.
Michael W. Patrick, age 47, has served as President of the Company since
October 1981, a director of the Company since April 1982 and Chief Executive
Officer since March 29, 1989. He joined the Company in 1970 and served in a
number of operational and film booking and buying capacities prior to becoming
President. Mr. Patrick is the son of Mr. C. L. Patrick. Mr. Patrick is a
director of Columbus Bank & Trust Company. He also serves as a director of the
Will Rogers Institute.
John O. Barwick, III, age 48, joined the Company as Controller in July 1977
and was elected Treasurer and Chief Financial Officer in August 1981. In
August 1982, he became Vice President - Finance of the Company and in December
1997 was elected Senior Vice President-Finance. Prior to joining the Company,
Mr. Barwick was a certified public accountant with Ernst & Ernst, a predecessor
of the accounting firm of Ernst & Young LLP, from 1973 to 1977. Mr. Barwick
is also a director of First Union National Bank of Columbus and a Trustee of
the Columbus State University Athletic Fund.
Anthony J. Rhead, age 56, joined the Company in June 1981 as manager of the
booking office in Charlotte, North Carolina. In July 1983, Mr. Rhead became
Vice President - Film of the Company and in December 1997 was elected Senior
Vice President-Film. Prior to joining the Company, he worked as a film booker
for Plitt Theatres, Inc. from 1973 to 1981.
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Larry M. Adams, age 54, joined the Company as Data Processing Manager in
July 1973. In August 1982, he became Vice President - Informational Systems in
August 1988 and in December 1997 he became Senior Vice President-Information
Systems.
Fred W. Van Noy, age 41, joined the Company in 1975. He served as a
District Manager from 1984 to 1985 and as Western Division Manager from 1985 to
1988, when he became Vice President - General Manager. In December 1997 he was
elected to his present position as Senior Vice President-Operations.
Prentiss Lamar Fields, age 43, joined the Company in January 1983 as
Director of Real Estate. He served in this position until 1985 when he became
Vice President - Development. In December 1997 he was elected to his present
position of Senior Vice President-Real Estate.
H. Madison Shirley, age 46, joined the Company in 1976 as a theatre
manager. He served as a District Manager from 1983 to 1987 and as Director of
Concessions from 1987 until 1990. He became Vice President - Concessions in
1990 and Senior Vice President-Concessions and Assistant Secretary in December
1997.
Forrest Lee Champion, III, age 47, joined the Company in February 1998 as
Senior Vice President and General Counsel. Prior to joining the Company, Mr.
Champion practiced law with the firm of Champion and Champion.
Marilyn Grant, age 50, joined the Company in 1975 as a bookkeeper. She
served as Advertising Coordinator from 1984 to 1985 and became the Director of
Advertising in 1985. In August 1990, she was elected to her present position
as Vice President - Advertising.
James R. Davis, age 59, joined the Company in 1990 as Technical Director.
He served in this position until December 1995, when he was elected to his
present position as Vice President-Technical.
Phillip A. Smitley, age 38, joined the Company in April 1997 as Controller.
In January, 1998 he was elected to his present position of Assistant Vice
President and Controller. Prior to joining the Company, Mr. Smitley was
Divisional Controller-Transportation of Burnham Service Corporation, a trucking
company.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information regarding the market for the Company's common equity and
related stockholder matters is incorporated by reference to the inside back
cover of the Company's 1997 Annual Report to Shareholders.
Item 6. Selected Financial Data
Selected financial data for the five years ended December 31, 1997 is
incorporated by reference to page 27 of the Company's 1997 Annual Report to
Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's discussion and analysis of financial condition and results of
operations of the Company is incorporated by reference to pages 24 through 26
of the Company's 1997 Annual Report to Shareholders.
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated by reference to pages
12 through 23 of the Company's 1997 Annual Report to Shareholders.
Information as to quarterly results of operations for the year ended
December 31, 1997 is incorporated by reference to page 22 of the Company's 1997
Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
18
<PAGE> 19
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding the directors of the Company is incorporated by
reference to the section entitled "Election of Directors" in the Proxy
Statement relating to the 1998 Annual Meeting of Shareholders of the Company
(hereinafter, the "1998 Proxy Statement").
Information regarding the executive officers of the Company is set forth in
Part I of this Report on Form 10-K pursuant to General Instruction G(3) of Form
10-K.
Item 11. Executive Compensation
Information regarding executive compensation is incorporated by reference
to the section entitled "Executive Compensation and Other Information"
contained in the 1998 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference to the
sections entitled "Security Ownership of Certain Beneficial Holders" and
"Security Ownership of Management" contained in the 1998 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is
incorporated by reference to the section entitled "Certain Relationships and
Related Transactions" contained in the 1998 Proxy Statement.
19
<PAGE> 20
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1) and (2) Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Carmike
Cinemas, Inc. included in the Company's 1997 Annual Report to
Shareholders are incorporated by reference in Item 8:
Consolidated balance sheets--December 31, 1997 and 1996
Consolidated statements of operations--Years ended
December 31, 1997, 1996 and 1995
Consolidated statements of shareholders' equity--Years
ended December 31, 1997, 1996 and 1995
Consolidated statements of cash flows--Years ended
December 31, 1997, 1996 and 1995
Notes to consolidated financial statements--December 31,
1997
Report of Independent Auditors
Financial statement schedules are omitted because they are not
applicable or not required under the related instructions, or because the
required information is shown either in the consolidated financial statements
or in the notes thereto.
20
<PAGE> 21
(a)(3) Listing of Exhibits
<TABLE>
<CAPTION>
Exhibit
Number
- - ------
<S> <C>
3(a)(i) Restated Certificate of Incorporation of the Company (filed as Exhibit 3(a) to
the Company's Form 10-Q for the fiscal quarter ended June 30, 1995, and
incorporated herein by reference).
3(a)(ii) Certificate of Amendment of Restated Certificate of Incorporation (filed as
Exhibit 3(b) to the Company's Form 10-Q for the quarter ended June 30, 1995,
and incorporated herein by reference).
3(b) By-laws of the Company (filed as Exhibit 3(b) to the Company's Form 10-K for the
fiscal year ended December 31, 1987 (the "1987 Form 10-K"), and incorporated
herein by reference).
4(a) Note Purchase Agreement dated as of June 1, 1990 with respect to 10.53% Senior
Notes due 2005 (filed as Exhibit 4 to the Company's Form 10-Q for the fiscal quarter
ended June 30, 1990, and incorporated herein by reference).
4(b) Note Purchase Agreement dated as of March 1, 1992 with respect to 7.90% Senior
Notes due 2002 (filed as Exhibit 4(c) to the Company's Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference).
4(c) Note Purchase Agreement dated as of April 15, 1993 with respect to 7.52% Senior
Notes due 2003 (filed as Exhibit 4 to the Company's Form 10-Q for the fiscal quarter
ended March 31, 1993, and incorporated herein by reference).
4(d) Zero Coupon Convertible Subordinated Note due June 1, 1998 (filed as Exhibit 4(e)
to the Company's 1993 Form 10-K, and incorporated herein by reference).
4(e) Credit Agreement dated as of October 17, 1997 among Carmike Cinemas, Inc., various
banks and Wachovia Bank, N.A., as Agent (filed as Exhibit 4 to the
Company's Form 10-Q for the quarter ended September 30, 1997, and incorporated
herein by reference).
10(a) 1986 Carmike Cinemas, Inc. Class A Stock Option Plan, as amended, together with
form of Stock Option Agreement (filed as Exhibit 10(a) to the Company's Form 10-K
for the year ended December 31, 1990, and incorporated herein by reference).
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
(a)(3)(Continued)
Exhibit
Number
- - ------
<S> <C>
10(b) Downtown Development Authority of Columbus, Georgia $4,500,000 Industrial
Development Revenue Bonds (Martin Theatres, Inc. Project), Series 1985
(filed as Exhibit 10(d) to Amendment No. 1 to the Company's Registration
Statement on Form S-1, No. 33-8007 on October 10, 1986, and incorporated
herein by reference).
10(c) Employment Agreement dated August 30, 1986 by and between C. L. Patrick and
the Company, as amended on October 31, 1986 and January 1, 1990 (filed as
Exhibit 10(e) to the Company's Registration Statement on Form S-1, Commission
File No. 33-33558, and incorporated herein by reference).
10(d) Employment Agreement dated January 1, 1993 by and between Michael W. Patrick
and the Company (filed as Exhibit 10(e) to the Company's 1992 Form 10-K and
incorporated herein by reference).
10(e) Aircraft Lease dated July 1, 1983, as amended June 30, 1986, by and between C.L.P.
Equipment and the Company (filed as Exhibit 10(h) to the Company's Registration
Statement on Form S-1, No. 33-8007, and incorporated herein by reference).
10(f) Equipment Lease Agreement dated December 17, 1982 by and between Michael W.
Patrick and the Company (Kingsport, Tennessee) (filed as Exhibit 10(i) to the
Company's Registration Statement on Form S-1, No. 33-8007, and incorporated
herein by reference).
10(g) Equipment Lease Agreement dated January 29, 1983 by and between Michael W.
Patrick and the Company (Valdosta, Georgia) (filed as Exhibit 10(j) to the Company's
Registration Statement on Form S-1, No. 33-8007, and incorporated herein by reference).
10(h) Equipment Lease Agreement dated November 23, 1983 by and between Michael W.
Patrick and the Company (Nashville (Belle Meade), Tennessee) (filed as Exhibit 10(k)
to the Company's Registration Statement on Form S-1, No. 33-8007, and incorporated
herein by reference).
10(i) Equipment Lease Agreement dated December 17, 1982 by and between Michael W.
Patrick and the Company (Opelika, Alabama) (filed as Exhibit 10(l) to the Company's
Registration Statement on Form S-1, No. 33-8007, and incorporated herein by
reference).
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
(a)(3)(Continued)
Exhibit
Number
- - ------
<S> <C>
10(j) Equipment Lease Agreement dated July 1, 1986 by and between Michael W. Patrick
and the Company (Muskogee and Stillwater, Oklahoma) (filed as Exhibit 10(m) to the
Company's Registration Statement on Form S-1, No. 33-8007, and incorporated
herein by reference).
10(k) Equipment Lease Agreement dated December 17, 1982 by and between C. L. Patrick
and the Company (Eastridge, Tennessee) (filed as Exhibit 10(n) to the Company's
Registration Statement on Form S-1, No. 33-8007, and incorporated herein by
reference).
10(l) Summary of Extensions of Equipment Lease Agreements, which are Exhibits 10(f),
10(g), 10(h), 10(i), and 10(k) (filed as Exhibit 10(o) to the 1987 Form 10-K and
incorporated herein by reference).
10(m) Summary of Extensions of the Equipment Lease Agreements, which are Exhibits 10(f),
10(g), 10(h), 10(i), and 10(k) as extended as shown in Exhibit 10(m) (filed as Exhibit
10(n) to the Company's Form 10-K for the year ended December 31, 1991 and
incorporated herein by reference).
10(n) Summary of Extensions of Aircraft Lease Agreement and Equipment Lease
Agreement which are Exhibits 10(e) and 10(k) (filed as Exhibit 10(o) to the
Company's Form 10-K for the year ended December 31, 1991 and incorporated
herein by reference).
10(o) Carmike Cinemas, Inc. Deferred Compensation Agreement and Trust Agreement dated
as of January 1, 1990 (filed as Exhibit 10(u) to the Company's Form 10-K for the year
ended December 31, 1990, and incorporated herein by reference).
10(p) Carmike Cinemas, Inc. 1998 Class A Stock Option Plan, together with form of Stock
Option Agreement.
10(q) Asset Purchase Agreement dated as of January 25, 1996 by and between Fox Theatres
Corporation, Carmike Cinemas, Inc. and Eastwynn Theatres, Inc. (filed as Exhibit 2(l)
to the Company's Form 10-K for the fiscal year ended December 31, 1995, and
incorporated herein by reference).
