SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
| (Mark One) | ||
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |
| For the quarterly period ended September 30, 2003 | ||
| OR | ||
| [ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
| For the transition period from to | ||
Commission file number 000-14993
CARMIKE CINEMAS, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE (State or other jurisdiction of incorporation or organization) |
58-1469127 (I.R.S. Employer Identification No.) |
|
| 1301 First Avenue, Columbus, Georgia (Address of Principal Executive Offices) |
31901-2109 (Zip Code) |
(706) 576-3400
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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 November 7, 2003
PART I
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands, except for share data)
| September 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| Assets | (unaudited) | |||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 32,475 | $ | 53,491 | ||||||
Accounts and notes receivable |
3,053 | 1,574 | ||||||||
Inventories |
1,942 | 3,171 | ||||||||
Recoverable construction allowances |
4,300 | 8,742 | ||||||||
Prepaid expenses |
9,475 | 9,367 | ||||||||
Total current assets |
51,245 | 76,345 | ||||||||
Other assets: |
||||||||||
Investment in and advances to partnerships |
6,567 | 6,542 | ||||||||
Other |
21,493 | 12,181 | ||||||||
| 28,060 | 18,723 | |||||||||
Property and equipment, net of accumulated
depreciation |
423,281 | 438,305 | ||||||||
Goodwill, net of accumulated amortization |
23,354 | 23,354 | ||||||||
Total assets |
$ | 525,940 | $ | 556,727 | ||||||
See accompanying notes
2
| September 30, 2003 |
December 31, 2002 |
|||||||||
| Liabilities and Shareholders' Equity | (unaudited) | |||||||||
Current liabilities: |
||||||||||
Accounts payable |
$ | 15,650 | $ | 31,946 | ||||||
Accrued expenses |
38,206 | 45,820 | ||||||||
Current maturities of long-term debt, capital lease obligations
and long-term trade payables |
33,903 | 27,051 | ||||||||
Total current liabilities |
87,759 | 104,817 | ||||||||
Long-term liabilities: |
||||||||||
Long-term debt, less $28,302 and $26,080 in current maturities
as of September 30, 2003 and December 31, 2002, respectively |
309,137 | 339,044 | ||||||||
Capital lease obligations, less current maturities of $1,157 and
$972 as of September 30, 2003 and December 31, 2002,
respectively |
51,726 | 52,673 | ||||||||
Long-term trade payables, less current maturities |
8,723 | 7,693 | ||||||||
Deferred income taxes |
1,927 | 1,927 | ||||||||
| 371,513 | 401,337 | |||||||||
Liabilities subject to compromise |
22,489 | 37,367 | ||||||||
Shareholders’ Equity |
||||||||||
Preferred Stock, $1.00 par value, authorized 1,000,000 shares,
none outstanding as of September 30, 2003 and December 31,
2002, respectively |
— | — | ||||||||
Common Stock, $0.03 par value, authorized 20,000,000
shares, issued and outstanding 9,088,512 and 8,991,262
shares as of September 30, 2003 and December 31, 2002,
respectively |
273 | 270 | ||||||||
Paid-in capital |
212,181 | 208,252 | ||||||||
Retained deficit |
(168,275 | ) | (195,316 | ) | ||||||
| 44,179 | 13,206 | |||||||||
Total liabilities and shareholders’ equity |
$ | 525,940 | $ | 556,727 | ||||||
See accompanying notes
3
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands, except per share data)
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Revenues |
|||||||||||||||||
Admissions |
$ | 86,539 | $ | 82,844 | $ | 242,763 | $ | 253,262 | |||||||||
Concessions and miscellaneous |
41,688 | 40,495 | 119,118 | 123,802 | |||||||||||||
| 128,227 | 123,339 | 361,881 | 377,064 | ||||||||||||||
Costs and Expenses |
|||||||||||||||||
Film exhibition costs |
46,652 | 44,748 | 128,665 | 137,529 | |||||||||||||
Concession costs |
4,605 | 3,898 | 13,613 | 14,689 | |||||||||||||
Other theatre operating costs |
46,809 | 43,351 | 136,016 | 135,365 | |||||||||||||
General and administrative expenses |
3,862 | 4,052 | 10,697 | 9,585 | |||||||||||||
Depreciation and amortization expenses |
7,711 | 8,233 | 23,134 | 24,374 | |||||||||||||
Gain on real estate sales |
(1 | ) | (134 | ) | (2,503 | ) | (340 | ) | |||||||||
| 109,638 | 104,148 | 309,622 | 321,202 | ||||||||||||||
Operating income |
18,589 | 19,191 | 52,259 | 55,862 | |||||||||||||
Other Income and Expenses |
|||||||||||||||||
Interest expense (Contractual interest for the
three months and nine months ended
September 30, 2003 and 2002 was $9,804 and
$12,815 and $30,616 and $38,429,
respectively) |
9,678 | 11,097 | 29,141 | 93,869 | |||||||||||||
Income (loss) before reorganization costs
and income taxes |
8,911 | 8,094 | 23,118 | (38,007 | ) | ||||||||||||
Reorganization costs |
(115 | ) | 22 | (3,923 | ) | 15,057 | |||||||||||
Income (loss) before income taxes |
9,026 | 8,072 | 27,041 | (53,064 | ) | ||||||||||||
