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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

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   58-1469127

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

1301 First Avenue, Columbus, Georgia   31901-2109
(Address of Principal Executive Offices)   (Zip Code)

(706) 576-3400

(Registrant’s Telephone Number, Including Area Code)

 

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

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

Common Stock, par value $0.03 per share — 12,966,942 shares outstanding as of October 25, 2011.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

     Page  

PART I. FINANCIAL INFORMATION

  

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

     3   

CONDENSED CONSOLIDATED BALANCE SHEETS

     3   

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

     4   

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

     5   

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     6   

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     23   

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     30   

ITEM 4. CONTROLS AND PROCEDURES

     31   

PART II. OTHER INFORMATION

  

ITEM 1. LEGAL PROCEEDINGS

     32   

ITEM 1A. RISK FACTORS

     32   

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     32   

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     32   

ITEM 4. RESERVED

     32   

ITEM 5. OTHER INFORMATION

     32   

ITEM 6. EXHIBITS

     33   

EXHIBIT INDEX

     33   

SIGNATURES

     34   

EX-31.1 SECTION 302 CERTIFICATION OF CEO

  

EX-31.2 SECTION 302 CERTIFICATION OF CFO

  

EX-32.1 SECTION 906 CERTIFICATION OF CEO

  

EX-32.2 SECTION 906 CERTIFICATION OF CFO

  

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

CARMIKE CINEMAS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

 

     September 30,     December 31,  
     2011     2010  
     (Unaudited)        

Assets:

    

Current assets:

    

Cash and cash equivalents

   $ 18,999      $ 13,066   

Restricted cash

     75        335   

Accounts receivable

     3,338        4,440   

Screenvision receivable (Note 9)

     —          30,000   

Inventories

     2,729        2,741   

Prepaid expenses and other assets

     7,646        6,696   
  

 

 

   

 

 

 

Total current assets

     32,787        57,278   
  

 

 

   

 

 

 

Property and equipment:

    

Land

     54,631        54,603   

Buildings and building improvements

     276,369        272,956   

Leasehold improvements

     120,612        120,320   

Assets under capital leases

     48,205        50,924   

Equipment

     215,598        210,329   

Construction in progress

     4,909        2,424   
  

 

 

   

 

 

 

Total property and equipment

     720,324        711,556   

Accumulated depreciation and amortization

     (360,920     (343,372
  

 

 

   

 

 

 

Property and equipment, net of accumulated depreciation

     359,404        368,184   

Intangible assets, net of accumulated amortization

     564        612   

Investments in unconsolidated affiliates (Note 11)

     8,194        8,093   

Other assets

     18,546        20,591   
  

 

 

   

 

 

 

Total assets

   $ 419,495      $ 454,758   
  

 

 

   

 

 

 

Liabilities and stockholders’ equity:

    

Current liabilities:

    

Accounts payable

   $ 18,312      $ 21,660   

Income taxes payable

     2,812        —     

Accrued expenses

     28,837        27,431   

Current maturities of long-term debt, capital leases and long-term financing obligations

     4,007        4,240   
  

 

 

   

 

 

 

Total current liabilities

     53,968        53,331   
  

 

 

   

 

 

 

Long-term liabilities:

    

Long-term debt, less current maturities

     207,153        233,092   

Capital leases and long-term financing obligations, less current maturities

     115,022        116,036   

Deferred revenue

     34,297        35,150   

Other

     16,817        17,050   
  

 

 

   

 

 

 

Total long-term liabilities

     373,289        401,328   
  

 

 

   

 

 

 

Commitments and contingencies (Note 7)

    

Stockholders’ (deficit) equity:

    

Preferred Stock, $1.00 par value per share: 1,000,000 shares authorized, no shares issued

     —          —     

Common Stock, $0.03 par value per share: 35,000,000 shares authorized, 13,419,872 shares issued and 12,966,942 shares outstanding at September 30, 2011, and 13,331,872 shares issued and 12,882,673 shares outstanding at December 31, 2010

     401        400   

Treasury stock, 452,930 and 449,199 shares at September 30, 2011 and December 31, 2010, respectively

     (11,683     (11,657

Paid-in capital

     290,575        288,986   

Accumulated deficit

     (287,055     (277,630
  

 

 

   

 

 

 

Total stockholders’ (deficit) equity

     (7,762     99   
  

 

 

   

 

 

 

Total liabilities and stockholders’ (deficit) equity

   $ 419,495      $ 454,758   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


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CARMIKE CINEMAS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2011     2010     2011     2010  
     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Revenues:

        

Admissions

   $ 86,441      $ 81,884      $ 232,653      $ 247,437   

Concessions and other

     47,543        41,567        129,450        125,338   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     133,984        123,451        362,103        372,775   

Operating costs and expenses:

        

Film exhibition costs

     47,182        45,240        126,140        138,881   

Concession costs

     5,716        4,704        14,958        13,721   

Other theatre operating costs

     54,491        54,907        153,484        160,906   

General and administrative expenses

     4,458        4,365        13,687        13,669   

Severance agreement charges (Note 12)

     —          —          845        —     

Depreciation and amortization

     8,260        7,947        23,948        23,857   

Loss (gain) on sale of property and equipment

     47        (658     108        (649

Write-off of note receivable

     —          —          750        —     

Impairment of long-lived assets

     18        220        1,342        3,832   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     120,172        116,725        335,262        354,217   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     13,812        6,726        26,841        18,558   

Interest expense

     8,050        8,786        25,833        27,451   

Loss on extinguishment of debt

     —          5        —          2,573   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax and income from unconsolidated affiliates

     5,762        (2,065     1,008        (11,466

Income tax expense (benefit) (Note 4)

     3,939        (2,441     11,255        (1,988

Income from unconsolidated affiliates (Note 11)

     1,291        —          987        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     3,114        376        (9,260     (9,478

(Loss) income from discontinued operations (Note 6)

     (24     154        (165     43   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 3,090      $ 530      $ (9,425   $ (9,435
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     12,823        12,779        12,801        12,740   

Diluted

     12,849        12,794        12,801        12,740   

Net income (loss) per common share (Basic and Diluted):

        

Income (loss) from continuing operations

   $ 0.24      $ 0.03      $ (0.72   $ (0.74

Income (loss) from discontinued operations, net of tax

     —          0.01        (0.01     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 0.24      $ 0.04      $ (0.73   $ (0.74
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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CARMIKE CINEMAS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Nine Months Ended
September 30,
 
     2011     2010  
     (Unaudited)     (Unaudited)  

Cash flows from operating activities:

    

Net loss

   $ (9,425   $ (9,435

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Depreciation and amortization

     24,043        24,133   

Amortization of debt issuance costs

     2,582        2,682   

Impairment on long-lived assets

     1,342        3,944   

Loss on extinguishment of debt

     —          2,573   

Stock-based compensation

     1,590        1,680   

Income from unconsolidated affiliates

     (987     —     

Other

     416        1,181   

Write-off of note receivable

     750        —     

Gain on sale of property and equipment

     (123     (933

Changes in operating assets and liabilities:

    

Accounts receivable and inventories

     302        88   

Screenvision receivable

     30,000        —     

Prepaid expenses and other assets

     869        2,258   

Accounts payable

     (4,692     (11,475

Accrued expenses and other liabilities

     2,512        (4,753

Distribution from unconsolidated affiliates

     344        —     
  

 

 

   

 

 

 

Net cash provided by operating activities

     49,523        11,943   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (12,306     (10,881

Release of restricted cash

     260        324   

Investment in unconsolidated affiliates

     (718     —     

Theatre acquisition

     (2,550     —     

Proceeds from sale of property and equipment

     444        3,879   
  

 

 

   

 

 

 

Net cash used in investing activities

     (14,870     (6,678
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Debt activities:

    

Short-term borrowings

     —          5,000   

Repayment of short-term borrowings

     —          (5,000

Issuance of long-term debt

     —          262,350   

Repayments of long-term debt

     (26,698     (277,722

Debt issuance costs

     (588     (9,154

Repayments of capital lease and long-term financing obligations

     (1,408     (1,213

Purchase of treasury stock

     (26     (712
  

 

 

   

 

 

 

Net cash used in financing activities

     (28,720     (26,451
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     5,933        (21,186

Cash and cash equivalents at beginning of period

     13,066        25,696   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 18,999      $ 4,510   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

    

Cash paid during the period for:

    

Interest

   $ 25,738      $ 27,567   

Income taxes

   $ 9,405      $ 3,680   

Non-cash investing and financing activities:

    

Non-cash purchase of property and equipment

   $ 3,165      $ 419   

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2011 and 2010

(unaudited)

(in thousands except share and per share data)

NOTE 1—BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Carmike Cinemas, Inc. (referred to as “we”, “us”, “our”, and the “Company”) has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). This information reflects all adjustments which in the opinion of management are necessary for a fair presentation of the statement of financial position as of September 30, 2011 and December 31, 2010, and the results of operations and cash flows for the three and nine month periods ended September 30, 2011 and 2010. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010. That report includes a summary of our critical accounting policies. There have been no material changes in our accounting policies during the first nine months of 2011.

The financial statements include the accounts of the Company’s wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

Accounting Estimates

In the preparation of financial statements in conformity with GAAP, management must make certain estimates, judgments and assumptions. These estimates, judgments and assumptions are made when accounting for items and matters such as, but not limited to, depreciation, amortization, asset valuations, impairment assessments, lease classification, employee benefits, income taxes, other provisions and contingencies. These estimates are based on the information available when recorded. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Changes in estimates are recognized in the period they are determined.

Discontinued Operations

The results of operations for theatres that have been disposed of or classified as held for sale are eliminated from the Company’s continuing operations and classified as discontinued operations for each period presented within the Company’s condensed consolidated statements of operations. Theatres are reported as discontinued operations when the Company no longer has continuing involvement in the theatre operations and the cash flows have been eliminated, which generally occurs when the Company no longer has operations in a given market. See Note 6 – Discontinued Operations.

Impairment of Long-Lived Assets

Long-lived assets are tested for recoverability whenever events or circumstances indicate that the assets’ carrying values may not be recoverable. The Company performs its impairment analysis at the individual theatre-level, the lowest level of independent, identifiable cash flow. Management reviews all available evidence when assessing long-lived assets for impairment, including negative trends in theatre-level cash flow, the impact of competition, the age of the theatre, and alternative uses of the assets. The Company’s evaluation of negative trends in theatre-level cash flow considers the seasonality of the business, with significant revenues and cash flow generated in the summer and year-end holiday season. Absent any unusual circumstances, management evaluates new theatres for potential impairment only after a theatre has been open and operational for a sufficient period of time to allow its operations to mature.

For those assets that are identified as potentially being impaired, if the undiscounted future cash flows from such assets are less than the carrying value, the Company recognizes a loss equal to the difference between the carrying value and the asset’s fair value. The fair value of the assets is primarily estimated using the discounted future cash flow of the assets with consideration of other valuation techniques and using assumptions consistent with those used by market participants. Significant judgment is involved in estimating cash flows and fair value; significant assumptions include attendance levels, admissions and concessions pricing, and the weighted average cost of capital. Management’s estimates are based on historical and projected operating performance.

 

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Fair Value Measurements

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term maturities of these assets and liabilities.

The fair value of the senior secured credit facilities described in Note 3 – Debt, which consist of a term loan and a revolving credit facility, is estimated based on quoted market prices at the date of measurement.

Reclassifications

The Company previously reported investments in unconsolidated affiliates in other assets on the 2010 consolidated balance sheet. The 2010 amounts have been reclassified from other assets to a separate line item on the consolidated balance sheets to conform to the 2011 presentation.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and IFRS.” The ASU expands the existing disclosure requirements for fair value measurements in Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” and makes other amendments to conform wording differences between U.S. GAAP and IFRS. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The amendments are not expected to have any impact on the Company’s financial position or results of operations.

NOTE 2—IMPAIRMENT OF LONG-LIVED ASSETS

For the three and nine months ended September 30, 2011, impairment charges aggregated to $18 and $1,342, respectively. The impairment charges were primarily the result of continued deterioration of previously impaired theatres and a decline in market value of a previously closed theatre. The Company recorded impairment charges during the three and nine months ended September 30, 2010 of $220 and $3,944, respectively, which were primarily the result of deterioration in the operating results of the impaired theatres.

The estimated aggregate fair value of the long-lived assets impaired during the three and nine months ended September 30, 2011 was approximately $356 and $4,866, respectively. These fair value estimates are considered Level 3 estimates and were derived primarily from discounting estimated future cash flows, contracts to sell certain owned properties and reference to appraised values.

NOTE 3—DEBT

Our debt consisted of the following on the dates indicated:

 

     September 30,     December 31,  
     2011     2010  

Term loan

   $ 210,765      $ 237,464   

Less discount on term loan

     (1,467     (1,973
  

 

 

   

 

 

 

Total debt

     209,298        235,491   

Current maturities

     (2,145     (2,399
  

 

 

   

 

 

 

Total long-term debt

   $ 207,153      $ 233,092   
  

 

 

   

 

 

 

On January 27, 2010, the Company entered into a new Credit Agreement (the “Credit Agreement”), by and among the Company, as borrower, and several banks and other financial institutions or entities from time to time parties to the Credit Agreement, as lenders, consisting of:

 

   

a $265,000 six year term loan facility that matures on January 27, 2016; and

 

   

a $30,000 three year revolving credit facility that matures on January 27, 2013.

The proceeds were used to repay the Company’s $170,000 seven year term loan that was due in May 2012 with a then outstanding balance of $139,600 and the $185,000 seven year delayed-draw term loan facility that was due in May 2012 with a then outstanding balance of $111,150. The $30,000 revolving credit facility replaced the Company’s prior $50,000 revolving credit facility that was scheduled to mature in May 2010.