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
(a)(3)(Continued)
Exhibit
Number
- - ------
<S> <C>
10(r) Stock Purchase Agreement dated as of June 27, 1997 by and between the shareholders of
Morgan Creek Theatres, Inc.; shareholders of SB Holdings, Inc.; members of RDL
Consulting Limited Liability Company; Morgan Creek Theaters, Inc.; SB Holdings, Inc.;
RDL Consulting Limited Liability Company; First International Theatres; Carmike
Cinemas, Inc. and Eastwynn Theatres, Inc. (filed as Exhibit 2 to the Company's Form
10-Q for the fiscal quarter ended June 30, 1997, and incorporated herein by reference).
13 Those sections of the 1997 Annual Report to Shareholders of Carmike Cinemas, Inc.
incorporated by reference in Items 5, 6, 7 and 8 hereof.
21 List of Subsidiaries.
23 Consent of Ernst & Young LLP
27 Financial Data Schedule (for SEC use only).
</TABLE>
24
<PAGE> 25
(b) Reports on Form 8-K
During the fiscal quarter ended December 31, 1997, the Company
did not file any reports on Form 8- K.
(c) Exhibits
The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statements Schedules
None.
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 27, 1998 By: /s/ Michael W. Patrick
----------------------
Michael W. Patrick
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature
---------
Title Date
----- ----
<S> <C> <C>
/s/ C. L. Patrick Chairman of the Board March 27, 1998
- - ------------------------------
C. L. Patrick
/s/ Michael W. Patrick President and Chief March 27, 1998
- - ------------------------------ Executive Officer, Director
Michael W. Patrick
/s/ John O. Barwick, III Senior Vice President-Finance, March 27, 1998
- - ------------------------------ Treasurer (Chief Financial Officer,
John O. Barwick, III Chief Accounting Officer)
/s/ Carl L. Patrick, Jr. Director March 27, 1998
- - ------------------------------
Carl L. Patrick, Jr.
/s/ Carl E. Sanders Director March 27, 1998
- - ------------------------------
Carl E. Sanders
/s/ John W. Jordan, II Director March 27, 1998
- - ------------------------------
John W. Jordan, II
/s/ David W. Zalaznick Director March 27, 1998
- - ------------------------------
David W. Zalaznick
</TABLE>
26
<PAGE> 27
CARMIKE CINEMAS, INC.
EXHIBIT INDEX
Report on Form 10-K for the fiscal year Ended December 31, 1997
<TABLE>
<CAPTION>
Page Number
Exhibit in Manually
Number Description Signed Original
- - ------ ----------- ---------------
<S> <C> <C>
3(a)(i) Restated Certificate of Incorporation of the Company (filed
as Exhibit 3(a) to the Company's Form 10-Q for the fiscal
quarter ended June 30, 1995, and incorporated herein by
reference).
3(a)(ii) Certificate of Amendment of Restated Certificate of Incorporation
(filed as Exhibit 3(b) to the Company's Form 10-Q for the quarter
ended June 30, 1995, and incorporated herein by reference).
3(b) By-Laws of the Company (filed as Exhibit 3(b) to the Company's
Form 10-K for the fiscal year ended December 31, 1987 (the "1987
Form 10-K"), and incorporated herein by reference).
4(a) Note Purchase Agreement dated as of June 1, 1990 with respect to
10.53% Senior Notes due 2005 (filed as Exhibit 4 to the Company's
Form 10-Q for the fiscal quarter ended June 30, 1990, and
incorporated herein by reference).
4(b) Note Purchase Agreement dated as of March 1, 1992 with respect to
7.90% Senior Notes due 2002 (filed as Exhibit 4(c) to the Company's
Form 10-K for the year ended December 31, 1991, and incorporated
herein by reference).
4(c) Note Purchase Agreement dated as of April 15, 1993 with respect to
7.52% Senior Notes due 2003 (filed as Exhibit 4 to the Company's
Form 10-Q for the fiscal quarter ended March 31, 1993, and
incorporated herein by reference).
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
Page Number
Exhibit in Manually
Number Description Signed Original
- - ------ ----------- ---------------
<S> <C> <C>
4(d) Zero Coupon Convertible Subordinated Note due June 1, 1998 (filed
as Exhibit 4(e) to the Company's 1993 Form 10-K, and incorporated
herein by reference).
4(e) Credit Agreement dated as of October 17, 1997 among Carmike Cinemas,
Inc., various banks and Wachovia Bank, N.A., as Agent (filed as
Exhibit 4 to the Company's Form 10-Q for the quarter ended September
30, 1997, and incorporated herein by reference).
10(a) 1986 Carmike Cinemas, Inc. Class A Stock Option Plan, as amended,
together with form of Stock Option Agreement (filed as Exhibit 10(a)
to the Company's Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference).
10(b) Downtown Development Authority of Columbus, Georgia $4,500,000 Industrial
Development Revenue Bonds (Martin Theatres, Inc. Project), Series 1985
(filed as Exhibit 10(d) to Amendment No. 1 to the Company's
Registration Statement on Form S-1, No. 33-8007 on October 10, 1986,
and incorporated herein by reference).
10(c) Employment Agreement dated August 30, 1986 by and between C. L. Patrick
and the Company, as amended on October 31, 1986 and January 1, 1990
(filed as Exhibit 10(e) to the Company's Registration Statement on Form
S-1, Commission File No. 33-33558, and incorporated herein by
reference).
10(d) Employment Agreement dated January 1, 1993 by and between Michael W.
Patrick and the Company (filed as Exhibit 10(e) to the Company's 1992
Form 10-K and incorporated herein by reference).
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
Page Number
Exhibit in Manually
Number Description Signed Original
- - ------ ----------- ---------------
<S> <C> <C>
10(e) Aircraft Lease dated July 1, 1983, as amended June 30, 1986,
by and between C.L.P. Equipment and the Company (filed as Exhibit
10(h) to the Company's Registration Statement on Form S-1, No.
33-8007, and incorporated herein by reference).
10(f) Equipment Lease Agreement dated December 17, 1982 by and between
Michael W. Patrick and the Company (Kingsport, Tennessee) (filed
as Exhibit 10(i) to the Company's Registration Statement on Form S-1,
No. 33-8007, and incorporated herein by reference).
10(g) Equipment Lease Agreement dated January 29, 1983 by and between
Michael W. Patrick and the Company (Valdosta, Georgia) (filed as
Exhibit 10(j) to the Company's Registration Statement on Form S-1,
No. 33-8007, and incorporated herein by reference).
10(h) Equipment Lease Agreement dated November 23, 1983 by and between
Michael W. Patrick and the Company (Nashville (Belle Meade), Tennessee)
(filed as Exhibit 10(k) to the Company's Registration Statement on Form
S-1, No. 33-8007, and incorporated herein by reference).
10(i) Equipment Lease Agreement dated December 17, 1982 by and between Michael
W. Patrick and the Company (Opelika, Alabama) (filed as Exhibit 10(l)
to the Company's Registration Statement on Form S-1, No. 33-8007, and
incorporated herein by reference).
10(j) Equipment Lease Agreement dated July 1, 1986 by and between Michael W.
Patrick and the Company (Muskogee and Stillwater, Oklahoma) (filed as
Exhibit 10(m) to the Company's Registration Statement on Form S-1, No.
33-8007, and incorporated herein by reference).
10(k) Equipment Lease Agreement dated December 17, 1982 by and between C. L.
Patrick and the Company (Eastridge, Tennessee) (filed as Exhibit 10(n)
to the Company's Registration Statement on Form S-1, No. 33-8007, and
incorporated herein by reference).
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
Page Number
Exhibit in Manually
Number Description Signed Original
- - ------ ----------- ---------------
<S> <C> <C>
10(l) Summary of Extensions of Equipment Lease Agreements, which are
Exhibits 10(f), 10(g), 10(h), 10(i), and 10(k) (filed as Exhibit
10(o) to the 1987 Form 10-K and incorporated herein by reference).
10(m) Summary of Extensions of the Equipment Lease Agreements, which are
Exhibits 10(f), 10(g), 10(h), 10(i) and 10(k) as extended as shown in
Exhibit 10(m) (filed as Exhibit 10(n) to the Company's Form 10-K for
the year ended December 31, 1991 and incorporated herein by reference).
10(n) Summary of Extensions of Aircraft Lease Agreement and Equipment Lease
Agreement which are Exhibits 10(e) and 10(k) (filed as Exhibit 10(o) to
the Company's Form 10-K for the year ended December 31, 1991 and
incorporated herein by reference).
10(o) Carmike Cinemas, Inc. Deferred Compensation Agreement and Trust
Agreement dated as of January 1, 1990 (filed as Exhibit 10(u) to the
Company's Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference).
10(p) Carmike Cinemas, Inc. 1998 Class A Stock Option Plan, together with
form of Stock Option Agreement.
10(q) Asset Purchase Agreement dated as of January 25, 1996 by and between Fox
Theaters Corporation, Carmike Cinemas, Inc. and Eastwynn
Theaters, Inc.(filed as Exhibit 2(l) to the Company's Form 10-K for
the fiscal year ended December 31, 1995, and incorporated herein by
reference).
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
Page Number
Exhibit in Manually
Number Description Signed Original
- - ------ ----------- ---------------
<S> <C> <C>
10(r) Stock Purchase Agreement dated as of June 27, 1997 by and between
the shareholders of Morgan Creek Theatres, Inc.; shareholders of SB
Holdings, Inc.; members of RDL Consulting Limited Liability Company;
Morgan Creek Theaters, Inc.; SB Holdings, Inc.; RDL Consulting Limited
Liability Company; First International Theatres; Carmike Cinemas, Inc.
and Eastwynn Theatres, Inc. (filed as Exhibit 2 to the Company's Form
10-Q for the fiscal quarter ended June 30, 1997, and incorporated
herein by reference).
13 Those sections of the 1997 Annual Report to Shareholders of Carmike
Cinemas, Inc. which are incorporated by reference in Items 5, 6, 7 and
8 hereof.
21 List of Subsidiaries.
23 Consent of Ernst & Young LLP
27 Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE> 1
EXHIBIT 10(p)
CARMIKE CINEMAS, INC.
1998 CLASS A STOCK OPTION PLAN
Effective as of the 15th day of January, 1998.
<PAGE> 2
CARMIKE CINEMAS, INC.
1998 CLASS A STOCK OPTION PLAN
ARTICLE I
1.1 Name and Purpose. The name of this Plan is the "Carmike
Cinemas, Inc. 1998 Class A Stock Option Plan" (the "Plan"). Its purposes are (a)
to maximize the long-term success of Carmike Cinemas, Inc. (the "Company"), (b)
to ensure a balanced emphasis on both current and long-term performance, (c) to
enhance Participants' identification with stockholders' interests, and (d) to
facilitate the attraction and retention of key individuals with outstanding
ability.
1.2 Definitions. Whenever used in the Plan, the following terms
shall have the meaning set forth below:
(a) "Board of Directors" or "Board" shall mean the Board
of Directors of Carmike Cinemas, Inc. as constituted from time to time.
(b) "Change in Control" shall have the meaning ascribed
by Section 5.5 hereof.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
(d) "Class A Common Stock" shall mean the Company's Class
A Common Stock, par value $.03 per share.
(e) "Committee" shall mean a committee of the Board's
members or an officer of the Company as designated by the Board as set forth in
Section 2.1(a).
(f) "Company" shall mean Carmike Cinemas, Inc. or any
successor thereto.
(g) "Disability" shall mean total and permanent
disability as defined in Code Section 22(e).
(h) "Employee" shall mean any person who is currently a
common law employee of the Company or any of its Subsidiaries.
(i) "Effective Date" shall mean the 15th date of January,
1998, subject, in the case of Incentive Stock Options, to approval by the
stockholders of the Company at a meeting held within twelve (12) months
following the date of adoption by the Board.
