Attached files
Exhibit 99.1
CARMIKE CINEMAS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On November 15, 2012, Carmike Cinemas, Inc. (Carmike or the Company) completed its acquisition of 16 entertainment complexes in seven U.S. states (the Theatres) pursuant to the terms of the Membership Interest Purchase Agreement (the Purchase Agreement) with Rave Reviews Cinemas, L.L.C (Rave) and Rave Reviews Holdings, LLC (Acquisition Sub) dated September 28, 2012. Prior to consummation of the acquisition, Rave transferred to the Acquisition Sub the Theatres and certain related assets and certain assumed liabilities, including the leases, related to the Theatres. Carmike subsequently acquired all of the ownership interests of the Acquisition Sub (the Acquisition). In consideration for the Acquisition, Carmike paid $20.9 million in cash, including $1.9 million in working capital adjustments. In addition, the Company assumed approximately $110.2 million of capital leases and financing obligations. The purchase price was paid using cash on hand.
The following unaudited pro forma condensed combined balance sheet as of September 30, 2012 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2012 and for the year ended December 31, 2011 are based on the historical financial statements of the Company, adjusted to give effect to the Acquisition, including the acquisition of all of the membership interests of the Acquisition Sub and substantially all of the assets of Rave. The Acquisition did not include four Rave theatres.
The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2012 and for the year ended December 31, 2011 give pro forma effect to the Acquisition as if it had occurred on January 1, 2011. The unaudited pro forma condensed combined balance sheet as of September 30, 2012 assumes that the transaction was effective on September 30, 2012.
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2011 was derived from the Companys audited consolidated statement of operations for the year ended December 31, 2011 and from Raves audited consolidated statement of operations for the year ended December 29, 2011 (as restated).
The unaudited pro forma condensed combined balance sheet and statement of operations as of and for the nine months ended September 30, 2012 were derived from the Companys unaudited condensed combined financial statements as of and for the nine months ended September 30, 2012 and from Raves unaudited condensed combined financial statements as of and for the nine months ended September 27, 2012.
The following unaudited pro forma condensed combined financial information is based on, and should be read in conjunction with:
| The historical audited financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and filed with the Securities and Exchange Commission (SEC) on March 12, 2012; |
| The historical unaudited interim financial statements of the Company included in its quarterly report on Form 10-Q for the three and nine months ended September 30, 2012, and filed with the SEC on November 1, 2012; |
| The historical audited consolidated balance sheets of Rave as of December 29, 2011 and December 30, 2010, and the consolidated statements of operations and members deficit and cash flows for the years ended December 29, 2011, December 30, 2010 and December 31, 2009, all as restated, attached as Exhibit 99.2 to the current report on Form 8-K/A to which this unaudited pro forma combined condensed financial information is attached (the Form 8-K/A); and |
| The historical unaudited consolidated balance sheet of Rave as of September 27, 2012 and the consolidated statements of operations and members deficit and cash flows of Rave for the nine months ended September 27, 2012 and September 26, 2011, attached as Exhibit 99.3 to the Form 8-K/A. |
The unaudited pro forma condensed combined financial information has been prepared by the Company using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 805, Business Combinations. The acquisition accounting is dependent on certain valuation and other studies that have yet to progress to a stage where there is sufficient information for a definitive measurement. The assets and liabilities of Rave have been measured based on preliminary estimates using assumptions that the Company believes are reasonable. Differences between these estimates and the final acquisition accounting could occur, and those differences could have a material impact on the accompanying pro forma condensed combined financial statements. Carmike intends to complete the necessary valuation required to finalize the acquisition accounting as soon as practicable, but in no event later than one year following completion of the Acquisition.
The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the financial position or results of operations in future periods or the financial position or results of operations that actually would have been realized had the Company and Rave been a combined company during the specified periods. It also does not reflect any cost savings, operating synergies or revenue enhancements that the Company may achieve with respect to the combined company.
