Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q

For the transition period from __________ to __________

Commission file number 000-14993

CARMIKE CINEMAS, INC.
(Exact name of registrant as specified in its charter)

(706) 576-3400
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No þ

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

Indicate the number of shares outstanding of the issuer’s common stock, as of the latest practicable date.

Common Stock, $.03 par value —

	9,088,512 shares outstanding as of August 11, 2003

PART I

ITEM 1.    FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands, except for share data)

See accompanying notes

2

See accompanying notes

3

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands, except per share data)

See accompanying notes

4

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands)

See accompanying notes

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CARMIKE CINEMAS, INC. and SUBSIDIARIES
For the Six Months Ended June 30, 2003 and 2002

NOTE 1 — BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

On August 8, 2000, Carmike Cinemas, Inc. (“Carmike”) and its subsidiaries, Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc. (collectively “the Company”) filed voluntary petitions for relief under Chapter 11 (the “Chapter 11 Cases”) of the United States Bankruptcy Code. In connection with the Chapter 11 Cases, the Company was required to report in accordance with Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, (“SOP 90-7”). SOP 90-7 requires, among other things, (1) pre-petition liabilities that are subject to compromise be segregated in the Company’s consolidated balance sheet as liabilities subject to compromise and (2) the identification of all transactions and events that are directly associated with the reorganization of the Company in the Consolidated Statements of Operations.

On January 4, 2002, the United States Bankruptcy Court for the District of Delaware entered an order confirming the Company’s Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated as of November 14, 2001 (the “Plan”). The Plan became effective on January 31, 2002 (the “Reorganization Date”).

Further, the Company’s accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and bankruptcy related items) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information, refer to the consolidated financial statements and footnotes included in Carmike’s Annual Report on Form 10-K for the year ended December 31, 2002.

The Company has identified several critical accounting policies which can be reviewed in detail in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

The Company accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”).

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For SFAS No. 123 purposes, the fair value of each option grant and stock based

6

award has been estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

The estimated fair value of the options granted during 2003 is $12.12 per share income. Had compensation cost been determined consistent with SFAS No. 123, utilizing the assumptions detailed above, the Company’s pro forma net income (loss) and pro forma basic and diluted earnings (loss) per share would have decreased to the following amounts (in thousands, except share data):

NOTE 2 — PROCEEDINGS UNDER CHAPTER 11

On January 31, 2002, the Company emerged from bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. A description of the proceedings under the Chapter 11 Cases is contained in Note 2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

7

Reorganization costs for the six month periods ended June 30, 2003 and 2002 are as follows (in thousands):

NOTE 3 — LIABILITIES SUBJECT TO COMPROMISE

The principal categories of obligations classified as Liabilities Subject to Compromise under the Chapter 11 Cases are identified below. The amounts in total may vary significantly from the stated amounts of proofs of claims filed with the bankruptcy court, and may be subject to future adjustments depending on bankruptcy court action, further developments with respect to potential disputed claims, and determination as to the value of any collateral securing claims or other events. During the three months ended June 30, 2003, certain claims were resolved for less than the related amounts, resulting in a change in estimate of liability of $4.6 million.

A summary of the principal categories of claims classified as Liabilities Subject to Compromise at June 30, 2003 and December 31, 2002 are as follows (in thousands):

The change in outstanding liability results from a change in estimate of $4.6 million, cash payments of $4.2 million and a reclass from liabilities subject to compromise to long-term trade payables of $4.6 million.

NOTE 4 — INCOME TAXES

For the fiscal year ended December 31, 2002, the Company had net deferred tax assets of approximately $79.9 million that were fully offset by a valuation allowance. Further, as a result of its Chapter 11 filing, default on bank facilities, and changes in future projections of operating results, the Company believes that doubt remains as to the ability to recognize future tax benefits related to its deferred tax assets. Thus, the Company continues to offset existing deferred tax assets with a valuation allowance.

In connection with the reorganization and Chapter 11 filing, the Company is currently evaluating whether it underwent an ownership change or changes within the meaning of Section 382 of the

8

Internal Revenue Code. If so, the ability of the Company to use its net operating losses may be severely limited and subject to an annual limitation based on the product of the fair value of the Company immediately before the reorganization multiplied by the federal long-term tax exempt bond rate. Furthermore, the Company is currently evaluating available elections based on existing tax law that may impact the usability of future losses and possibly mitigate the consequences of the Section 382 limitation.

For tax purposes, any discharge of the liabilities pursuant to the Chapter 11 filing may result in income that is excluded from the Company’s taxable income. However, certain of the Company’s tax attributes, including net operating loss carryforwards, may be reduced by the amount of any cancellation of debt income. To the extent the amount excluded exceeds these tax attributes, the tax basis in the Company’s property must be reduced by the amount of the excluded cancellation of debt income.

It is anticipated that the Company will not pay income taxes in 2003. Also, after the 2002 estimated taxable loss and taking into account the net operating loss carryback claim filed in the first quarter of 2002, the Company has federal and state net operating loss carryovers of approximately $116.0 million which begin to expire in the year 2020.

NOTE 5 — STOCK PLANS

Upon emergence from Chapter 11, the Company’s Board of Directors approved a new management incentive plan, the Carmike Cinemas, Inc. 2002 Stock Plan. The Board of Directors has approved the grant of 780,000 shares under the 2002 Stock Plan to Michael W. Patrick, the Company’s Chief Executive Officer. Pursuant to the terms of Mr. Patrick’s employment agreement dated January 31, 2002 these shares will be delivered