(j) "Fair Market Value" or "FMV" shall mean the fair
market value of the Class A Common Stock, which shall be determined as follows:
<PAGE> 3
(i) if the Class A Common Stock is listed on any
established stock exchange or a national market system,
including, without limitation, the NASDAQ National Market, its
fair market value shall be the closing sale price of the Class
A Common Stock, as quoted on such exchange (or the exchange
with the greatest volume of trading) on the trading day
preceding the date of such determination, as reported in The
Wall Street Journal or such other source as the Board deems
reliable; or
(ii) if the Class A Common Stock is not traded on an
exchange or a national market system, its Fair Market Value
shall be determined in good faith by the Board.
In no event shall the Fair Market Value equal less than the par value
of the Class A Common Stock.
(k) "Incentive Stock Option" shall mean a stock option
within the meaning of Section 422 of the Code granted pursuant to Section 4.1
hereof.
(l) "Nonqualified Stock Option" shall mean an Option,
other than an Incentive Stock Option, granted pursuant to Section 4.1 hereof.
(m) "Option" shall mean, individually and collectively,
an Incentive Stock Option or a Nonqualified Stock Option to purchase Class A
Common Stock.
(n) "Option Price" shall mean the price per share of
Class A Common Stock set by the Board upon the grant of an Option.
(o) "Parent" shall mean any corporation which qualifies
as a parent of the Company under the definition of "parent corporation" under
Code Section 424(e).
(p) "Participant" shall mean any person who satisfies the
criteria set forth in Article III hereof.
(q) "Person" shall mean any individual, partnership,
association, corporation, trust or other legal entity.
(r) "Separation Date" shall mean, as determined by the
Board, the date of a Participant's Termination.
(s) "Subsidiary" shall mean a subsidiary corporation of
the Company as defined in Code Section 424(f).
(t) "Termination" shall mean the termination of a
Participant's employment by the Company, the termination of a Participant's
service as a director (including service as a honorary director or director
emeritus) of the Company and the
-2-
<PAGE> 4
termination of a Participant's engagement as a consultant to the Company, as
applicable. Transfer of employment, service as a director or engagement as a
consultant to a Parent or Subsidiary shall not constitute a Termination. Whether
any leave of absence shall constitute Termination for purposes of this Plan
shall be determined in each case by the Board at its sole discretion.
Where the context requires, words in the masculine gender shall include
the feminine and neuter genders, words in the singular shall include the plural,
and words in the plural shall include the singular.
1.3 Plan Duration. The Plan shall remain in effect for ten (10)
years from the Effective Date or until terminated by the Board, whichever comes
first.
ARTICLE II
2.1 Plan Administration.
(a) The Plan shall be administered by the Board. The
Board is authorized to establish such rules and to appoint such agents as it
deems appropriate for the proper administration of the Plan, and to make such
determinations (which shall be sufficiently evidenced if set forth in any
written action of the Board or in any written stock option agreement) and to
take such steps in connection with the Plan or the benefits provided hereunder
as it deems necessary or advisable. The Board also is authorized to delegate to
a Committee of its members or to any officer of the Company any or all of its
authority under this Plan, including any or all of its rights or obligations
hereunder.
(b) The Board shall have the authority, in its sole
discretion and from time to time to take the following actions:
(i) select those individuals who meet the
participation requirements of the Plan;
(ii) grant Options provided by the Plan in such
form and amount as the Board shall determine;
(iii) impose such limitations, restrictions and
conditions upon any such Options as the Board shall deem
appropriate; and
(iv) interpret the Plan, adopt, amend and rescind
rules and regulations related to the Plan, and make all other
determinations and take all other actions necessary or
advisable for the implementation and administration of the
Plan.
(c) The decision of the Board with respect to any
question arising as to the grant of an Option to a Participant in the Plan, the
term, form and amount of Options
-3-
<PAGE> 5
under the Plan, or any other matter concerning the Plan shall be final,
conclusive, and binding on both the Company and the Participants.
ARTICLE III
3.1 Eligibility. The Participants in the Plan shall be selected by
the Board from the directors, officers and key Employees of the Company, or a
consultant, advisor or other person providing services to the Company or its
Subsidiaries who occupy responsible managerial, professional or advisory
positions and who have the capability of making a substantial contribution to
the success of the Company. In making this selection and in determining the form
and amount of Options, the Board shall consider any factors deemed relevant,
including the individual's functions, responsibilities, value of services to the
Company or its Subsidiaries and past and potential contributions to the
Company's profitability and sound growth. The Board may also grant "Substitute
Awards" under the Plan in substitution for stock and stock based awards held by
persons who are or were directors, officers or employees of another corporation
which merges or consolidates with, or the stock or property of which other
corporation is acquired by the Company or a Subsidiary. The Board may direct
that the Substitute Awards be granted on such terms and conditions as the Board
considers appropriate in the circumstances. Participants who are not otherwise
Employees may receive Nonqualified Stock Options but may not receive Incentive
Stock Options under the Plan.
ARTICLE IV
4.1 Options. The Board shall determine the forms and amounts of
Options for Participants. All Options shall be subject to the terms and
conditions of the Plan and to such other terms and conditions consistent with
the Plan as the Board deems appropriate. Options under the Plan need not be
uniform and Incentive Stock Options and Nonqualified Stock Options may be
granted together in one agreement. Options may take the following forms, in the
Board's sole discretion:
(a) Incentive Stock Options.
(i) The Board may grant Incentive Stock Options
within the meaning of Code Section 422 to purchase Class A
Common Stock. In addition to other restrictions contained in
the Plan, an Incentive Stock Option (1) shall not be exercised
more than ten (10) years following the date of grant, (2)
shall not have an Option Price less than the FMV of Class A
Common Stock on the date the Incentive Stock Option is
granted, (3) shall otherwise comply with Code Section 422, and
(4) shall be designated in writing as an "Incentive Stock
Option" by the Board. The date an Incentive Stock Option is
granted shall mean the date selected by the Board as of which
the Board allots a specific number of shares to a Participant
pursuant to the Plan. Notwithstanding the foregoing, the
Option Price of an Incentive
-4-
<PAGE> 6
Stock Option granted to any owner of 10% or more of the total
combined voting power of the Company, its Parent or
Subsidiaries shall be no less than 110% of FMV on the date of
grant and such Option shall not be exercisable after the
expiration of five years from the date of its grant. No
Incentive Stock Option shall be granted to any Participant who
is not otherwise an Employee.
(ii) The grant of an Incentive Stock Option shall
be evidenced by a written Incentive Stock Option Agreement,
executed by the Company and the holder of an Incentive Stock
Option, stating the number of shares of Class A Common Stock
subject to the Incentive Stock Option evidenced thereby and
conditions and restrictions on the exercise of the Option
imposed by the Plan or the Board and in such form as the Board
may from time to time determine.
(b) Nonqualified Stock Options.
(i) The Board may grant Nonqualified Stock
Options to purchase Class A Common Stock which are not
intended to qualify as Incentive Stock Options under Code
Section 422 and which are designated in writing by the Board
as "Nonqualified Stock Options." At the time of the grant, the
Board shall determine the Option exercise period, the Option
Price, and such other conditions or restrictions on the
exercise of the Nonqualified Stock Option as the Board deems
appropriate.
(ii) The Board shall cause the Company to enter
into a written Nonqualified Stock Option Agreement with the
Participant stating that the Options are Nonqualified Stock
Options, the number of shares of Class A Common Stock subject
to the Nonqualified Stock Option, any conditions and
restrictions on the exercise of the Option imposed by the Plan
or the Board, and in such form as the Board shall from time to
time determine.
4.2 Option Exercise. Except as otherwise provided in Article V
hereof, an Incentive Stock Option may not be exercised at any time unless the
holder thereof is then an Employee of the Company, its Parent or Subsidiary.
Options may be exercised in whole at any time, or in part from time to time,
with respect to whole shares only, within the period permitted for the exercise
thereof, and shall be exercised by written notice of intent to exercise the
Option with respect to a specified number of shares delivered to the Company's
Secretary at the Company's principal office, along with payment in full to the
Company at said office of the amount of the Option Price for the number of
shares of Class A Common Stock with respect to which the Option is then being
exercised. In addition to and at the time of payment of the Option Price, the
Participant shall pay to the Company in cash or in Class A Common Stock, the
full amount, if any, that the Company is required to withhold or pay under
federal or state law with respect to the exercise of the Option. Alternatively,
the number of shares delivered by the Company upon exercise of the Option shall
be appropriately reduced to reimburse the Company for such payment.
-5-
<PAGE> 7
4.3 Payment.
(a) Except as otherwise provided below in Section 4.3(b),
payment of the purchase price upon exercise of any Option granted under this
Plan shall be made
(i) in cash or by optionee's personal check,
certified check or bank draft, payable to the order of the
Company in lawful money of the United States;
(ii) with shares of Class A Common Stock already
owned by the optionee (only to the extent that such an
exercise of the Option would not result in an accounting
compensation charge with respect to the shares used to pay the
Option Price); or
(iii) through a "cashless exercise" procedure
involving a broker or dealer approved by the Board, provided
that the Participant has delivered an irrevocable notice of
exercise (the "Notice") to the broker or dealer and such
broker or dealer agrees: (x) to sell immediately the number of
shares of Common Stock specified in the Notice to be acquired
upon exercise of the Option in the ordinary course of its
business, (y) to pay promptly to the Company the aggregate
exercise price (plus the amount necessary to satisfy any
applicable tax liability) and (z) to pay to the Participant
the balance of the proceeds of the sale of such shares over
the amount determined under clause (y) of this sentence, less
applicable commissions and fees; provided, however, that the
Board may modify the provisions of this sentence to the extent
necessary to conform the exercise of the Option to Regulation
T of the Securities Exchange Act of 1934, as amended.
(b) In its discretion, the Board may also permit a
Participant to exercise an Option through any alternative method, provided that
such alternative method of exercise be specifically set forth in the stock
option agreement relating to such Option.
(c) In the event the Option Price is paid in whole or in
part with shares of Class A Common Stock such shares shall be valued at their
FMV as of the date of exercise of the Option. Such shares shall be delivered
along with any portion to be paid in cash or by promissory note within five (5)
days after the date of exercise. If the Participant fails to pay the Option
Price within such five (5) day period, the Board shall have the right to take
whatever action it deems appropriate, including terminating the Option or
voiding the exercise of the Option. The Company shall not issue or transfer
Class A Common Stock upon the exercise of an Option until the Option Price is
paid in full.
-6-
<PAGE> 8
ARTICLE V
5.1 Termination. Except as provided in this Article V or except as
otherwise determined by the Board, all Options under the Plan shall terminate
upon the Termination of the Participant as of the Participant's Separation Date.
5.2 Death of a Participant. In the event of the death of a
Participant prior to the exercise of all Options granted to such Participant,
all unexercised Options shall become immediately exercisable and the
administrator of the deceased Participant's estate, the executor under his or
her will, or the person(s) to whom the Options shall have been validly
transferred by such executor or administrator pursuant to the will or laws of
intestate succession shall have the right, within one year from the date of such
Participant's death, but not beyond the expiration date of the Options, to
exercise such Options.
5.3 Retirement or Termination. In the event of the Termination of
a Participant prior to the exercise of Options granted to the Participant
pursuant to this Plan, such Participant shall have the right, within three (3)
months of his Separation Date (or such longer period as determined by the Board
and set forth in such Participant's Option Agreement), but not beyond the
expiration date of such Options, to exercise such Nonqualified Stock Options, to
the extent exercisable on his Separation Date; provided, however, if the Option
is an Incentive Stock Option, such Option shall only continue to be exercisable
as an Incentive Stock Option for a period of three months following the date
that the Participant ceases to be an employee of the Company. At the end of such
three month period the Option, if not then exercised, shall be treated as a
nonqualified stock option.