CARMIKE CINEMAS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2012
Carmike Historical |
Rave Historical |
Pro Forma Adjustments (Footnote 3) |
Carmike Pro Forma Combined |
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(In Thousands, Except Share and Per Share Amounts) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets: |
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Cash and cash equivalents |
$ | 82,043 | $ | 2,583 | $ | (23,447 | ) a | $ | 61,179 | |||||||
Restricted cash |
58 | | | 58 | ||||||||||||
Accounts receivable |
4,706 | 813 | (168 | ) b | 5,351 | |||||||||||
Inventories |
2,860 | 637 | (147 | ) b | 3,350 | |||||||||||
Prepaid expenses and other current assets |
9,878 | 714 | (413 | ) b, c | 10,179 | |||||||||||
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Total current assets |
99,545 | 4,747 | (24,175 | ) | 80,117 | |||||||||||
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Property and equipment: |
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Land |
52,646 | 5,735 | (5,735 | ) b | 52,646 | |||||||||||
Buildings and building improvements |
269,016 | 126,534 | (48,814 | ) b, d | 346,736 | |||||||||||
Leasehold improvements |
121,853 | | | 121,853 | ||||||||||||
Assets under capital leases |
44,970 | | | 44,970 | ||||||||||||
Equipment |
220,801 | 49,669 | (32,866 | ) b, d | 237,604 | |||||||||||
Construction in progress |
7,466 | | | 7,466 | ||||||||||||
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Total property and equipment |
716,752 | 181,938 | (87,415 | ) | 811,275 | |||||||||||
Accumulated depreciation and amortization |
(365,258 | ) | (85,995 | ) | 85,995 | d | (365,258 | ) | ||||||||
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Property and equipment, net of accumulated depreciation |
351,494 | 95,943 | (1,420 | ) | 446,017 | |||||||||||
Goodwill |
8,087 | | 51,511 | e | 59,598 | |||||||||||
Intangible assets, net of accumulated amortization |
1,088 | | | 1,088 | ||||||||||||
Investments in unconsolidated affiliates |
7,960 | | | 7,960 | ||||||||||||
Other assets |
21,020 | 844 | (398 | ) b, f | 21,466 | |||||||||||
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Total assets |
$ | 489,194 | $ | 101,534 | $ | 25,518 | $ | 616,246 | ||||||||
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LIABILITIES AND EQUITY | ||||||||||||||||
Current liabilities: |
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Accounts payable |
$ | 20,075 | $ | 4,797 | $ | (961 | ) b | $ | 23,911 | |||||||
Accrued expenses |
36,671 | 7,586 | (1,193 | ) b, h | 43,064 | |||||||||||
Current maturities of long-term debt, capital leases and long-term financing obligations |
2,216 | 4,673 | (2,376 | ) g | 4,513 | |||||||||||
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Total current liabilities |
58,962 | 17,056 | (4,530 | ) | 71,488 | |||||||||||
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Long-term liabilities: |
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Deferred revenue |
33,273 | | | 33,273 | ||||||||||||
Long-term debt, less current maturities |
209,530 | | | 209,530 | ||||||||||||
Capital leases and long-term financing obligations, less current maturities |
113,237 | 120,047 | (12,101 | ) b, i | 221,183 | |||||||||||
Other |
17,024 | 8,545 | (1,965 | ) j, k | 23,604 | |||||||||||
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Total long-term liabilities |
373,064 | 128,592 | (14,066 | ) | 487,590 | |||||||||||
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Commitments and contingencies |
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Stockholders equity: |
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Preferred Stock, $1.00 par value per share: 1,000,000 shares authorized, no shares issued |
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Common Stock, $0.03 par value per share: 35,000,000 shares authorized, 18,238,847 shares issued and 17,781,617 shares outstanding at September 30, 2012 |
539 | | | 539 | ||||||||||||
Treasury stock, 457,230 shares at cost at September 30, 2012 |
(11,740 | ) | | | (11,740 | ) | ||||||||||
Paid-in capital |
349,046 | 67,711 | (67,711 | ) l | 349,046 | |||||||||||
Accumulated deficit |
(280,677 | ) | (111,825 | ) | 111,825 | l | (280,677 | ) | ||||||||
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Total stockholders equity |
57,168 | (44,114 | ) | 44,114 | 57,168 | |||||||||||
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Total liabilities and stockholders equity |
$ | 489,194 | $ | 101,534 | $ | 25,518 | $ | 616,246 | ||||||||
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The accompanying notes are an integral part of these financial statements.