 

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The $265,000 senior secured term loan facility has an interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 3.5%, or the base rate (subject to a floor of 3.0%) plus a margin of 2.5%, as the Company may elect. The Credit Agreement (as amended) provides that if the Company’s leverage ratio exceeds 4.50 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by 25 basis points (0.25%), and if the leverage ratio exceeds 5.00 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by an additional 25 basis points (0.25%).

The debt was issued with a discount of approximately $2,600, which is being amortized to interest expense using the effective interest method over the life of the debt. The Company is currently required to make principal repayments of the senior secured term loan in the amount of $536 on the last day of each calendar quarter, with a balance of $202,185 due at final maturity on January 27, 2016. During the nine months ended September 30, 2011, the Company voluntarily repaid $25,000 of principal on its term loan. For the nine months ended September 30, 2011 and 2010, the average interest rate on the Company’s debt was 5.50%.

The $30,000 revolving credit facility has an interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 4.0%, or base rate (subject to a 3.0% floor) plus a margin 3.0%, as the Company may elect. Thereafter, the applicable margins are subject to adjustment based on the Company’s ratio of total debt to EBITDA as reflected in the Company’s quarterly or annual financial statements, with the margins ranging from 3.50% to 4.00% on LIBOR based loans, and from 2.50% to 3.00% on base rate based loans. In addition, the Company is required to pay commitment fees on the unused portion of the revolving credit facility. The commitment fee rate is initially 0.75% per annum, and is also subject to adjustment thereafter based on the Company’s ratio of total debt to EBITDA, with the rates ranging from 0.50% to 0.75%. There was no outstanding balance on the revolving credit facilities at September 30, 2011 or 2010.

The Credit Agreement requires that mandatory prepayments be made from (1) 100% of the net cash proceeds from certain asset sales, dispositions or issuances of certain debt obligations, (2) 100% of the net cash proceeds from sales-leaseback transactions, and (3) various percentages (ranging from 0% to 75% depending on our consolidated leverage ratio) of excess annual cash flow as defined in the credit agreement. In addition, the first amendment to the Credit Agreement imposes a prepayment fee of 1% of the amount prepaid in connection with certain refinancings and repricings occurring prior to March 3, 2012.

The senior secured term loan and revolving credit facilities are guaranteed by each of the Company’s subsidiaries and secured by a perfected first priority security interest in substantially all of the Company’s present and future assets.

The fair value of the senior secured term loan is estimated based on quoted market prices as follows:

 

     As of September 30,      As of December 31,  
     2011      2010  

Carrying amount

   $ 209,298       $ 235,491   

Fair value

   $ 205,194       $ 239,244   

Interest Rate Cap Agreement

The Company is required as part of its senior secured term loan facility to enter into interest rate protection to the extent necessary to provide that at least 50% of the term loan is subject to either a fixed interest rate or interest rate protection for a period of not less than three years. On April 15, 2010, the Company entered into a three-year interest rate cap agreement which was not designated as a hedging instrument. This agreement caps the interest rate on $125,000 of aggregate principal amount of the Company’s outstanding term loan at 9.5%. As of September 30, 2011 and December 31, 2010, the fair value of the interest rate cap was immaterial.

Debt Covenants

The senior secured term loan and revolving credit facilities contain covenants which, among other things, restrict the Company’s ability, and that of its restricted subsidiaries, to:

 

   

pay dividends or make any other restricted payments to parties other than to the Company;

 

   

incur additional indebtedness and financing obligations;

 

   

create liens on their assets;

 

   

make certain investments;

 

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sell or otherwise dispose of their assets other than in the ordinary course of business;

 

   

consolidate, merge or otherwise transfer all or any substantial part of their assets;

 

   

enter into transactions with their affiliates; and

 

   

engage in businesses other than those in which the Company is currently engaged or those reasonably related thereto.

The Credit Agreement for the term loan and revolving credit facilities imposes an annual limit of $25,000 on capital expenditures, plus a carryforward of $5,000 of any unused capital expenditures from the prior year. In addition to the dollar limitation, the Company may not make any capital expenditure if any default or event of default under the credit agreement has occurred and is continuing, or if a breach of the financial covenants contained in the credit agreement would result on a pro forma basis after giving effect to the capital expenditure.

The Credit Agreement also contains financial covenants that require the Company to maintain a ratio of funded debt to adjusted EBITDA (“leverage ratio”) below a specified maximum ratio, a ratio of adjusted EBITDA to interest expense (“interest coverage ratio”) above a specified minimum ratio and a ratio of total adjusted debt (adjusted for certain leases and financing obligations) to adjusted EBITDA plus rental expense (“EBITDAR ratio”) below a specified maximum ratio. The financial covenants contain normal and customary periodic changes in the required ratios over the life of the senior secured term loan and revolving credit facilities.

Leverage Ratio- The maximum leverage ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 5.50 to 1.00 for any four quarter period ending March 31, 2011 through June 30, 2012; (b) 5.00 to 1.00 for any four quarter period ending September 30, 2012 through December 31, 2012; (c) 4.50 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 4.25 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 4.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

Interest Coverage Ratio- The minimum interest coverage ratio as of the last day of any four consecutive fiscal quarters may not be less than: (a) 1.50 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 1.60 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 1.75 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 1.85 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 2.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

EBITDAR Ratio- The maximum EBITDAR ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 8.00 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 7.50 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 7.00 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 6.75 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 6.50 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

As of September 30, 2011, the Company was in compliance with all of the financial covenants in the amended Credit Agreement for the term loan and revolving credit facilities. As of September 30, 2011, the Company’s leverage, interest coverage, and EBITDAR ratios were 3.18, 2.55, and 5.77, respectively.

The Company’s financial results depend to a substantial degree on the availability of suitable motion pictures for screening in its theatres and the appeal of such motion pictures to patrons in its specific theatre markets. The complete motion picture release schedule for 2012 and beyond is not yet known. Based on current projections and our current financial covenant ratios, the Company believes it will remain in compliance with its financial covenants for the foreseeable future. However, it is possible that the Company may not comply with some or all of its financial covenants in the future.

The Company could seek waivers or additional amendments to the Credit Agreement if a violation did occur. However, the Company can provide no assurance that it will successfully obtain such waivers or amendments from its lenders. If the Company is unable to comply with some or all of the financial or non-financial covenants and if it fails to obtain future waivers or amendments to the Credit Agreement, the lenders may terminate the revolving credit facility with respect to additional advances and may declare all or any portion of the obligations under the revolving credit facility and the term loan facility due and payable.

NOTE 4—INCOME TAXES

For the three and nine months ended September 30, 2011, the Company has utilized the discrete effective tax rate method, as allowed by ASC 740-270-30-18, “Income Taxes - Interim Reporting,” to calculate its interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year to date period as if it was the annual period and determines the income tax expense or benefit on that basis. The Company believes that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as (i) the estimated annual effective tax rate method is not reliable due to the high degree of uncertainty in estimating annual pretax earnings and (ii) the Company’s ongoing assessment that the recoverability of its deferred tax assets is not likely.

 

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As a result of the Company’s history of operating losses, the Company’s net deferred tax assets are fully offset by a valuation allowance at September 30, 2011 and December 31, 2010.