5.4 Disability.
(a) In the event of the Termination of a Participant by
Disability prior to the exercise of all Incentive Stock Options granted to the
Participant, all unexercised Incentive Stock Options shall become immediately
exercisable and such Participant or his legal representative shall have the
right, within twelve (12) months of his Separation Date, but not beyond the
expiration date of such Incentive Stock Options, to exercise such Incentive
Stock Options.
(b) In the event of the Termination of a Participant by
Disability prior to the exercise of all Nonqualified Stock Options granted to
the Participant, all unexercised Nonqualified Stock Options shall become
immediately exercisable and such Participant or his legal representative shall
have the right, within twelve (12) months of his Separation Date (or such longer
period as determined by the Board and set forth in such Participant's Option
Agreement), but not beyond the expiration date of such Nonqualified Stock
Options, to exercise such Nonqualified Stock Options.
5.5 Change in Control.
(a) In the event of a Change in Control of the Company,
-7-
<PAGE> 9
(i) all outstanding Options granted hereunder
shall become fully exercisable as of the date of the Change in
Control, whether or not then exercisable, and
(ii) such outstanding Options shall remain
exercisable for their remaining terms, notwithstanding any
other provision of this Plan or the applicable option
agreements.
(b) A "Change in Control" shall be deemed to have
occurred when
(i) any Person (other than
(x) the Company, any Subsidiary of the
Company, any employee benefit plan of the
Company or of any Subsidiary of the Company,
or any person or entity organized, appointed
or established by the Company or any
Subsidiary of the Company for or pursuant to
the terms of any such plan or
(y) a Class B Holder or a Permitted
Transferee thereof (in each case, as defined
in the Company's Restated Certificate of
Incorporation),
alone or together with its Affiliates and Associates
(collectively, an "Acquiring Person"), shall become the
Beneficial Owner of securities of the Company representing
fifty percent (50%) or more of the combined voting power of
the Company's then outstanding voting securities,
(ii) individuals who, as of the date hereof,
constitute the Board, and any new director (other than a
director who is a representative or nominee of an Acquiring
Person) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at
least a majority of the directors then in office
(collectively, the "Continuing Directors"), cease for any
reason to constitute a majority of the Board,
(iii) the stockholders of the Company approve a
merger, reorganization or consolidation of the Company with
any other corporation, in each case, with respect to which,
persons who were the stockholders of the Company immediately
prior to such merger, reorganization or consolidation do not,
immediately thereafter, own more than fifty percent (50%) of
the combined voting power of the reorganized, merged or
consolidated company's then outstanding voting securities, or
-8-
<PAGE> 10
(iv) the stockholders of the Company approve a
plan of reorganization (other than a reorganization under the
United States Bankruptcy Code) or complete liquidation of the
Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets;
provided, however, that a Change in Control shall not be
deemed to have occurred in the event of (i) a sale or
conveyance in which the Company continues as a holding company
of an entity or entities that conduct all or substantially all
of the business or businesses formerly conducted by the
Company or (ii) any transaction undertaken for the purpose of
incorporating the Company under the laws of another
jurisdiction, if such transaction does not materially affect
the beneficial ownership of the Company's capital stock.
ARTICLE VI
6.1 Limitation of Shares of Class A Common Stock Available under
the Plan.
(a) Shares of stock which may be issued under the Plan
shall be authorized and unissued or treasury shares of Class A Common Stock. The
total number of shares of Class A Common Stock available to be granted by the
Board as Options to the Participants under the Plan, and the maximum number of
shares of Class A Common Stock with respect to which Options may be granted to
any Participant during any calendar year, shall not exceed 750,000 shares (which
number may be increased by the Board, without stockholder approval, to reflect
adjustments pursuant to Section 7.1 below).
(b) The grant of Incentive Stock Options and Nonqualified
Stock Options shall reduce the available shares by the number of shares subject
to such Options.
(c) The lapse or cancellation of an Incentive Stock
Option or Nonqualified Stock Option shall increase the available shares by the
number of shares released from such Option.
ARTICLE VII
7.1 Adjustment Upon Changes in Capitalization. In the event of any
change in the outstanding Class A Common Stock by reason of a stock dividend or
distribution, recapitalization, merger, consolidation, split-up, combination,
exchange of shares or the like, appropriate adjustments shall be made in the
number and kind of shares which may be issued under the Plan, the number and
kind of shares subject to Options theretofore granted under the Plan, the Option
Price of Options theretofore granted under the Plan, and any and all other
matters deemed appropriate by the Board.
-9-
<PAGE> 11
ARTICLE VIII
8.1 Employment. The establishment of the Plan and Options
hereunder shall not be construed as conferring on any Participant any right to
continued employment, and the employment of any Participant may be terminated
without regard to the effect which such action might have upon him as a
Participant.
8.2 Rights as a Stockholder. The recipient of any Option under the
Plan shall have no rights as a stockholder with respect thereto unless and until
certificates for shares of Class A Common Stock are issued to him.
8.3 Non-Assignability. During the life of the Participant, Options
awarded under this Plan shall be exercisable only by such person or by such
person's guardian or legal representative.
8.4 Stockholder Approval. Continuance of the Plan for purposes of
granting Incentive Stock Options shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted by the Board. Any Incentive Stock Options granted hereunder shall become
effective only upon such stockholder approval. The Board may grant Incentive
Stock Options or Nonqualified Stock Options under the Plan prior to such
stockholder approval, but until stockholder approval is obtained, no such Option
shall be exercisable. In the event that such stockholder approval is not
obtained within the period provided above, all Options previously granted
pursuant to the Plan shall terminate. If such stockholder approval is obtained
at a meeting of stockholders, the Plan must be approved by a majority of the
votes cast at such meeting at which a quorum representing a majority of all
outstanding voting stock of the Company is, either in person or by proxy,
present and voting on the Plan. If such stockholder approval is obtained by
written consent, it must be obtained by the written consent of the holders of a
majority of all outstanding voting stock of the Company.
8.5 Amendment, Modification, and Termination of the Plan. The
Board may from time to time amend, suspend or discontinue this Plan; provided,
however, that subject to the provisions of Section 7.1 hereof, no action of the
Board may amend this Plan if such approval would adversely affect the treatment
of any Option intended to qualify as an incentive stock option under the Code if
obtained without approval by a majority vote of the stockholders having a right
to vote thereon being secured.
8.6 Indemnification. Each person who is or shall have been a
member of the Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action or failure to act under the Plan and against
and from any and all amounts paid by him in satisfaction of judgment in any such
action, suit, or proceeding against him. Such person shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be
-10-
<PAGE> 12
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
8.7 Reliance on Reports. Each member of the Board shall be fully
justified in relying or acting in good faith upon any report made by the
independent public accountants of the Company and upon any other information
furnished in connection with the Plan by any person or persons other than
himself. In no event shall any person who is or shall have been a member of the
Board be liable for any determination made or other action taken or any omission
to act in reliance upon any such report or information or for any action taken,
including the furnishing of information, or failure to act, if in good faith.
8.8 Governing Law. To the extent that federal law shall not be
held to have preempted local law, this Plan shall be governed by the laws of the
State of Delaware. If any provision of the Plan shall be held invalid or
unenforceable, the remaining provisions hereof shall continue in full force and
effect.
(SIGNATURES ON NEXT PAGE)
-11-
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused the Carmike Cinemas, Inc.
1998 Class A Stock Option Plan to be executed by its duly authorized officer
pursuant to resolutions of the Board to be effective as of the 15th day of
January, 1998.
CARMIKE CINEMAS, INC.
By:
---------------------------------
John O. Barwick, III
Vice President -- Finance
-12-
<PAGE> 14
EXHIBIT 10(p)
CARMIKE CINEMAS, INC.
1998 CLASS A STOCK OPTION PLAN
GRANT OF EMPLOYEE NONQUALIFIED STOCK OPTION
DATE OF GRANT: JANUARY 15, 1998
THIS GRANT, dated as of the date of grant first stated above (the "Date
of Grant"), is delivered by Carmike Cinemas, Inc. (the "Company") to
_____________________ (the "Grantee"), who is an Employee of the Company or a
Subsidiary.
WHEREAS, the Board of Directors of the Company (the "Board") on January
21, 1998, adopted the Carmike Cinemas, Inc. 1998 Class A Stock Option Plan (the
"Plan") effective as of January 15, 1998;
WHEREAS, the Plan provides for the granting of Nonqualified Stock
Options by the Board or the Committee to directors, officers and key employees
of the Company and its Subsidiaries and consultants and advisers to the Company
to purchase shares of the Class A Common Stock of the Company (the "Stock"), in
accordance with the terms and provisions thereof; and
WHEREAS, the Board considers Grantee to be a person who is eligible for
a grant of Nonqualified Stock Options under the Plan, and has determined that it
would be in the best interest of the Company to grant the Nonqualified Stock
Options documented herein.
NOW THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows (capitalized terms not otherwise defined herein shall
have the meanings set forth in the Plan):
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the
Company, with the approval and at the direction of the Board, hereby grants to
Grantee, as of the Date of Grant, an option to purchase up to __________ shares
of Stock at a price of $27.125 per share. The shares of stock purchasable upon
exercise of the Option are hereinafter sometimes referred to as the "Option
Shares." The Option is intended by the parties hereto to be, and shall be
treated as, a Nonqualified Stock Option which is not subject to the provisions
of Code Section 422.
2. Term of Option.
Subject to the further limitations contained herein, this
Option shall become 100% exercisable on and after the third anniversary of the
Date of Grant.
<PAGE> 15
3. Termination of Option.
(a) The Option and all rights hereunder with respect
thereto, to the extent such rights shall not have been exercised, shall
terminate and become null and void after the expiration of ten (10) years from
the Date of Grant (the "Option Term").
(b) Upon the Termination (as defined in Section 1.2(t) of
the Plan) of Grantee, the Option, to the extent not previously exercised, shall
terminate and become null and void upon the terms set forth below. Upon a
Termination of Grantee by reason of Disability or death, all unexercised
portions of the Option shall become immediately exercisable and the Option may
be exercised during the period beginning upon such Termination and ending one
year after such date. Upon Termination of Grantee for any other reason, the
Option may be exercised during the period beginning upon the date of Termination
and ending three months after such date, but only to the extent that the Option
was outstanding and exercisable on the date of such Termination. In no event,
however, shall any such period extend beyond the Option Term.
(c) In the event of Grantee's death, the Option may be
exercised by Grantee's legal representative(s) as and to the extent that the
Option would otherwise have been exercisable by Grantee, subject to the
provisions of Section 3(b) hereof.
4. Change in Control.
In the event of a Change in Control of the Company (as defined
in Section 5.5 of the Plan) and notwithstanding anything to the contrary set
forth in this Agreement,
(a) the Option shall become fully exercisable as of the
date of the Change in Control, whether or not then exercisable by its terms; and
(b) the Option shall remain exercisable for its then
remaining term.
5. Exercise of Options.
(a) Grantee may exercise the Option with respect to all
or any part of the number of Option Shares that are exercisable hereunder by
giving the Secretary of the Company written notice of intent to exercise. The
notice of exercise shall specify the number of Option Shares as to which the
Option is to be exercised and date of exercise thereof, which date shall be at
least five (5) days after the signing of such notice unless an earlier time
shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by Grantee of the
Option Price for Option Shares purchased shall be made on or before the exercise
date specified in the notice of exercise (i) in cash, (ii) in shares of Class A
Common Stock already owned by Grantee (but only to the extent that such exercise
of the Option would not result in an accounting compensation change with respect
to the shares used to pay the exercise price) having an aggregate Fair Market
Value on the date of exercise equal to the aggregate exercise price, (iii)
through a "cashless exercise" procedure involving a broker or dealer approved by
the Board, provided that Grantee has
-2-
<PAGE> 16
delivered an irrevocable notice of exercise (the "Notice") to the broker or
dealer and such broker or dealer agrees: (x) to sell immediately the number of
shares of Class A Common Stock specified in the Notice to be acquired upon
exercise of the Option in the ordinary course of its business, (y) to pay
promptly to the Company the aggregate exercise price (plus the amount necessary
to satisfy any applicable tax liability) and (z) to pay to Grantee the balance
of the proceeds of the sale of such shares over the amount determined under
clause (y) of this sentence, less applicable commissions and fees; provided,
however, that the Board may modify the provisions of this sentence to the extent
necessary to conform the exercise of the Option to Regulation T of the
Securities Exchange Act of 1934, as amended; or (iv) in any combination of the
methods set forth above.