CARMIKE CINEMAS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
Carmike Historical |
Rave Historical Restated |
Pro Forma Adjustments (Footnote 3) |
Carmike Pro Forma Combined |
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(In Thousands, Except Per Share Amounts) | ||||||||||||||||
Revenues: |
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Admissions |
$ | 309,782 | $ | 82,500 | $ | (23,138 | ) m | $ | 369,144 | |||||||
Concessions and other |
172,427 | 43,046 | (13,310 | ) m | 202,163 | |||||||||||
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Total operating revenues |
482,209 | 125,546 | (36,448 | ) | 571,307 | |||||||||||
Operating costs and expenses: |
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Film exhibition costs |
167,385 | 45,020 | (12,607 | ) m | 199,798 | |||||||||||
Concession costs |
19,895 | 5,131 | (1,533 | ) m | 23,493 | |||||||||||
Other theatre operating costs |
203,012 | 42,038 | (11,806 | ) m | 233,244 | |||||||||||
General and administrative expenses |
19,084 | 5,227 | (5,227 | ) n | 19,084 | |||||||||||
Severance agreement charges |
845 | | | 845 | ||||||||||||
Depreciation and amortization |
32,258 | 10,180 | (1,298 | ) o | 41,140 | |||||||||||
Loss on sale of property and equipment |
333 | | | 333 | ||||||||||||
Write-off of note receivable |
750 | | | 750 | ||||||||||||
Impairment of long-lived assets |
3,489 | 539 | | 4,028 | ||||||||||||
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Total operating costs and expenses |
447,051 | 108,135 | (32,471 | ) | 522,715 | |||||||||||
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Operating income |
35,158 | 17,411 | (3,977 | ) | 48,592 | |||||||||||
Interest expense |
34,113 | 21,425 | (4,935 | ) q | 50,603 | |||||||||||
Other expense |
| 190 | | 190 | ||||||||||||
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Income (loss) from continuing operations before income tax and income from unconsolidated affiliates |
1,045 | (4,204 | ) | 958 | (2,201 | ) | ||||||||||
Income tax expense (benefit) |
10,375 | | (1,282 | ) r | 9,093 | |||||||||||
Income from unconsolidated affiliates |
1,797 | | | 1,797 | ||||||||||||
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Loss from continuing operations |
$ | (7,533 | ) | $ | (4,204 | ) | $ | 2,240 | $ | (9,497 | ) | |||||
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Weighted average shares outstanding: |
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Basic |
12,807 | 12,807 | ||||||||||||||
Diluted |
12,807 | 12,807 | ||||||||||||||
Net loss per common share (Basic and Diluted): |
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Net loss per common share |
$ | (0.59 | ) | $ | (0.74 | ) | ||||||||||
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The accompanying notes are an integral part of these financial statements.