The Company recognizes a tax benefit associated with an uncertain tax position when, in the Company’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority.

As of September 30, 2011 and December 31, 2010, the amount of unrecognized tax benefits was $2,500, all of which would affect the Company’s annual effective tax rate, if recognized. This unrecognized tax benefit is associated with the Company’s non-forfeitable ownership interest in SV Holdco, LLC (see Note 9 - Screenvision Transaction). The Company has recognized a tax basis for these units that is lower than their carrying value for financial statement purposes. However, as this tax position may not be sustained upon examination, the Company has recorded a related liability for this uncertain tax position.

The effective tax rate from continuing operations for the three months ended September 30, 2011 was 55.8%. The effective tax rate from continuing operations for the nine months ended September 30, 2011 was 564.2%. The Company’s tax rates differ from the statutory tax rate primarily due to the current tax expense associated with the $30,000 cash payment received from Screenvision in January 2011 (see Note 9) and the Company’s ongoing assessment that the realization of its deferred tax assets is unlikely.

The Company regularly assesses whether it is more likely than not that its deferred tax asset balance will be recovered from future taxable income, taking into account such factors as its earnings history, carryback and carryforward periods, and tax planning strategies. When evidence exists that indicates that recovery is uncertain, a valuation allowance is maintained against the deferred tax asset. At this time, the Company does not believe that realization of its deferred tax assets is more likely than not to occur.

NOTE 5—EQUITY BASED COMPENSATION

In March 2004, the Board of Directors adopted the Carmike Cinemas, Inc. 2004 Incentive Stock Plan (the “2004 Incentive Stock Plan”). The Company’s Compensation and Nominating Committee (or similar committee) may grant stock options, stock grants, stock units, and stock appreciation rights under the 2004 Incentive Stock Plan to certain eligible employees and to outside directors. As of September 30, 2011, there were 1,410,275 shares available for future grants under the 2004 Incentive Stock Plan. The Company’s policy is to issue new shares upon exercise of options and the issuance of stock grants.

The Company also issues restricted stock awards to certain key employees and directors. Generally, the restricted stock vests over a one to three year period and compensation expense is recognized over the one to three year period equal to the grant date fair value of the shares awarded to the employee. As of September 30, 2011, the Company also has 93,583 shares of performance-based awards outstanding which are dependent on the achievement of EBITDA targets that vest over a three-year period. As of September 30, 2011, 33,000 shares of these performance-based stock awards have been earned due to the achievement of EBITDA targets. Performance-based stock awards are recognized in compensation expense over the vesting period based on the fair value on the date of grant and the number of shares ultimately expected to vest. The Company has determined the achievement of the performance target for the unearned awards is probable.

The Company’s total stock-based compensation expense was approximately $403 and $458 for the three months ended September 30, 2011 and 2010, respectively, and $1,590 and $1,680 for the nine months ended September 30, 2011 and 2010, respectively. Included in stock-based compensation expense for the three and nine months ended September 30, 2011, is $222 related to the accelerated vesting of stock-based awards to our former Senior Vice-President-General Counsel and Secretary (see Note 12). Stock-based compensation expense is included in general and administrative expenses in the consolidated statement of operations with the exception of the accelerated vested awards which are included in Severance Agreement Charges. As of September 30, 2011, the Company had approximately $2,411 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s plans. This cost is expected to be recognized as stock-based compensation expense over a weighted-average period of approximately 1.8 years. This expected cost does not include the impact of any future stock-based compensation awards.

Options – Service Condition Vesting

The Company currently uses the Black-Scholes option pricing model to determine the fair value of its stock options for which vesting is dependent only on employees providing future service.

The following table sets forth information about the weighted-average fair value of options granted and the weighted-average assumptions for such options granted during the first nine months of 2011 and 2010:

 

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     2011     2010  

Fair value of options on grant date

   $ 4.87      $ 6.84   

Expected life (years)

     6.0        6.0   

Risk-free interest rate

     2.3     2.6

Expected dividend yield

     —       —  

Expected volatility

     76.2     71.1

The Company’s stock-based compensation expense is recorded based on an estimated forfeiture rate of 5%.

The following table sets forth the summary of option activity for stock options with service vesting conditions as of September 30, 2011:

 

     Shares     Weighted
Average
Exercise
Price
     Weighted
Average
Remaining
Contractual
Life
     Aggregate
Intrinsic

Value
 

Outstanding at January 1, 2011

     704,500      $ 13.77         7.24      

Granted

     172,000        7.24         9.48         6   

Exercised

     —             

Forfeited

     (20,000     35.63         
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding at September 30, 2011

     856,500      $ 11.95         6.70       $ 30   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable on September 30, 2011

     482,333      $ 14.61         5.17       $ 24   
  

 

 

   

 

 

    

 

 

    

 

 

 

Expected to vest September 30, 2011

     355,459      $ 8.52         8.66       $ 6   
  

 

 

   

 

 

    

 

 

    

 

 

 

Restricted Stock

The following table sets forth the summary of activity for restricted stock grants, including performance based awards, for the nine months ended September 30, 2011:

 

     Shares     Weighted
Average
Grant

Date Fair
Value
 

Nonvested at January 1, 2011

     131,333      $ 10.58   

Granted

     158,975        7.24   

Vested

     (43,167     10.47   

Forfeited

     (5,000     7.34   
  

 

 

   

Nonvested at September 30, 2011

     242,141        8.47   
  

 

 

   

NOTE 6—DISCONTINUED OPERATIONS

Theatres are generally considered for closure due to an expiring lease, underperformance, or the opportunity to better deploy invested capital. During the three months ended September 30, 2011 and 2010, the Company closed one theatre in each period and for the nine months ended September 30, 2011 and 2010, the Company closed five and seven theatres, respectively. With respect to the closure during the three months ended September 30, 2011, the Company classified one theatre as discontinued operations. The Company did not classify any theatres as discontinued operations for the three months ended September 30, 2010. For the nine months ended September 30, 2011 and 2010, the Company classified five and one theatres, respectively, as discontinued operations. The Company reported the results of these operations, including gains and losses in disposal, as discontinued operations. The operations and cash flows of these theatres have been eliminated from the Company’s operations, and the Company will not have any continuing involvement in their operations.

 

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All activity during the three and nine months ended September 30, 2010 included in the accompanying consolidated statements of operations has been reclassified to separately reflect the results of operations from theatres closed in 2011 and considered discontinued operations through the respective date of the theatre closings. Assets and liabilities associated with the discontinued operations have not been segregated from assets and liabilities from continuing operations as they are not material.