(c) If Grantee fails to pay for any of the Option Shares
specified in such notice or fails to accept delivery thereof, Grantee's right to
purchase such Option Shares may be terminated by the Company or the exercise of
the Option may be ignored, as the Committee in its sole discretion may
determine. The date specified in Grantee's notice as the date of exercise shall
be deemed the date of exercise of the Option, provided that payment in full for
the Option Shares to be purchased upon such exercise shall have been received by
such date.
6. Adjustment of and Changes in Stock.
(a) In the event of any change in the outstanding Class A
Common Stock by reason of a reorganization, recapitalization, change of shares,
stock split, spin-off, stock dividend, reclassification, subdivision, or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure of shares of capital stock of the Company, the
appropriate adjustments shall be made in the number and kind of shares of Stock
subject to the Option or in the option price; provided, however, that no such
adjustment shall give Grantee any additional benefits under the Option.
(b) In the case of a merger of, or a consolidation
involving, the Company in which the Company is
(i) not the surviving corporation (the
"Surviving Entity") or
(ii) becomes a wholly owned subsidiary of the
Surviving Entity or parent thereof,
the Option (if not exercised before such date) shall after such merger or
consolidation, be exercisable upon the terms and conditions specified in this
Agreement, for the number of shares of stock or other securities or other assets
to which a holder of the number of Option Shares purchasable (at the time of
such merger or consolidation) upon exercise of such Option, would have been
entitled upon such merger or consolidation, and in any such case, if necessary,
the provisions set forth in this Agreement with respect to the rights thereafter
of the Grantee shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any shares of stock or other securities or assets
thereafter deliverable on the exercise of the Option.
-3-
<PAGE> 17
7. No Rights as Shareholders.
Grantee shall have no rights as a shareholder with respect
thereto unless and until certificates for shares of Common Stock are issued to
him or her.
8. Non-Transferability of Option.
During Grantee's lifetime, this Option shall be exercisable
only by Grantee or his or her guardian or legal representative.
9. Employment Not Affected.
The grant of the Option hereunder shall not be construed as
conferring on Grantee any right to continued employment, and Grantee's
employment may be terminated without regard to the effect which such action
might have upon him as a holder of this Option.
10. Amendment of Option.
The Option may be amended by the Committee at any time (i) if
the Committee determines, in its sole discretion, that amendment is necessary or
advisable in light of any addition to or change in the Code or in the
regulations issued thereunder, or any federal or state securities law or other
law of regulation, which change occurs after the Date of Grant and by its terms
applies to the Option; or (ii) other than in the circumstances described in
clause (i), with the consent of Grantee.
11. Notice.
Any notice to the Company provided for in this instrument
shall be addressed to it in care of its Secretary at its executive offices and
any notice to Grantee shall be addressed to Grantee at the current address shown
on the payroll records of the Employer. Any notice shall be deemed to be duly
given if and when properly addressed and posted by registered or certified mail,
postage prepaid.
12. Incorporation of Plan by Reference.
The Option is granted pursuant to the Plan, the terms and
definitions of which are incorporated herein by reference, and the Option shall
in all respects be interpreted in accordance with the Plan.
13. Governing Law.
To the extent that federal law shall not be held to have
preempted local law, this Option shall be governed by the laws of the State of
Delaware. If any provision of the Option shall be held invalid or unenforceable,
the remaining provisions hereof shall continue in full force and effect.
-4-
<PAGE> 18
IN WITNESS WHEREOF, the Company has caused its duly authorized officer
to execute this Grant of Nonqualified Stock Option, and Grantee has placed his
or her signature hereon, effective as of the Date of Grant.
CARMIKE CINEMAS, INC.
By:
--------------------------------------
John O. Barwick, III
Vice President -- Finance
GRANTEE
Signature:
----------------------------------
Name:
----------------------------------
(Print)
Address:
----------------------------------
----------------------------------
-5-
<PAGE> 1
EXHIBIT 13
Information Incorporated by Reference to the 1997 Annual Report to
Shareholders of Carmike Cinemas, Inc.
<PAGE> 2
CONSOLIDATED BALANCE SHEETS
[In thousands except for share data]
<TABLE>
<CAPTION>
DECEMBER 31
ASSETS 1997 1996
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents .............................................. $ 16,545 $ 5,569
Short-term investments ................................................. 3,042 7,726
Recoverable construction allowances under capital leases ............... 2,100 4,178
Accounts and notes receivable .......................................... 758 644
Inventories ............................................................ 3,082 2,631
Prepaid expenses ....................................................... 5,448 5,363
--------- ---------
TOTAL CURRENT ASSETS 30,975 26,111
OTHER ASSETS
Investments in and advances to partnerships ............................ 14,148 10,324
Other .................................................................. 9,669 2,425
--------- ---------
23,817 12,749
PROPERTY AND EQUIPMENT-Notes B, C, D and E
Land ................................................................... 59,546 42,182
Buildings and improvements ............................................. 184,769 126,790
Leasehold improvements ................................................. 177,970 148,586
Leasehold interests .................................................... 37,921 38,180
Equipment .............................................................. 185,955 151,988
--------- ---------
646,161 507,726
Accumulated depreciation and amortization .............................. (149,105) (119,811)
--------- ---------
497,056 387,915
EXCESS OF PURCHASE PRICE OVER
NET ASSETS OF BUSINESSES ACQUIRED ...................................... 68,149 62,608
--------- ---------
$ 619,997 $ 489,383
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ....................................................... $ 26,122 $ 21,432
Accrued expenses ....................................................... 17,833 17,240
Current maturities of long-term
indebtedness and capital lease obligations ........................... 19,077 15,026
--------- ---------
TOTAL CURRENT LIABILITIES 63,032 53,698
LONG-TERM LIABILITIES
Long-term debt, less current maturities-Note D ......................... 222,242 124,476
Senior Notes-Note D .................................................... 79,870 93,831
Capital lease obligations, less current maturities-Note E .............. 39,550 31,351
Convertible subordinated debt-Note D ................................... -0- 3,575
Deferred income taxes-Note H ........................................... 12,431 4,522
--------- ---------
354,093 257,755
SHAREHOLDERS' EQUITY-Notes C, D, F, and G
Class A Common Stock, $.03 par value, one vote per share,
authorized 22,500,000 shares, issued and outstanding
9,918,587 and 9,758,601 shares, respectively ....................... 298 292
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 ........................................................ 104,677 99,927
Retained earnings ...................................................... 97,854 77,668
--------- ---------
202,872 177,930
--------- ---------
See accompanying notes $ 619,997 $ 489,383
========= =========
</TABLE>
<PAGE> 3
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT FOR SHARE DATA) YEARS ENDED DECEMBER 31
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Admissions .............................................. $ 319,235 $ 296,629 $ 253,691
Concessions and other ................................... 139,363 130,097 111,058
--------- --------- ---------
458,598 426,726 364,749
Costs and expenses:
Film exhibition costs ................................... 169,672 156,968 135,654
Concession costs ........................................ 18,334 17,252 14,959
Other theatre operating costs ........................... 175,103 164,149 143,682
General and administrative .............................. 6,352 5,959 5,482
Depreciation and amortization ........................... 33,443 28,408 27,216
Impairment of long-lived assets-Note B .................. -0- 45,447 -0-
--------- --------- ---------
402,904 418,183 326,993
--------- --------- ---------
OPERATING INCOME 55,694 8,543 37,756
Interest expense ........................................... 23,142 20,289 16,031
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 32,552 (11,746) 21,725
Income tax expense (benefit) ............................... 12,366 (4,469) 8,638
--------- --------- ---------
NET INCOME (LOSS) $ 20,186 $ (7,277) $ 13,087
========= ========= =========
Weighted average shares outstanding:
Basic ................................................... 11,277 11,174 11,161
Effect of dilutive securities-Employee stock options .... 89 -0- 99
--------- --------- ---------
Diluted ................................................. 11,366 11,174 11,260
========= ========= =========
Earnings (loss) per common share:
Basic ................................................... $ 1.79 $ (.65) $ 1.17
========= ========= =========
Diluted ................................................. $ 1.78 $ (.65) $ 1.16
========= ========= =========
</TABLE>
See accompanying notes.
<PAGE> 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
[IN THOUSANDS] YEARS ENDED DECEMBER 31
1997 1996 1995
----------- ----------- -----------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) ............................................... $ 20,186 $ (7,277) $ 13,087
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization ......................... 33,443 28,408 27,216
Impairment of long-lived assets ....................... -0- 45,447 -0-
Deferred income taxes ................................. 7,011 (14,811) 921
Gain on sales of property and equipment ............... (2,202) (767) (723)
Changes in operating assets and liabilities:
Accounts and notes receivable ..................... (114) 7,267 (5,197)
Inventories ....................................... (451) 305 (997)
Prepaid expenses .................................. (85) (231) (607)
Accounts payable .................................. 4,690 (2,941) 1,395
Accrued expenses .................................. 593 (962) 7,775
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 63,071 54,438 42,870
INVESTING ACTIVITIES
Purchases of property and equipment ............................. (126,144) (70,926) (58,035)
Purchases of assets from other theatre operators ................ (11,647) (23,075) (64,485)
Proceeds from sales of property and equipment ................... 8,729 1,808 2,232
Decrease (increase) in:
Short-term investments ..................................... 4,684 (224) (2,687)
Other ...................................................... (11,216) (5,781) (458)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (135,594) (98,198) (123,433)
FINANCING ACTIVITIES
Debt:
Additional borrowings ...................................... 2,354,594 1,205,678 392,689
Repayments .............................................. (2,273,674) (1,167,929) (315,504)
Issuance of Class A Common Stock ................................ 501 113 51
Recoverable construction allowances under capital leases ........ 2,078 122 (3,200)
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 83,499 37,984 74,036
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,976 (5,776) (6,527)
Cash and cash equivalents at beginning of year .................... 5,569 11,345 17,872
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 16,545 $ 5,569 $ 11,345
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE> 5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
[IN THOUSANDS)] CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------ ------------ PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1994 ............... 9,738 $ 292 1,421 $ 43 $ 99,763 $71,858 $171,956
Issuance of Class A Common Stock
on exercise of stock options ........ 7 -0- -0- -0- 51 -0- 51
Net income ............................... -0- -0- -0- -0- -0- 13,087 13,087
----- ----- ----- ---- -------- ------- --------
BALANCES AT DECEMBER 31, 1995 ............... 9,745 292 1,421 43 99,814 84,945 185,094
Issuance of Class A Common Stock
on exercise of stock options ........ 14 -0- -0- -0- 113 -0- 113
Net loss ................................. -0- -0- -0- -0- -0- (7,277) (7,277)
----- ----- ----- ---- -------- ------- --------
BALANCES AT DECEMBER 31, 1996 ............... 9,759 292 1,421 43 99,927 77,668 177,930
ISSUANCE OF CLASS A COMMON STOCK:
EXERCISE OF STOCK OPTIONS ............. 31 1 -0- -0- 500 -0- 501
PURCHASE OF BUSINESS-NOTE C ........... 129 5 -0- -0- 4,250 -0- 4,255
NET INCOME ............................... -0- -0- -0- -0- -0- 20,186 20,186
----- ----- ----- ---- -------- ------- --------
BALANCES AT DECEMBER 31, 1997 ............... 9,919 $ 298 1,421 $ 43 $104,677 $97,854 $202,872
===== ===== ===== ==== ======== ======= ========
</TABLE>
See accompanying notes.