CARMIKE CINEMAS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
Carmike Historical |
Rave Historical |
Pro Forma Adjustments (Footnote 3) |
Carmike Pro Forma Combined |
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(In Thousands, Except Per Share Amounts) | ||||||||||||||||
Revenues: |
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Admissions |
$ | 250,423 | $ | 66,423 | $ | (18,486 | ) m | $ | 298,360 | |||||||
Concessions and other |
143,888 | 34,927 | (10,381 | ) m | 168,434 | |||||||||||
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Total operating revenues |
394,311 | 101,350 | (28,867 | ) | 466,794 | |||||||||||
Operating costs and expenses: |
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Film exhibition costs |
136,126 | 36,552 | (10,092 | ) m | 162,586 | |||||||||||
Concession costs |
16,863 | 4,468 | (1,299 | ) m | 20,032 | |||||||||||
Other theatre operating costs |
158,465 | 32,536 | (9,050 | ) m | 181,951 | |||||||||||
General and administrative expenses |
15,826 | 4,129 | (5,009 | ) n, p | 14,946 | |||||||||||
Severance agreement charges |
588 | | | 588 | ||||||||||||
Depreciation and amortization |
24,028 | 7,409 | (747 | ) o | 30,690 | |||||||||||
Loss on sale of property and equipment |
948 | | | 948 | ||||||||||||
Impairment of long-lived assets |
3,371 | 607 | | 3,978 | ||||||||||||
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Total operating costs and expenses |
356,215 | 85,701 | (26,197 | ) | 415,719 | |||||||||||
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Operating income |
38,096 | 15,649 | (2,670 | ) | 51,075 | |||||||||||
Interest expense |
25,478 | 15,774 | (4,861 | ) q | 36,391 | |||||||||||
Loss on extinguishment of debt |
4,961 | | | 4,961 | ||||||||||||
Other expense |
| 62 | | 62 | ||||||||||||
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Income (loss) from continuing operations before income tax |
7,657 | (187 | ) | 2,191 | 9,661 | |||||||||||
Income tax expense |
3,822 | | 792 | r | 4,614 | |||||||||||
Income from unconsolidated affiliates |
958 | | | 958 | ||||||||||||
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Income (loss) from continuing operations |
$ | 4,793 | $ | (187 | ) | $ | 1,399 | $ | 6,005 | |||||||
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Weighted average shares outstanding: |
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Basic |
15,775 | | 15,775 | |||||||||||||
Diluted |
16,061 | | 16,061 | |||||||||||||
Net income per common share (Basic) |
$ | 0.30 | $ | 0.38 | ||||||||||||
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Net income per common share (Diluted) |
$ | 0.30 | $ | 0.37 | ||||||||||||
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The accompanying notes are an integral part of these financial statements.
CARMIKE CINEMAS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. | Basis of Presentation |
The historical financial information is derived from the historical consolidated financial statements of Carmike and the historical consolidated financial statements of Rave. The unaudited pro forma condensed combined balance sheet as of September 30, 2012 has been prepared as if the Acquisition had occurred on September 30, 2012 and combines the historical balance sheet of Carmike as of September 30, 2012 and the historical balance sheet of Rave as of September 27, 2012. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2011 and the nine months ended September 30, 2012 have been prepared as if the Acquisition had occurred on January 1, 2011 and combine the historical results for Carmike, for the year ended December 31, 2011 and for the nine months ended September 30, 2012, and Rave, for the year ended December 29, 2011 and for the nine months ended September 27, 2012.
The unaudited pro forma condensed combined financial information has been prepared by the Company using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The acquisition accounting is dependent on certain valuation and other studies that have yet to progress to a stage where there is sufficient information for a definitive measurement. The assets and liabilities of Rave have been measured based on preliminary estimates using assumptions that the Company believes are reasonable. Differences between these estimates and the final acquisition accounting could occur, and those differences could have a material impact on the accompanying pro forma condensed combined financial statements. Carmike intends to complete the necessary valuation required to finalize the acquisition accounting as soon as practicable, but in no event later than one year following completion of the Acquisition.
2. | Assets Acquired and Liabilities Assumed at Fair Value |
The Company prepared the allocation of the fair values of the assets acquired and liabilities assumed in the September 30, 2012 pro forma condensed combined balance sheet based on managements best estimates of the fair value of assets acquired and liabilities assumed.
The following table summarizes the purchase price and purchase price allocation based on the fair value of net assets acquired (amounts in thousands):
Cash |
$ | 19,000 | ||
Leases and financing obligations assumed |
110,243 | |||
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Purchase price |
129,243 | |||
Working capital adjustment |
1,864 | |||
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Total purchase price |
$ | 131,107 | ||
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Accounts receivable |
$ | 645 | ||
Inventory |
490 | |||
Other current assets |
301 | |||
Property and equipment |
94,523 | |||
Other assets |
446 | |||
Current liabilities |
(10,229 | ) | ||
Other liabilities |
(6,580 | ) | ||
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Net assets acquired |
79,596 | |||
Goodwill |
51,511 | |||
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Total |
$ | 131,107 | ||
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For the purpose of these pro forma condensed combined financial statements, the carrying value of all assets acquired, except for property and equipment and goodwill, and all liabilities assumed, approximates fair value.