The following table sets forth the summary of activity for discontinued operations for the three and nine months ended September 30, 2011 and 2010:

 

     Three Months
Ended September 30,
 
     2011     2010  

Revenue from discontinued operations

   $ 93      $ 1,343   
  

 

 

   

 

 

 

Operating (loss) income before income taxes

   $ (40   $ 81   

Income tax benefit from discontinued operations

     18        73   

Loss on disposal, before income taxes

     (3     —     

Income tax benefit on disposal

     1        —     
  

 

 

   

 

 

 

(Loss) income from discontinued operations

   $ (24   $ 154   
  

 

 

   

 

 

 

 

     Nine Months  Ended
September 30,
 
     2011     2010  

Revenue from discontinued operations

   $ 497      $ 3,757   
  

 

 

   

 

 

 

Operating loss before income taxes

   $ (494   $ (214

Income tax benefit for discontinued operations

     184        82   

Gain on disposal, before income taxes

     231        284   

Income tax expense on disposal

     (86     (109
  

 

 

   

 

 

 

(Loss) income from discontinued operations

   $ (165   $ 43   
  

 

 

   

 

 

 

NOTE 7—COMMITMENTS AND CONTINGENCIES

Contingencies

The Company, in the normal course of business, is involved in routine litigation and legal proceedings, such as personal injury claims, employment matters, contractual disputes and claims alleging Americans with Disabilities Act violations. Currently, there is no pending litigation or proceedings that the Company believes will have a material adverse effect, either individually or in the aggregate, on its business or its financial position, results of operations or cash flow.

NOTE 8—NET INCOME (LOSS) PER SHARE

Basic net income (loss) per common share has been computed using the weighted-average number of shares of common stock outstanding during the period. Diluted income (loss) per share is computed using the weighted average number of common shares and common stock equivalents outstanding. For the three months ended September 30, 2011 and 2010, common stock equivalents totaling 1,253,201 and 870,413 were excluded from the calculation of diluted earnings per share because of a decline in the average market price of the common stock below the exercise price. As a result of the Company’s net losses, all common stock equivalents aggregating 1,049,092 and 1,058,792 for the nine months ended September 30, 2011 and 2010, respectively, were excluded from the calculation of diluted loss per share given their anti-dilutive effect.

NOTE 9—SCREENVISION TRANSACTION

On October 14, 2010, the Company finalized the modification of its long-term exhibition agreement (the “Modified Exhibition Agreement”) with Technicolor Cinema Advertising, LLC (“Screenvision”), the Company’s exclusive provider of on-screen advertising services. The Modified Exhibition Agreement extends the Company’s exhibition agreement with Screenvision, which was set to expire on July 1, 2012, for an additional 30 year term through July 1, 2042 (“Expiration Date”).

In connection with the Modified Exhibition Agreement, the Company received a cash payment of $30,000 from Screenvision in January 2011 and, on October 14, 2010, the Company received membership units representing approximately 20% of the issued and outstanding membership units of SV Holdco, LLC (“SV Holdco”), a holding company of the Screenvision business. The units are structured as a “profits interest” and entitle the Company to receive certain pro rata distributions (such as dividends or distributions

 

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upon a liquidation of SV Holdco). The Company will also receive additional units (“bonus units”), all of which will be subject to forfeiture, or may forfeit some of its initial units, based upon changes in the Company’s future theatre and screen count. Bonus units and those initial units subject to forfeiture will each become non-forfeitable on the Expiration Date, or upon the earlier occurrence of certain events, including (1) a change of control or liquidation of SV Holdco or (2) the consummation of an initial public offering of securities of SV Holdco. As a result, bonus units and forfeitable units will not be reflected in the Company’s consolidated financial statements until such units become non-forfeitable. The non-forfeitable ownership interest in SV Holdco was recorded at an estimated fair value of $6,555 using the Black Scholes Model. The Company has applied the equity method of accounting for the non-forfeitable units and began recording the related percentage of the earnings or losses of SV Holdco in its consolidated statement of operations since October 14, 2010.

In September 2011, the Company made a capital contribution of $718 to SV Holdco. The capital contribution was made to retain the Company’s current ownership interest following an acquisition by Screenvision and additional capital contributions by other owners of SV Holdco. As of September 30, 2011, the carrying value of the Company’s ownership interest in Screenvision is $7,205 and is included in Investments in Unconsolidated Affiliates in the consolidated balance sheets.

Both the cash and non-forfeitable unit consideration ($36,555 in the aggregate) has been deferred and will be recognized as concessions and other revenue on a straight line basis over the remaining term of the Modified Exhibition Agreement. Included in concession and other revenues in the consolidated statements of operations are amounts related to Screenvision of approximately $2,800 and $7,100 for the three and nine months ended September 30, 2011, respectively. Included in accounts receivable in the consolidated balance sheets are amounts due from Screenvision of $636 and $1,901 at September 30, 2011 and December 31, 2010, respectively.

NOTE 10—RELATED PARTY TRANSACTION

In August 2010, the Company entered into a management agreement with Bigfoot Ventures, Ltd. (“Bigfoot”), the holder of approximately 14% of the Company’s common stock, pursuant to which the Company provides management services for a theatre owned by Bigfoot in Westwood, California. The agreement had an initial term of one year, and may be extended upon the written consent of both parties. Bigfoot paid the Company an initial fee of $25 and is required to pay an amount equal to the greater of $5 per month or 8% of the theatre’s gross revenues, during the initial term. Revenue recognized during the three and nine months ended September 30, 2011 related to this agreement is not significant to the condensed consolidated statements of operations. On October 4, 2011, the Company terminated its management agreement with Bigfoot Theatres.

NOTE 11—INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Our investments in affiliated companies accounted for by the equity method consist of our ownership interest in Screenvision as discussed in Note 9 – Screenvision Transaction and interests in other joint ventures.

Combined financial information of the unconsolidated affiliated companies accounted for by the equity method is as follows:

 

     As of September 30,  
     2011  

Assets:

  

Current assets

   $ 69,953   

Noncurrent assets

     168,067   
  

 

 

 

Total assets

   $ 238,020   
  

 

 

 

Liabilties:

  

Current liabilities

   $ 66,415   

Noncurrent liabilities

     83,696   
  

 

 

 

Total liabilities

   $ 150,111   
  

 

 

 

 

     Three Months Ended
September 30, 2011
     Nine Months Ended
September 30, 2011
 

Results of operations:

     

Revenue

   $ 55,828       $ 124,770   

Net income (loss)

   $ 5,217       $ (2,519

Our investments in unconsolidated affiliated companies were not material during the three and nine months ended September 30, 2010.

 

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NOTE 12—SEVERANCE AGREEMENT CHARGE

On July 15, 2011 (the “Retirement Date”), the Company’s Senior Vice President-General Counsel and Secretary, F. Lee Champion, ceased employment with the Company. In June 2011, the Company and Mr. Champion entered into a retirement agreement and general release (the “Retirement Agreement”) setting forth the terms of his departure from the Company. Pursuant to the Retirement Agreement, the Company will make a lump sum payment to Mr. Champion of $143 in January 2012 and monthly payments of $24 for each of the 18 consecutive calendar months beginning in February 2012. All stock options granted by the Company to Mr. Champion became fully vested and exercisable on the Retirement Date and remained exercisable for 90 days, or if less, for the remaining term of each such option. Any restrictions on any outstanding shares of restricted stock held by Mr. Champion expired on the Retirement Date and Mr. Champion’s right to such stock became nonforfeitable. Any performance shares awarded to Mr. Champion as part of the Company’s 2011 long-term incentive program did not vest and were forfeited on the Retirement Date. The consideration payable to Mr. Champion under the Retirement Agreement was based on the terms of his existing employment agreement. The Company recorded a charge of $845 for the nine months ended September 30, 2011 for the estimated future costs associated with the Retirement Agreement.