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE A-SIGNIFICANT ACCOUNTING POLICIES
The primary business of the Company is the operation of motion picture theatres
which generate revenues principally through admissions and concessions sales.
Such revenues are received in cash at the point of sale. Seven major
distributors in the motion picture industry accounted for films producing
approximately 91%, 92% and 88% of the Company's admission revenues in 1997, 1996
and 1995, respectively.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
OPERATING AGREEMENTS: The Company jointly owns or leases certain theatres which
it operates under the terms of operating agreements related to the other
participants' undivided interest in such theatres. The Company consolidates the
results of operations of these theatres in the accompanying Consolidated
Statements of Operations.
CASH EQUIVALENTS: Cash equivalents are highly liquid investments consisting
primarily of money market accounts and investment grade, short-term debt
instruments and have maturities at the date of purchase of less than three
months. The Company limits the amount of its credit exposure to any one
commercial issue of debt instruments. Cash equivalents are stated at cost which
represents the deposit amount plus interest credited to the account. Deposits
with banks are federally insured in limited amounts.
SHORT-TERM INVESTMENTS: Short-term investments consist principally of U.S.
Government securities with maturity dates less than one year from date of
purchase and are stated at cost which approximates market.
INVENTORIES: Inventories, principally concessions and theatre supplies, are
stated at the lower of cost (first-in, first-out method) or market.
INVESTMENT IN PARTNERSHIPS: The Company is a partner in three partnerships which
operate motion picture theatres. The investments in these partnerships are
accounted for by the equity method whereby the cost of the investment is
adjusted to reflect the Company's equity in the earnings or losses of the
partnership less withdrawals made by the Company. The Company's equity in the
earnings of these partnerships was approximately $243,000, $399,000 and $405,000
in 1997, 1996 and 1995, respectively.
PROPERTY AND EQUIPMENT: Property and equipment are carried at cost. Depreciation
is computed by the straight-line method for financial reporting purposes as
follows: 30 years for buildings and building improvements; 1-30 years for
leasehold interests and leasehold improvements; and 5-15 years for equipment.
The Company uses accelerated methods of depreciation for income tax purposes.
Amortization of assets recorded under capital leases is included with
depreciation expense in the accompanying Consolidated Statements of Operations.
ACCRUED EXPENSES: Accrued expenses include accrued property taxes of
approximately $2.5 million and $2.7 million at December 31, 1997 and 1996,
respectively.
ADVERTISING: The Company expenses advertising costs when incurred.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
EXCESS OF PURCHASE PRICE OVER NET ASSETS OF BUSINESSES ACQUIRED: The excess of
purchase price over the net assets of businesses acquired is amortized on a
straight-line basis over a 40-year period. Accumulated amortization was $4.6
million and $3.0 million at December 31, 1997 and 1996, respectively.
In the event that facts and circumstances indicate that the excess of purchase
price over net assets of businesses acquired may be impaired, an evaluation of
continuing value would be performed. If an evaluation is required, the estimated
future undiscounted cash flows associated with this asset would be compared to
its carrying amount to determine if a write down to market value or discounted
cash flow value is required.
BENEFIT PLANS: The Company has a non-qualified deferred compensation plan for
certain of its executive officers. Under this plan, the Company contributes ten
percent of the employee's taxable compensation to a trust designated for the
employee. The Company also has a discretionary benefit plan for certain
non-executive employees. Contributions to this plan are at the discretion of the
Company's executive management. Expenses related to these plans are not material
to the Company's operations.
STOCK BASED COMPENSATION: The Company grants stock options to employees for a
fixed number of shares with an exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for stock option grants in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
and accordingly, recognizes no compensation expense for the stock option grants.
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS PER COMMON SHARE: In 1997, the Financial Accounting Standards Board
("FASB") issued Statement No. 128, Earnings per Share. Statement No. 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where appropriate, restated to
conform to the Statement No. 128 requirements.
ACCOUNTING POLICIES NOT YET ADOPTED: In June 1997, the FASB issued Statement No.
130, Reporting Comprehensive Income and Statement No. 131, Disclosures About
Segments of an Enterprise and Related Information. Statement No. 130 establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Statement No.
131 generally requires that companies report segment information for operating
segments which are revenue producing components and for which separate financial
information is produced internally.
The Company plans to adopt Statement No. 130 and Statement No. 131 in 1998, but
has not yet completed its analysis of the impact, if any, that Statement No. 131
may have on its financial statements. Statement No. 130 is not anticipated to
have a material impact when adopted by the Company.
- - --------------------------------------------------------------------------------
NOTE B-IMPAIRMENT OF LONG LIVED ASSETS
The Company adopted FASB's Statement No. 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 of 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 periodically reviews and
monitors its internal management reports and the competition in its markets for
indicators of impairment of individual theatres. 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 No.
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 estimated
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 current or 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.
The initial non-cash charge upon the Company's adoption of Statement No. 121
was approximately $45.4 million ($28.2 million after tax or $2.52 per diluted
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 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. The 1996 charge included approximately $11.3 million of the excess
of purchase price over net assets of businesses acquired.
As a result of the reduced carrying amount of the impaired assets, depreciation
and amortization expense for 1997 and 1996 was reduced by approximately $3.8
million and $4.2 million, respectively (1997 - $2.4 million after tax or $.21
per diluted share; 1996 - $2.6 million after tax or $.23 per diluted share).
Statement No. 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 No. 121 on assets held for disposal was not material.
- - --------------------------------------------------------------------------------
NOTE C-ACQUISITIONS
The Company's acquisitions are 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
financial statements as of their respective acquisition dates. The assets and
liabilities of acquired businesses are included based on an allocation of the
purchase prices.
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In separate transactions, the Company has acquired certain assets and businesses
as follows:
<TABLE>
<CAPTION>
Approximate Number
Seller Purchase Price Theatres Screens Effective Date
------ -------------- -------- ------- --------------
(in thousands)
<C> <C> <C> <C> <C> <C>
1997 First International Theatres $16,800 19 104 May 23, 1997
======= == ===
1996 Maxi Saver Cinemas $ 3,975 2 18 January 5, 1996
Fox Theaters Corp. 19,100 12 61 February 16, 1996
------- -- ---
$23,075 14 79
======= == ===
1995 Carolina Cinema, Corp. $ 750 2 7 February 10, 1995
Theatre Developers, Inc. 1,200 1 8 February 24, 1995
Floyd Theatres, Inc. and affiliates 11,300 21 83 March 17, 1995
Rocky Mountain Cinema Partners 1,585 5 11 May 5, 1995
Plitt Theatres, Inc. 22,000 28 145 June 2, 1995
Midcontinent Theatre, Inc. 19,000 14 67 October 13, 1995
Cinemark, USA 8,000 10 46 November 10, 1995
Theatres Consulting and Management 650 2 10 November 10, 1995
------- -- ---
$64,485 83 377
======= == ===
</TABLE>
The First International Theatres acquisition purchase price included 128,986
shares of the Company's Class A Common Stock with a fair market value of
approximately $4.25 million at the date of acquisition.
The excess of purchase price over net assets of businesses acquired has been
recorded as an intangible asset. Amounts recorded were $6.1 million, $17.0
million and $16.7 million in 1997, 1996 and 1995, respectively.
Pro-forma results have not been presented as they are not significantly
different than reported amounts.
NOTE D--INDEBTEDNESS
Indebtedness consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-------- --------
<S> <C> <C>
Revolving credit facility $220,000 $122,000
Industrial Revenue Bonds; payable in
equal installments through May
2006, with interest rates ranging
from 3.90% to 5.98% 2,500 2,719
Convertible Note 3,855 -0-
-------- --------
226,355 124,719
Less current maturities (4,113) (243)
-------- --------
$222,242 $124,476
======== ========
</TABLE>
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. The 1997 Credit 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. Upon entering
into the 1997 Credit Agreement, the Company repaid all amounts outstanding under
its then existing bank credit agreement.
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
Company specifically designates interest rate swaps as hedges of debt
instruments and recognizes interest differentials as
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
adjustments to interest expense in the period they occur. 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. If, in the future, an interest
rate swap agreement were terminated, any resulting gain or loss would be
deferred and amortized to interest expense over the remaining life of the debt
instrument which was hedged. In the event of 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.
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 December 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 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
December 31, 1997) for a total effective rate of 6.01%.
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.
CONVERTIBLE NOTE: In connection with a 1993 acquisition, the Company issued a $4
million face value zero coupon convertible subordinated note (the "Convertible
Note") maturing June 1, 1998 and convertible, at the holder's option, into
100,000 shares of Class A Common Stock.
SENIOR NOTES: The Company has outstanding various unsecured notes payable to
institutional investors (collectively the "Senior Notes") as follows (in
thousands):
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-------- --------
<S> <C> <C>
10.53% Senior Notes, due 2005.............. $ 54,545 $ 61,364
7.90% Senior Notes, due 2002............... 17,857 21,428
7.52% Senior Notes, due 2003............... 21,429 25,000
-------- --------
93,831 107,792
Less current maturities.................... (13,961) (13,961)
-------- --------
$ 79,870 $ 93,831
======== ========
</TABLE>
- - -------------------------------------------------------------------------------
The 7.52% Senior Notes provide for annual principal payments of $3.6 million
which began March 1, 1997 and will continue through maturity. The 7.90% Senior
Notes provide for annual principal payments of $3.6 million through maturity.
The 10.53% Senior Notes provide for annual principal payments of $6.8 million
through maturity. Loan fees of approximately $.9 million applicable to the
10.53% Senior Notes were capitalized and are being amortized over the life of
the 10.53% Senior Notes.
The agreements pursuant to which each of the above Senior Notes were issued
contain certain restrictive provisions which, among other things, limit
additional indebtedness of the Company and require minimum levels of net worth
and cash flows.
On December 31, 1997, the Company had approximately $45.6 million of
unrestricted retained earnings available for dividends under its most
restrictive debt agreement.
Interest paid and interest capitalized were as follows (in thousands):
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST INTEREST
YEAR ENDED DECEMBER 31 PAID CAPITALIZED
- - ---------------------- -------- -----------
<S> <C> <C>
1997.................... $24,856 $2,914
1996.................... 21,055 1,115
1995.................... 15,995 794
</TABLE>
- - -------------------------------------------------------------------------------
Aggregate principal payments on all indebtedness as of December 31, 1997 are as
follows (in thousands):
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG-TERM
DEBT SENIOR NOTES TOTAL
--------- ------------ -----
<S> <C> <C> <C>
1998.................... $ 4,113 $13,961 $ 18,074
1999.................... 272 13,961 14,233
2000.................... 286 13,961 14,247
2001.................... 303 13,961 14,264
2002 and thereafter..... 221,381 37,987 259,368
-------- ------- --------
$226,355 $93,831 $320,186
======== ======= ========
</TABLE>
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E-LEASES
Certain of the Company's theatres and equipment are leased under non-cancelable
leases expiring in various years through 2023. The theatre leases generally
provide for the payment of fixed monthly rentals, contingent rentals based on a
percentage of revenue over a specified amount, and the payment of property
taxes, common area maintenance, insurance and repairs. The Company, at its
option, can renew a substantial portion of its theatre leases, at the then fair
rental rate, for various periods with the maximum renewal period totaling 40
years.