3. | Pro Forma Adjustments |
The pro forma financial information does not give effect to any synergies that may be realized as a result of the Acquisition. The unaudited pro forma combined balance sheets and statements of operations reflect the effect of the following pro forma adjustments:
(a) | Adjustment to reflect the $20,864, inclusive of preliminary working capital adjustment, paid by the Company in connection with the Acquisition and cash balances totaling $2,583 held by Rave as of the closing date not included in the Acquisition. |
(b) | Adjustment to reflect the net book value of assets and liabilities associated with the four Rave theatres not acquired. |
(c) | Adjustment to reflect the note receivable of $348 due from one of Raves former officers which was not included in the Acquisition. |
(d) | Adjustment to increase the net book value of buildings and building improvements and equipment by $26,000 and $800, respectively, to reflect the acquisition date fair value and to reset accumulated depreciation to $0. |
(e) | Adjustment to reflect the excess of purchase price over the estimated fair value of the net assets acquired. |
Total purchase price |
$ | 131,107 | ||||||
Accounts receivable |
$ | 645 | ||||||
Inventory |
490 | |||||||
Prepaid and other assets |
301 | |||||||
Property and equipment |
94,523 | |||||||
Other assets |
446 | |||||||
Accounts payable |
(3,836 | ) | ||||||
Accrued expenses |
(6,393 | ) | ||||||
Other liabilities |
(6,580 | ) | ||||||
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Net assets acquired |
$ | 79,596 | ||||||
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Goodwill |
$ | 51,511 | ||||||
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(f) | Adjustment to reflect the elimination of deferred financing fees of $359 as a result of fair value accounting. |
(g) | Adjustment to reflect the elimination of Rave debt of $1,000 that was settled in conjunction with the Acquisition and the elimination of the current portion of accrued straight-line and deferred rent credits of $1,376 as a result of fair value accounting. |
(h) | Adjustment to reflect the accrual of acquisition-related expenses of $1,200 incurred in connection with and contingent upon the closing of the Acquisition and the elimination of $997 of Rave deferred revenue. |
(i) | Adjustment to reflect the increase in the fair value of capital leases and long-term financing obligations of $9,536. |
(j) | Adjustment to reflect the elimination of straight-line and deferred rent credits of $8,545 as a result of fair value accounting. |
(k) | Adjustment to record the fair value of $6,580 associated with an unfavorable operating lease acquired in the Acquisition. |
(l) | Adjustment to reflect the elimination of Rave stockholders equity. |
(m) | Adjustment to reflect corporate revenues and expenses associated with the four Rave theatres not acquired. |
(n) | Adjustment to reflect the elimination of Raves corporate general and administrative expenses as the Acquisition only included the assets, employees and operations of the 16 acquired theatres and none of Raves corporate assets or management personnel or functions. The Company does not expect to incur any incremental future operating costs of significance to incorporate these theatres into its circuit. |
(o) | Adjustment to reflect depreciation expense for the adjusted asset base and depreciable lives as determined per the fair value assessment. Depreciable lives range from three to twenty years. |
(p) | Adjustment to reflect the elimination of $880 of acquisition-related expenses incurred by Carmike during the nine months ended September 30, 2012. The Company has removed these expenses from the unaudited pro forma combined condensed statement of income for the nine months ended September 30, 2012 on the basis that they are non-recurring. No adjustment was made for the twelve months ended December 31, 2011 as there were no such costs incurred prior to January 1, 2012. |
(q) | Adjustment to reflect the elimination of interest expense of $424 and $240 for the year ended December 31, 2011 and nine months ended September 30, respectively, related to Rave debt settled in conjunction with the Acquisition. Also, the adjustment to reflect the reduction of interest expense of $4,511 and $4,621 for the year ended December 31, 2011 and nine months ended September 30, 2012, respectively, as a result of fair value accounting for assumed capital leases and financing obligations. |
(r) | Adjustment to reflect the tax (benefit) expense that would have been incurred with respect to the Rave theatres. Pro forma tax expense was calculated using a rate of 39.5%. We do not expect a significant difference between pre-tax book income and taxable income. Furthermore, the acquisition of Rave would not have caused us to conclude that a full valuation allowance upon our deferred tax assets was no longer required. |