NOTE 13—SUBSEQUENT EVENT

On October 21, 2011, the Company completed its purchase of certain assets of MNM Theatres for $9,250, plus additional consideration that is contingent upon MNM’s earnings performance over the next three years. The purchase is consistent with the Company’s focus of taking advantage of opportunistic acquisitions. MNM Theatres operated three theatres with forty screens in the Atlanta, Georgia area.

NOTE 14—GUARANTOR SUBSIDIARIES

The Company filed a registration statement which became effective in 2010. The registration statement registers certain securities, including debt securities which may be guaranteed by certain of Carmike Cinemas, Inc.’s subsidiaries and may be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended.

Carmike Cinemas, Inc. may sell debt securities and if so, it is expected that such securities would be fully and unconditionally guaranteed, on a joint and several basis, by the following 100% directly or indirectly owned subsidiaries: Eastwynn Theatres, Inc., George G. Kerasotes Corporation, GKC Indiana Theatres, Inc., GKC Michigan Theatres, Inc., GKC Theatres, Inc., and Military Services, Inc. Therefore, the Company is providing the following condensed consolidating financial statement information as of September 30, 2011 and December 31, 2010 and for the three and nine months ended September 30, 2011 and September 30, 2010 in accordance with SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered:

 

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CONDENSED CONSOLIDATING BALANCE SHEET

 

     As of September 30, 2011  
     Carmike
Cinemas, Inc
    Guarantor
Subsidiaries
    Eliminations     Consolidated  

Assets:

        

Current assets:

        

Cash and cash equivalents

   $ 12,413      $ 6,586      $ —        $ 18,999   

Restricted cash

     75        —          —          75   

Accounts receivable

     3,255        83        —          3,338   

Inventories

     569        2,160        —          2,729   

Prepaid expenses and other assets

     3,401        4,245        —          7,646   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     19,713        13,074        —          32,787   
  

 

 

   

 

 

   

 

 

   

 

 

 

Property and equipment:

        

Land

     13,438        41,193        —          54,631   

Buildings and building improvements

     47,970        228,399        —          276,369   

Leasehold improvements

     16,756        103,856        —          120,612   

Assets under capital leases

     8,675        39,530        —          48,205   

Equipment

     59,597        156,001        —          215,598   

Construction in progress

     2,113        2,796        —          4,909   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total property and equipment

     148,549        571,775        —          720,324   

Accumulated depreciation and amortization

     (76,232     (284,688     —          (360,920
  

 

 

   

 

 

   

 

 

   

 

 

 

Property and equipment, net of accumulated depreciation

     72,317        287,087        —          359,404   

Intercompany receivables

     114,014        —          (114,014     —     

Investment in subsidiaries

     84,066        —          (84,066     —     

Intangible assets, net of accumulated amortization

     —          564        —          564   

Investment in unconsolidated affiliates

     8,194        —          —          8,194   

Other

     11,146        7,400        —          18,546   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 309,450      $ 308,125      $ (198,080   $ 419,495   
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity:

        

Current liabilities:

        

Accounts payable

   $ 17,524      $ 788      $ —        $ 18,312   

Income taxes payable

     2,812        —          —          2,812   

Accrued expenses

     18,654        10,183        —          28,837   

Current maturities of long-term debt, capital leases and long-term financing obligations

     2,466        1,541        —          4,007   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     41,456        12,512        —          53,968   
  

 

 

   

 

 

   

 

 

   

 

 

 

Long-term liabilities:

        

Long-term debt, less current maturities

     207,153        —          —          207,153   

Capital leases and long-term financing obligations, less current maturities

     28,298        86,724        —          115,022   

Intercompany liabilities

     —          114,014        (114,014     —     

Deferred revenue

     34,297        —          —          34,297   

Other

     6,008        10,809        —          16,817   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total long-term liabilities

     275,756        211,547        (114,014     373,289   
  

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders’ (deficit) equity:

        

Preferred Stock

     —          —          —          —     

Common Stock

     401        1        (1     401   

Treasury stock

     (11,683     —          —          (11,683

Paid-in capital

     290,575        237,800        (237,800     290,575   

Accumulated deficit

     (287,055     (153,735     153,735        (287,055
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ (deficit) equity

     (7,762     84,066        (84,066     (7,762
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ (deficit) equity

   $ 309,450      $ 308,125      $ (198,080   $ 419,495   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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CONDENSED CONSOLIDATING BALANCE SHEET

 

     As of December 31, 2010  
     Carmike
Cinemas, Inc
    Guarantor
Subsidiaries
    Eliminations     Consolidated  

Assets:

        

Current assets:

        

Cash and cash equivalents

   $ 3,418      $ 9,648      $ —        $ 13,066   

Restricted cash

     335        —          —          335   

Accounts receivable

     4,255        185        —          4,440   

Screenvision receivable

     30,000        —          —          30,000   

Inventories

     526        2,215        —          2,741   

Prepaid expenses and other assets

     2,402        4,294        —          6,696   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     40,936        16,342        —          57,278   
  

 

 

   

 

 

   

 

 

   

 

 

 

Property and equipment:

        

Land

     13,716        40,887        —          54,603   

Buildings and building improvements

     48,437        224,519        —          272,956   

Leasehold improvements

     16,523        103,797        —          120,320   

Assets under capital leases

     8,675        42,249        —          50,924   

Equipment

     56,788        153,541        —          210,329   

Construction in progress

     724        1,700        —          2,424   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total property and equipment

     144,863        566,693        —          711,556   

Accumulated depreciation and amortization

     (72,446     (270,926     —          (343,372
  

 

 

   

 

 

   

 

 

   

 

 

 

Property and equipment, net of accumulated depreciation

     72,417        295,767        —          368,184   

Intercompany receivables

     133,202        —          (133,202     —     

Investment in subsidiaries

     79,444        —          (79,444     —     

Intangible assets, net of accumulated amortization

     —          612        —          612   

Investments in unconsolidated affiliates

     8,093            8,093   

Other

     12,792        7,799        —          20,591   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 346,884      $ 320,520      $ (212,646   $ 454,758   
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity:

        

Current liabilities:

        

Accounts payable

   $ 20,492      $ 1,168      $ —        $ 21,660   

Accrued expenses

     21,561        5,870        —          27,431   

Current maturities of long-term debt, capital leases and long-term financing obligations

     2,652        1,588        —          4,240   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     44,705        8,626        —          53,331   
  

 

 

   

 

 

   

 

 

   

 

 

 

Long-term liabilities:

        