Property and equipment includes the following amounts related to capital lease
assets (in thousands):
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-------- -------
<S> <C> <C>
Buildings and improvements ........ $ 43,443 $32,655
Equipment ......................... 2,877 2,877
-------- -------
46,320 35,532
Less accumulated amortization ..... (10,963) (9,141)
-------- -------
$ 35,357 $26,391
======== =======
</TABLE>
- - -------------------------------------------------------------------------------
Future minimum payments, by year and in the aggregate, under capital leases and
non-cancelable operating leases with terms over one year as of December 31, 1997
are as follows (in thousands):
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
------ ------
<S> <C> <C>
1998............................ $ 47,417 $ 5,927
1999............................ 45,608 5,818
2000............................ 43,099 5,675
2001............................ 40,310 5,637
2002............................ 37,542 5,724
Thereafter...................... 255,871 81,018
-------- --------
Total minimum lease payments ... $469,847 109,799
========
Less amounts representing interest ........ (69,246)
--------
Present value of future
minimum lease payments ................. 40,553
Less current maturities ................... (1,003)
--------
$ 39,550
========
</TABLE>
- - -------------------------------------------------------------------------------
Rent expense was approximately $57.6 million, $54.8 million and $45.6 million
for 1997, 1996 and 1995, respectively.
- - -------------------------------------------------------------------------------
NOTE F-STOCK OPTION PLAN
The Company has a stock option plan covering 700,000 shares of Class A Common
Stock. Key employees were granted options at terms (purchase price, expiration
date and vesting schedule) established at the date of grant by a committee of
the Company's Board of Directors. Options granted through December 31, 1997,
have been at a price which approximated fair market value on the date of the
grant. No shares are available for grant under this plan at December 31, 1997.
Changes in outstanding stock options were as follows (in thousands):
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXERCISE PRICE PER SHARE
--------------------------------------
$6.00-
8.50 $9.00 $18.00 TOTAL
----- ----- ------ -----
<S> <C> <C> <C> <C>
Stock options outstanding at December 31, 1994 ... 101 21 143 265
Exercised .................................... (7) -0- -0- (7)
--- -- --- ---
Stock options outstanding at December 31, 1995 ... 94 21 143 258
Exercised .................................... (14) -0- -0- (14)
Forfeited .................................... (1) (1) (8) (10)
--- -- --- ---
Stock options outstanding at December 31, 1996 ... 79 20 135 234
Exercised .................................... (6) -0- (25) (31)
--- -- --- ---
Stock options outstanding at December 31, 1997 ... 73 20 110 203
=== == === ===
</TABLE>
<PAGE> 11
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
At December 31, 1997, all the above options were exercisable.
In January 1998, the Board of Directors approved a new stock option plan (the
"1998 Plan") covering 750,000 shares of Class A Common Stock and granted
non-qualified stock options for 335,000 shares of Class A Common Stock at a
price which approximated fair market value on the date of the grant. The 1998
Plan will be submitted for shareholder approval at the May 1998 shareholders'
meeting.
- - --------------------------------------------------------------------------------
NOTE G-SHAREHOLDERS' EQUITY
The Company's authorized capital consists of 22.5 million shares of Class A
Common Stock, $.03 par value, 5 million shares of Class B Common Stock, $.03 par
value, and 1 million shares of Preferred Stock, $1.00 par value. Each share of
Class A Common Stock entitles the holder to one vote per share, whereas a share
of Class B Common Stock entitles the holder to ten votes per share. Each share
of Class B Common Stock is entitled to cash dividends, when declared, in an
amount equal to 85% of the cash dividends payable on each share of Class A
Common Stock. Additionally, Class B Common Stock is convertible at any time by
the holder into an equal number of shares of Class A Common Stock.
The Company has shares of Class A Common Stock reserved for future issuance as
follows (in thousands):
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
----- -----
<S> <C> <C>
Stock option plan ........................... 203 405
Convertible Note ............................ 100 100
Conversion rights of Class B Common Stock ... 1,421 1,421
----- -----
1,724 1,926
===== =====
</TABLE>
- - --------------------------------------------------------------------------------
NOTE H-INCOME TAXES
The Company accounts for income taxes in accordance with FASB Statement No. 109,
Accounting for Income Taxes. Under Statement No. 109, the liability method is
used in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rate
and laws that will be in effect when the differences are expected to reverse.
The provision for income tax expense (benefit) is summarized as follows (in
thousands):
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1997 1996 1995
------- -------- ------
<S> <C> <C> <C>
Current:
Federal ............. $ 4,037 $ 8,492 $6,255
State ............... 1,318 1,850 1,462
Deferred ................ 7,011 (14,811) 921
------- -------- ------
$12,366 $ (4,469) $8,638
======= ======== ======
</TABLE>
- - --------------------------------------------------------------------------------
Significant components of the Company's deferred tax liabilities (assets) are as
follows (in thousands):
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-------- --------
<S> <C> <C>
Financial statement bases of property
and equipment over tax bases .......... $ 12,091 $ 3,744
Deferred rent ............................. (2,025) (1,595)
Income taxes payable for prior years ...... 1,943 2,504
Other ..................................... 422 (131)
-------- --------
$ 12,431 $ 4,522
======== ========
</TABLE>
- - --------------------------------------------------------------------------------
A reconciliation of income tax expense (benefit) at the federal income tax rate
and income tax expense (benefit) as reflected in the consolidated financial
statements follows (in thousands):
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Income tax expense (benefit)
at statutory rates ................. $11,393 $(4,111) $7,604
State income taxes,
net of federal tax benefit ......... 1,375 (501) 1,071
Amortization of excess of
purchase price over net
assets of business acquired ........ 106 79 79
Other items, net ....................... (508) 64 (116)
------- ------- ------
$12,366 $(4,469) $8,638
======= ======= ======
</TABLE>
- - --------------------------------------------------------------------------------
Income taxes paid in 1997, 1996 and 1995 were approximately $8.1 million, $9.2
million and $3.7 million, respectively.
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I - COMMITMENTS AND CONTINGENCIES
The Company is subject to various claims and lawsuits arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
these matters will not have a material effect on the consolidated financial
statements of the Company. The Company has commitments at December 31, 1997
totaling approximately $40 million to build new theatres or to expand existing
theatres. The Company plans to fund the expenditures for such capital
improvements by (i) draws under its revolving credit facility (see Note D) or
(ii) executing leases under a $75 million operating lease facility which was
available at December 31, 1997 or (iii) cash flows from operations.
NOTE J - FINANCIAL INSTRUMENTS
CONCENTRATIONS OF CREDIT RISK: Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of
cash investments and short-term investments.
The Company maintains cash and cash equivalents and short-term investments and
certain other financial instruments with various financial institutions. These
financial institutions are located in the southeast and Company policy is
designed to limit exposure to any one institution. The Company performs periodic
evaluations of the relative credit standing of those financial institutions that
are considered in the Company's investment strategy.
SHORT-TERM INVESTMENTS: The Company's short-term investments consist of U.S.
Treasury Notes with maturities of less than one year. The carrying value
approximates market at December 31, 1997 and 1996. The following methods and
assumptions were used by the Company in estimating its fair value disclosures
for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in the balance sheets
for cash and cash equivalents approximates their fair value.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE: The carrying amounts reported in the
balance sheets for accounts receivable and accounts payable approximated their
fair value.
LONG-TERM DEBT: The carrying amounts of the Company's long-term debt borrowings
approximate their fair value. The fair values of the Company's long-term debt
are estimated using discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of borrowing arrangements.
SENIOR NOTES: The cumulative fair value of the Company's Senior Notes at
December 31, 1997 is estimated to be approximately $101.2 million. This estimate
is based on a discounted cash flow analysis using the Company's current
incremental borrowing rates for similar types of agreements. The Company does
not anticipate settlement of this debt at fair value and currently intends to
hold the Senior Notes through maturity.
INTEREST RATE SWAP AGREEMENTS: The unrealized gain for the interest rate swap
agreements was approximately $.8 million at December 31, 1997 based on
evaluations made by the counter-parties to the interest rate swap agreements.
The Company does not anticipate realization of this gain as the Company intends
to hold the interest rate swap agreements to maturity.
NOTE K - QUARTERLY RESULTS (UNAUDITED)
(In thousands, except for per share data)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTALS
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES .............................. $ 108,457 $ 110,074 $ 128,736 $ 111,331 $ 458,598
OPERATING INCOME ............................ 11,631 14,989 19,420 9,654 55,694
NET INCOME .................................. 3,965 5,941 8,228 2,052 20,186
BASIC INCOME PER COMMON SHARE ............... .35 .53 .73 .18 1.79
DILUTED INCOME PER COMMON SHARE ............. .35 .53 .72 .18 1.78
Year Ended December 31, 1996
Total revenues .............................. $ 92,156 $ 104,698 $ 121,108 $ 108,764 $ 426,726
Operating income ............................ (36,864) 13,039 20,290 12,078 8,543
Net income (loss) ........................... (25,915) 4,899 9,565 4,174 (7,277)
Basic income (loss) per common share ........ (2.30) .44 .86 .37 (.65)
Diluted income (loss) per common share ...... (2.30) .43 .85 .37 (.65)
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net income (loss) per common share calculations for each of the above quarters
is based on the weighted average number of shares outstanding for each period
and the sum of the quarters may not necessarily equal the net income (loss) per
common share amount for the year.
<PAGE> 13
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Carmike Cinemas, Inc.
We have audited the accompanying consolidated balance sheets of Carmike Cinemas,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Carmike Cinemas,
Inc. and subsidiaries at December 31, 1997 and 1996 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
As discussed in Note B to the financial statements, in 1996 the Company changed
its method of accounting for long-lived assets.
/S/ ERNST & YOUNG LLP
Columbus, Georgia
February 2, 1998
<PAGE> 14
SELECTED FINANCIAL AND OPERATING DATA
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 recent and proposed consolidations in the movie exhibition industry
and competition with other forms of entertainment, as well as other factors
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
Comparison of Years ended December 31, 1997 and December 31, 1996
Total revenues for the year ended December 31, 1997 increased 7.5% to $458.6
million from $426.7 million. This increase consists of a $22.6 million increase
in admissions and a $9.3 million increase in concessions and other. Overall
attendance increased 1.5% due to the additional screens in operation acquired in
1997 and 1996 (see Note C of Notes to Consolidated Financial Statements).
Attendance on a same screen comparison declined 5.0% during the year ended
December 31, 1997 compared to the year ended December 31, 1996. Revenue per
average screen was $173,449 for 1997 compared to $172,345 for 1996. Average
admission prices increased 6.0% to $4.24 from $4.00 and the average concession
sales per person increased 3.7% to $1.68 from $1.62. Also included in
concessions and other were a higher level of gains on sales of assets and
additional income from the Company's new family entertainment center, The
Hollywood Connection(R). Cost of theatre operations (film exhibition costs,
concession costs and other theatre operating costs) increased 7.3% to $363.1
million from $338.4 million due to the increased number of screens in operation
and the increase in attendance. As a percentage of revenues, cost of theatre
operations decreased from 79.3% to 79.2%.
General and administrative costs increased 6.6% to $6.4 million from $6.0
million reflecting additional general and administrative costs incurred in
connection with the additional screens added in 1996 and 1997. As a percentage
of total revenues, general and administrative costs remained the same at 1.4%.
Depreciation and amortization increased 17.7% to $33.4 million from $28.4
million as a result of the increased screens in operation. This amount has also
been reduced from the impact of adopting Statement No. 121 (see Note B of Notes
to Consolidated Financial Statements).
Interest expense increased 14.1% to $23.1 million from $20.3 in 1996. This
increase reflects a higher average amount of debt outstanding for 1997. The
increase in the Company's debt during 1997 resulted from capital expenditures
incurred in connection with theatre acquisitions and expansions. The Company's
average cost of debt in 1997 declined to 7.4% from 8.1% in 1996.
Comparison of Years Ended December 31, 1996 and December 31, 1995
Total revenues for the year ended December 31, 1996 increased 17.0% to $426.7
million from $364.7 million. This increase consists of a $42.9 million increase
in admissions and a $19.0 million increase in concessions and other. Overall
attendance increased 15.1% due to the additional screens in operation which were
acquired in 1995 and 1996 (see Note C of Notes to Consolidated Financial
Statements). Attendance on a same screen comparison was basically the same for
1996 as 1995. Average admission prices increased 2.3% to $4.00 from $3.91 and
average concession sales per person increased 2.5% from $1.58 to $1.62.