Income tax (benefit) |
— | — | — | (14,700 | ) | ||||||||||||
Net income (loss) available for common stock |
$ | 9,026 | $ | 8,072 | $ | 27,041 | $ | (38,364 | ) | ||||||||
Weighted average shares outstanding: |
|||||||||||||||||
Basic |
8,991 | 8,991 | 8,991 | 9,342 | |||||||||||||
Diluted |
9,397 | 9,080 | 9,331 | 9,342 | |||||||||||||
Net income (loss) per common share: |
|||||||||||||||||
Basic |
$ | 1.00 | $ | 0.90 | $ | 3.01 | $ | (4.11 | ) | ||||||||
Diluted |
$ | 0.96 | $ | 0.89 | $ | 2.90 | $ | (4.11 | ) | ||||||||
See accompanying notes
4
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands)
| Nine Months Ended | |||||||||
| September 30, | |||||||||
| 2003 | 2002 | ||||||||
Operating Activities |
|||||||||
Net income (loss) |
$ | 27,041 | $ | (38,364 | ) | ||||
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities: |
|||||||||
Depreciation and amortization |
23,134 | 24,374 | |||||||
Reorganization items |
(10,210 | ) | 5,888 | ||||||
Non-cash compensation |
3,932 | 2,524 | |||||||
Gain on real estate sales |
(2,503 | ) | (340 | ) | |||||
Changes in operating assets and liabilities: |
|||||||||
Accounts and notes receivable and inventories |
(275 | ) | 536 | ||||||
Prepaid expenses |
(1,532 | ) | 11,788 | ||||||
Accounts payable |
(16,296 | ) | (6,369 | ) | |||||
Accrued expenses and other liabilities |
(10,980 | ) | (7,482 | ) | |||||
Net cash provided by (used in) operating activities |
12,311 | (7,055 | ) | ||||||
Investing Activities |
|||||||||
Purchases of property and equipment |
(10,161 | ) | (3,660 | ) | |||||
Proceeds from sales of property and equipment |
5,136 | 3,104 | |||||||
Net cash used in investing activities |
(5,025 | ) | (556 | ) | |||||
Financing Activities |
|||||||||
Debt: |
|||||||||
Additional borrowings |
— | 21,705 | |||||||
Repayments |
(24,002 | ) | (54,906 | ) | |||||
Recoverable construction allowances under capital
leases |
(4,300 | ) | 1,975 | ||||||
Net cash used in financing activities |
(28,302 | ) | (31,226 | ) | |||||
Decrease in cash and cash equivalents |
(21,016 | ) | (38,837 | ) | |||||
Cash and cash equivalents at beginning of period |
53,491 | 94,187 | |||||||
Cash and cash equivalents at end of period |
$ | 32,475 | $ | 55,350 | |||||
See accompanying notes
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CARMIKE CINEMAS, INC. and SUBSIDIARIES
For the Nine Months Ended September 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 nine month period ended September 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:
| 2003 | 2002 | |||||||
Expected life (years) |
9.0 | 9.0 | ||||||
Risk-free interest rate |
4.34 | % | 4.19 | % | ||||
Dividend yield |
0.0 | % | 0.0 | % | ||||
Expected volatility |
0.40 | 0.40 | ||||||
The estimated fair value of the options granted during 2003 is $12.12 per share. 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):
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Net income (loss): |
||||||||||||||||||
As reported |
$ | 9,026 | $ | 8,072 | $ | 27,041 | $ | (38,364 | ) | |||||||||
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects |
(139 | ) | — | (279 | ) | — | ||||||||||||
Pro forma – for SFAS No. 123 |
8,887 | 8,072 | 26,762 | (38,364 | ) | |||||||||||||
Basic net earnings (loss) per share: |
||||||||||||||||||
As reported |
$ | 1.00 | $ | 0.90 | $ | 3.01 | $ | (4.11 | ) | |||||||||
Pro forma – for SFAS No. 123 |
0.99 | 0.90 | 2.98 | (4.11 | ) | |||||||||||||
Diluted net earnings (loss) per share: |
||||||||||||||||||
As reported |
$ | 0.96 | $ | 0.89 | $ | 2.90 | $ | (4.11 | ) | |||||||||
Pro forma – for SFAS No. 123 |
0.95 | 0.89 | 2.87 | (4.11 | ) | |||||||||||||
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 three and nine month periods ended September 30, 2003 and 2002 are as follows (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
Write-off of loan origination
fees |
$ | — | $ | — | $ | — | $ | 8,034 | ||||||||
Gain on interest rate swap |
— | — | — | 444 | ||||||||||||
Loss on sale of assets |
— | 30 | — | 15 | ||||||||||||
Interest income |
— | — | — | (107 | ) | |||||||||||
Change in estimate for general
unsecured claims |
(280 | ) | — | (4,907 | ) | — | ||||||||||
Professional
fees and other expenses |
165 | (8 | ) | 984 | 6,671 | |||||||||||
| $ | (115 | ) | $ | 22 | $ | (3,923 | ) | $ | 15,057 | |||||||
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 September 30, 2003, certain claims were resolved for less than the related amounts, resulting in a $0.3 million change in the Company’s estimate of liability.
A summary of the principal categories of claims classified as Liabilities Subject to Compromise at September 30, 2003 and December 31, 2002 are as follows (in thousands):
| September 30, 2003 | December 31, 2002 | |||||||
Disputed unsecured claims |
$ | 21,322 | $ | 36,075 | ||||
Disputed priority claims |
1,167 | 1,292 | ||||||
| $< | ||||||||