Long-term debt, less current maturities

     233,092        —          —          233,092   

Capital leases and long-term financing obligations, less current maturities

     28,477        87,559        —          116,036   

Intercompany liabilities

     —          133,202        (133,202     —     

Deferred revenue

     35,150        —          —          35,150   

Other

     5,361        11,689        —          17,050   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total long-term liabilities

     302,080        232,450        (133,202     401,328   
  

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders’ equity:

        

Preferred Stock

     —          —          —          —     

Common Stock

     400        1        (1     400   

Treasury stock

     (11,657     —          —          (11,657

Paid-in capital

     288,986        237,800        (237,800     288,986   

Accumulated deficit

     (277,630     (158,357     158,357        (277,630
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     99        79,444        (79,444     99   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 346,884      $ 320,520      $ (212,646   $ 454,758   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

16


Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

 

     Three Months Ended September 30, 2011  
     Carmike
Cinemas, Inc
    Guarantor
Subsidiaries
    Eliminations     Consolidated  

Revenues:

        

Admissions

   $ 14,241      $ 72,200      $ —        $ 86,441   

Concessions and other

     14,373        39,614        (6,444     47,543   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     28,614        111,814        (6,444     133,984   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

        

Film exhibition costs

     7,870        39,312        —          47,182   

Concession costs

     997        4,719        —          5,716   

Other theatre operating costs

     11,090        49,845        (6,444     54,491   

General and administrative expenses

     3,922        536        —          4,458   

Depreciation and amortization

     1,691        6,569        —          8,260   

Loss (gain) on sale of property and equipment

     51        (4     —          47   

Impairment of long-lived assets

     —          18        —          18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     25,621        100,995        (6,444     120,172   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     2,993        10,819        —          13,812   

Interest expense

     2,267        5,783        —          8,050   

Equity in earnings of subsidiaries

     (5,114     —          5,114        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax, income from unconsolidated subsidiaries and discontinued operations

     5,840        5,036        (5,114     5,762   

Income tax expense

     3,939        —          —          3,939   

Income from unconsolidated affiliates

     1,189        102        —          1,291   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     3,090        5,138        (5,114     3,114   

Loss from discontinued operations

     —          (24     —          (24
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 3,090      $ 5,114      $ (5,114   $ 3,090   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

17


Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

 

     Three Months Ended September 30, 2010  
     Carmike
Cinemas, Inc
    Guarantor
Subsidiaries
    Eliminations     Consolidated  

Revenues:

        

Admissions

   $ 13,775      $ 68,109      $ —        $ 81,884   

Concessions and other

     13,280        34,301        (6,014     41,567   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     27,055        102,410        (6,014     123,451   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

        

Film exhibition costs

     7,647        37,593        —          45,240   

Concession costs

     845        3,859        —          4,704   

Other theatre operating costs

     10,733        50,188        (6,014     54,907   

General and administrative expenses

     3,758        607        —          4,365   

Depreciation and amortization

     1,704        6,243        —          7,947   

Loss (gain) on sale of property and equipment

     52        (710     —          (658

Impairment of long-lived assets

     —          220        —          220   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     24,739        98,000        (6,014     116,725   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     2,316        4,410        —          6,726   

Interest expense

     2,538        6,248        —          8,786   

Equity in earnings of subsidiaries

     (975     —          975        —     

Loss on extinguishment of debt

     5        —          —          5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax and discontinued operations

     748        (1,838     (975     (2,065

Income tax expense (benefit)

     228        (2,669     —          (2,441
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     520        831        (975     376   

Income from discontinued operations

     10        144        —          154   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 530      $ 975      $ (975   $ 530   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

18


Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

 

     Nine Months Ended September 30, 2011  
     Carmike
Cinemas, Inc
    Guarantor
Subsidiaries
    Eliminations     Consolidated  

Revenues:

        

Admissions

   $ 39,593      $ 193,060      $ —        $ 232,653   

Concessions and other

     40,859        106,301        (17,710     129,450   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     80,452        299,361        (17,710     362,103   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

        

Film exhibition costs

     21,652        104,488        —          126,140   

Concession costs

     2,736        12,222        —          14,958   

Other theatre operating costs

     31,656        139,538        (17,710     153,484   

General and administrative expenses

     12,091        1,596        —          13,687   

Separation agreement charges

     845        —          —          845   

Depreciation and amortization

     4,990        18,958        —          23,948   

Loss (gain) on sale of property and equipment

     119        (11     —          108   

Write-off of note receivable

     750        —          —          750   

Impairment of long-lived assets

     907        435        —          1,342   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     75,746        277,226        (17,710     335,262   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     4,706        22,135        —          26,841   

Interest expense

     8,242        17,591        —          25,833   

Equity in earnings of subsidiaries

     (4,622     —          4,622        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax, income from unconsolidated subsidiaries and discontinued operations

     1,086        4,544        (4,622     1,008   

Income tax expense

     11,255        —          —          11,255   

Income from unconsolidated affiliates

     744        243        —          987   
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations

     (9,425     4,787        (4,622     (9,260

Loss from discontinued operations

     —          (165     —          (165
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (9,425   $ 4,622      $ (4,622   $ (9,425
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

 

     Nine Months Ended September 30, 2010  
     Carmike
Cinemas, Inc
    Guarantor
Subsidiaries
    Eliminations     Consolidated  

Revenues:

        

Admissions

   $ 43,124      $ 204,313      $ —        $ 247,437   

Concessions and other

     40,922        102,459        (18,043     125,338   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     84,046        306,772        (18,043     372,775   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

        

Film exhibition costs

     24,495        114,386        —          138,881   

Concession costs

     2,531        11,190        —          13,721   

Other theatre operating costs

     31,868        147,081        (18,043     160,906   

General and administrative expenses

     11,784        1,885        —          13,669   

Depreciation and amortization

     4,953        18,904        —          23,857   

Loss (gain) on sale of property and equipment

     68        (717     —          (649

Impairment of long-lived assets

     171        3,661        —          3,832   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     75,870        296,390        (18,043     354,217   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     8,176        10,382        —          18,558   

Interest expense

     8,078        19,373        —          27,451   

Equity in loss of subsidiaries

     6,598        —          (6,598     —     

Loss on extinguishment of debt

     2,573        —          —          2,573   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax and discontinued operations

     (9,073     (8,991     6,598        (11,466

Income tax expense (benefit)

     354        (2,342     —          (1,988
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations

     (9,427     (6,649     6,598        (9,478

Loss (income) from discontinued operations

     (8     51        —          43   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (9,435   $ (6,598   $ 6,598      $ (9,435
  

 

 

   

 

 

   

 

 

   

 

 

 

 

20


Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

 

     For the Nine Months Ended September 30, 2011  
     Carmike
Cinemas, Inc.
    Guarantor
Subsidiaries
    Eliminations      Consolidated  

Net cash provided by operating activities:

   $ 21,830      $ 27,693      $ —         $ 49,523   

Cash flows from investing activities:

         

Purchases of property and equipment

     (1,527     (10,779        (12,306

Purchase acquistion

     (2,550     —          —           (2,550

Investment in unconsolidated affiliates

     (718     —          —           (718

Proceeds from sale of property and equipment

     6        438           444   

Other investing activities

     260        —             260   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net cash used in investing activities