Cost of theatre operations (film exhibition costs, concession costs and other
theatre operating costs) increased 15.0% to $338.4 million from $294.2 million
due to the increased number of screens in operation and the
<PAGE> 15
SELECTED FINANCIAL AND OPERATING DATA
increase in attendance. As a percentage of revenues, cost of theatre operations
decreased from 80.7% of total revenues to 79.3%. This percentage decrease is due
primarily to a lower level of salaries at the Company.
General and administrative costs increased 8.7% from $5.5 million in 1995 to
$6.0 million in 1996 reflecting additional general and administrative costs
incurred to properly integrate the new screens acquired in 1995 and 1996. As a
percentage of total revenues, general and administrative costs decreased from
1.5% to 1.4%.
Depreciation and amortization increased 4.4% to $28.4 million as a result of the
increased screens in operation which were acquired in 1995 and 1996 (see Note C
of Notes to Consolidated Financial Statements) combined with the additional
screens added through internal construction. This amount has also been reduced
from the impact of adopting Statement No. 121 (see Note B of Notes to
Consolidated Financial Statements). As a percentage of total revenues,
depreciation and amortization decreased from 7.5% of total revenues to 6.7% of
total revenues.
Interest expense increased 26.6% to $20.3 million from $16.0 million in 1995.
This increase reflects a higher average amount of debt outstanding for 1996.
The Company adopted Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed of," as of January 1, 1996 (see Note B of Notes
to Consolidated Financial Statements). The initial non-cash charge upon the
Company's adoption of Statement No. 121 was approximately $45.4 million ($28.2
million after tax, or $2.52 per diluted share) to reduce the carrying value of
138 theatres, constituting approximately 26% of the Company's theatres. This
charge resulted from the evaluation of asset impairment on an individual theatre
level rather than on a market level, which had been the Company's previous
accounting policy for evaluating and measuring impairment. As noted above, the
write-down of assets under Statement No. 121 resulted in a reduction in
depreciation and amortization expense in the year ended December 31, 1996.
The Company grouped its theatres into corporations in 1995 to achieve business
and tax efficiencies. As a result of these changes, management costs are more
appropriately allocated among the operations and the Company's effective tax
rate declined from approximately 40% to approximately 38%.
SEASONALITY AND INFLATION
The major film distributors generally release those films which they anticipate
to be the most successful during the summer and holiday seasons. Consequently,
the Company has historically generated higher revenues during such periods.
The Company's financial statements are prepared on a historical cost basis under
generally accepted accounting principles. The Company adjusts its prices
periodically and will continue to do so as competitive conditions permit. In
general, management believes that inflation has not had a significant impact on
the operations of the Company in any of the periods discussed above.
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.
Cash from operating activities was $63.1 million for the year ended December 31,
1997, compared to $54.4 million for the year ended December 31, 1996. The
increase in cash flow from operating activities was primarily due to income,
before non-cash charges. Net cash used in investing activities was $135.6
million in the year ended December 31, 1997, as compared to $98.2 million in the
prior year. The increase in cash used in investing activities was primarily due
to an increase in purchases of property and equipment. For the years ended
December 31, 1997 and 1996, cash provided by financing activities was $83.5
million and $38.0 million, respectively, primarily from additional borrowings
under the Company's 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,
<PAGE> 16
SELECTED FINANCIAL AND OPERATING DATA
acquisitions and other general corporate purposes. 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% (effective
rate of 6.205% at December 31, 1997) and is required to pay annual facility 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. The 1997 Credit Agreement contains 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 1997, capital expenditures, capital leases and
acquisitions totaled approximately $154.5 million. The Company estimates that
total capital expenditures for 1998 will aggregate approximately $150 million.
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
the 1997 Credit Agreement (see Note D of Notes to Consolidated Fiinancial
Statements), additional sale of debt and/or equity securities, additional bank
financing and other forms of long-term debt and, where appropriate, future
lease financings. At March 18, 1998, the Company had approximately $10.9
million in cash and short-term investments on hand and approximately $46.5
million was available under the Company's revolving credit facility.
YEAR 2000
The Year 2000 issue refers generally to the data structure problem that will
prevent systems from properly recognizing dates after the year 1999. For
example, computer programs and various types of electronic equipment that
process date information by reference to two digits rather than four to define
the applicable year may recognize a date using "00" as the year 1900 rather than
the year 2000. The Year 2000 problem may occur in computer software programs,
computer hardware systems and any device that relies on a computer chip if that
chip relies on date information. Even if the systems that process date-sensitive
data are Year 2000 compliant, a Year 2000 problem may exist to the extent that
the data that such systems process is not. The Year 2000 problem could result in
system failures or miscalculations causing disruptions 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 compliant 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.
<PAGE> 17
SELECTED FINANCIAL AND OPERATING DATA
(in thousands except for per share and operating data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997(1) 1996(1) 1995(1) 1994 1993(2)
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Admissions ....................... $319,235 $ 296,629 $253,691 $232,134 $167,294
Concessions and other ............ 139,363 130,097 111,058 95,485 74,504
-------- --------- -------- -------- --------
TOTAL REVENUES .......... 458,598 426,726 362,749 327,619 241,798
Costs and expenses:
File exhibition costs ..................... 169,672 156,968 135,654 123,610 90,874
Concession costs .......................... 18,334 17,252 14,959 12,241 9,406
Other theatre operating costs ............. 175,103 164,149 143,682 118,905 86,498
General and administrative................. 6,352 5,959 5,482 5,092 4,710
Depreciation and amortization ............. 33,443 28,408 27,216 22,544 16,255
Impairment of long-lived assets ........... -0- 45,447 -0- -0- -0-
-------- --------- -------- -------- --------
402,904 418,183 326,993 282,392 207,743
-------- --------- -------- -------- --------
OPERATING INCOME ........ 55,694 8,543 37,756 45,227 34,055
Interest expense .......................... 23,142 20,289 16,031 17,028 14,282
-------- --------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES ......... 32,552 (11,746) 21,725 28,199 19,773
Income tax expense (benefit) .............. 12,366 (4,469) 8,638 11,246 7,912
-------- --------- -------- -------- --------
NET INCOME (LOSS) ....... $ 20,186 $ (7,277) $ 13,087 $ 16,953 $ 11,861
======== ========= ======== ======== ========
Weighted average common shares outstanding:
Basic ............................ 11,277 11,174 11,161 8,312 7,756
======== ========= ======== ======== ========
Diluted .......................... 11,366 11,174 11,260 8,477 7,917
======== ========= ======== ======== ========
Earnings (loss) per common share:
Basic ............................ $ 1.79 $ (.65) $ 1.17 $ 2.04 $ 1.53
======== ========= ======== ======== ========
Diluted .......................... $ 1.78 $ (.65) $ 1.16 $ 2.00 $ 1.50
======== ========= ======== ======== ========
OPERATING DATA:
Theatres (at end of period) ............... 520 519 519 445 409
Screens (as end of period) ................ 2,720 2,518 2,383 1,942 1,701
Average screens per theatre ............... 5.2 4.9 4.6 4.4 4.2
Total attendance (thousands) .............. 75,336 74,213 64,496 59,660 45,493
BALANCE SHEET DATA (AT END OF YEAR):
Cash and cash equivalents ................. $ 16,545 $ 5,569 $ 11,345 $ 17,872 $ 10.649
Total assets .............................. 619,997 489,383 478,012 377,598 327,024
Total long-term debt(3) ................... 341,662 253,233 218,305 143,973 180,636
Shareholders' equity ...................... 202,872 177,930 185,094 171,956 93,856
</TABLE>
(1) See Note C of Notes to Consolidated Financial Statements with respect to
acquisitions.
(2) Excludes $390,000 cumulative effect of change in accounting for income
taxes.
(3) Less current maturities. Includes senior notes, capital lease obligations
and convertible subordinated debt (see Notes D, E and F of Notes to Consolidated
Financial Statements).
[CARMIKE CINEMAS, INC. LOGO]
<PAGE> 18
GENERAL INFORMATION
Carmike Cinemas, Inc. is the largest motion picture exhibitor in the United
States, operating 520 theatres with an aggregate of 2,720 screens in markets
located primarily in the Southeast, the Northeast, the Midwest and the West.
During 1997, the Company opened 14 new theatres (156 screens), added 30 screens
to existing complexes and purchased nineteen multiplex theatres with a total of
104 screens.
STOCK TRADING INFORMATION
Carmike Cinemas, Inc. Class A Common Stock trades on the New York Stock Exchange
under the symbol "CKE." The following table sets forth for the periods indicated
the high and low sales prices of a share of Class A Common Stock as reported by
the New York Stock Exchange.
<TABLE>
<CAPTION>
1997 1996
Quarter Ended High Low High Low
<S> <C> <C> <C> <C>
March $29.0 $23 1/8 $23 7/8 $20 1/4
June $35 1/8 $28 1/2 $32 1/2 $22 7/8
September $32 3/4 $27 3/16 $27.0 $22 1/8
December $33 3/8 $28 3/16 $27 1/8 $22 3/8
</TABLE>
The Company has declared no dividends and intends to employ future earnings in
the expansion of its business. (See Notes D and E of Notes to Consolidated
Financial Statements with respect to restrictions on dividends.)
On Month 6, 1998, the Class A Common Stock was held of record by 2,711
shareholders. The Company believes that number substantially understates the
beneficial holders of its Class A Common Stock. As of the same date, the Class B
Common Stock was held of record by nine shareholders. There is no public trading
market for the Class B Common Stock of the Company.
<PAGE> 1
EXHIBIT 21
CARMIKE CINEMAS, INC.
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY % OWNED INCORPORATION
- - ---------- ------- -------------
<S> <C> <C>
Wooden Nickel Pub, Inc. 100% Delaware
Eastwynn Theatres, Inc. 100% Alabama
Military Services, Inc. 80% Delaware
Carmike Realty, Inc. 100% Georgia
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form 10-K
of Carmike Cinemas, Inc. for the year ended December 31, 1997, of our report
dated February 2, 1998, included in the 1997 Annual Report to Shareholders of
Carmike Cinemas, Inc. and subsidiaries.
We also consent to the incorporation by reference in the Registration
Statements (Form S-3 No. 333-34791, Form S-8 No. 33-13723 and Form S-8 No.
33-48011) pertaining to the 128,986 shares issued in the First International
Theatres, Inc. acquisition and to the stock option plan of Carmike Cinemas,
Inc. and subsidiaries of our report dated February 2, 1998, included in the
1997 Annual Report to Shareholders of Carmike Cinemas, Inc. and subsidiaries
which is incorporated by reference in the Annual Report on Form 10-K of Carmike
Cinemas, Inc. for the year ended December 31, 1997.
/s/ Ernst & Young LLP
Columbus, Georgia
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 16,545
<SECURITIES> 3,042
<RECEIVABLES> 2,858
<ALLOWANCES> 0
<INVENTORY> 3,082
<CURRENT-ASSETS> 30,975
<PP&E> 646,161
<DEPRECIATION> 149,105
<TOTAL-ASSETS> 619,997
<CURRENT-LIABILITIES> 63,032
<BONDS> 0
0
0
<COMMON> 341
<OTHER-SE> 202,531
<TOTAL-LIABILITY-AND-EQUITY> 619,997
<SALES> 139,363
<TOTAL-REVENUES> 458,598
<CGS> 18,334
<TOTAL-COSTS> 363,109
<OTHER-EXPENSES> 39,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,142
<INCOME-PRETAX> 32,552
<INCOME-TAX> 12,366
<INCOME-CONTINUING> 20,186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,186
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.78
</TABLE>