     (4,529     (10,341        (14,870

Cash flows from financing activities:

         

Repayments of long-term debt

     (26,698     —             (26,698

Intercompany receivable/payable

     19,188        (19,188        —     

Repayments of capital lease and long-term financing obligations

     (182     (1,226        (1,408

Other financing activities

     (614     —             (614
  

 

 

   

 

 

   

 

 

    

 

 

 

Net cash used in financing activities

     (8,306     (20,414     —           (28,720
  

 

 

   

 

 

   

 

 

    

 

 

 

Increase / (decrease) in cash and cash equivalents

     8,995        (3,062     —           5,933   

Cash and cash equivalents at beginning of period

     3,418        9,648           13,066   
  

 

 

   

 

 

   

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $ 12,413      $ 6,586      $ —         $ 18,999   
  

 

 

   

 

 

   

 

 

    

 

 

 

 

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Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

 

     For the Nine Months Ended September 30, 2010  
     Carmike
Cinemas, Inc.
    Guarantor
Subsidiaries
    Eliminations      Consolidated  

Net cash provided by operating activities

   $ 3,296      $ 8,647      $ —         $ 11,943   

Cash flows from investing activities:

         

Purchases of property and equipment

     (1,901     (8,980        (10,881

Proceeds from sale of property and equipment

     4        3,875           3,879   

Other investing activities

     324        —             324   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net cash used in investing activities

     (1,573     (5,105        (6,678

Cash flows from financing activities:

         

Short-term borrowings

     5,000             5,000   

Repayment of short-term borrowings

     (5,000          (5,000

Issuance of long-term debt

     262,350        —             262,350   

Repayments of long-term debt

     (277,722     —             (277,722

Repayments of capital lease and long-term financing obligations

     (123     (1,090        (1,213

Intercompany receivable/payable

     7,406        (7,406        —     

Other financing activities

     (9,866     0           (9,866
  

 

 

   

 

 

   

 

 

    

 

 

 

Net cash used in financing activities

     (17,955     (8,496     —           (26,451
  

 

 

   

 

 

   

 

 

    

 

 

 

Increase / (decrease) in cash and cash equivalents

     (16,232     (4,954     —           (21,186

Cash and cash equivalents at beginning of period

     16,232        9,464           25,696   
  

 

 

   

 

 

   

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $ —        $ 4,510      $ —         $ 4,510   
  

 

 

   

 

 

   

 

 

    

 

 

 

 

22


Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company

We are one of the largest motion picture exhibitors in the United States and as of September 30, 2011 we owned, operated or had an interest in 235 theatres with 2,215 screens located in 36 states. We target small to mid-size non-urban markets with the belief that they provide a number of operating benefits, including lower operating costs and fewer alternative forms of entertainment.

As of September 30, 2011, we had 218 theatres with 2,089 screens on a digital-based platform, including 208 theatres with 726 screens equipped for 3-D. We believe our leading-edge technologies allow us not only greater flexibility in showing feature films, but also provide us with the capability to explore revenue-enhancing alternative content programming. Digital film content can be easily moved to and from auditoriums in our theatres to maximize attendance. The superior quality of digital cinema and our 3-D capability allows us to provide a quality presentation to our patrons.

We generate revenue primarily from box office receipts and concession sales along with additional revenues from screen advertising sales, our two Hollywood Connection fun centers, video games located in some of our theatres, and theatre rentals. Our revenue depends to a substantial degree on the availability of suitable motion pictures for screening in our theatres and the appeal of such motion pictures to patrons in our specific theatre markets. A disruption in the production of motion pictures, a lack of motion pictures, or the failure of motion pictures to attract the patrons in our theatre markets will likely adversely affect our business and results of operations.

Our revenue also varies significantly depending upon the timing of the film releases by distributors. While motion picture distributors now release major motion pictures more evenly throughout the year, the most marketable films are usually released during the summer months and the year-end holiday season, and we usually earn more during those periods than in other periods during the year. As a result, the timing of such releases affects our results of operations, which may vary significantly from quarter to quarter and year to year.

We generate the majority of our box office revenue from a particular film within the first 30 days of its release date to theater exhibitors. Historically, films have not been released in other formats, such as DVD or video-on-demand, until approximately 120 days after the film’s initial release. However, over the past several years, the release window for films in other formats has shortened. It is possible that these release windows will continue to shorten, which could impact our ability to attract patrons to our theatres.

Film rental costs are variable in nature and fluctuate with the prospects of a film and the box office revenues of a film. Film rental rates are generally negotiated on a film-by-film and theatre-by-theatre basis and are typically higher for blockbuster films. Advertising costs, which are expensed as incurred, primarily represent advertisements and movie listings placed in newspapers. The cost of these advertisements is based on, among other things, the size of the advertisement and the circulation of the newspaper.

Concessions costs fluctuate with our concession revenues. We purchase substantially all of our non-beverage concession supplies from one supplier and substantially all of our beverage supplies from one supplier.

Other theatre costs consist primarily of theatre labor and occupancy costs. Theatre labor includes a fixed cost component that represents the minimum staffing needed to operate a theatre and a variable component that fluctuates in relation to revenues as theatre staffing is adjusted to address changes in attendance. Facility lease expense is primarily a fixed cost as most of our leases require a fixed monthly rent payment. Certain of our leases are subject to percentage rent clauses that require payments of amounts based on the level of revenue achieved at the theatre-level. Other occupancy costs are substantially fixed.

The ultimate performance of our film product any time during the calendar year will have a dramatic impact on our operating results and cash needs. In addition, the seasonal nature of the exhibition industry and positioning of film product makes our need for cash vary significantly from quarter to quarter. Generally, our liquidity needs are funded by operating cash flow, available funds under our credit agreement and short term float. Our ability to generate this cash will depend largely on future operations.

We continue to focus on operating performance improvements. This includes managing our operating costs, implementing pricing initiatives and closing underperforming theatres. We also intend to allocate our available capital primarily to improving the

 

23


Table of Contents

condition of our theatres, reducing our overall leverage and for potential acquisitions. To this end, during the nine months ended September 30, 2011, we made voluntary pre-payments of $25 million to reduce long-term debt.

We actively seek ways to grow our circuit through the building of new theatres and acquisitions. In October 2011, we finalized our acquisition of MNM Theatres, a three theatre, forty screen circuit in the Atlanta, Georgia area (as described in Note 13—Subsequent Events). In addition, we continue to pursue opportunities for organic growth through new theatre development. We anticipate opening one new build-to-suit theatre during the fourth quarter of 2011 and plan to open additional theatres in 2012.

For a summary of risks and uncertainties relevant to our business, please see “Item 1A. Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2010.

Results of Operations

Comparison of Three and Nine Months Ended September 30, 2011 and September 30, 2010

Revenues. We collect substantially all of our revenues from the sale of admission tickets and concessions. The table below provides a comparative summary of the operating data for this revenue generation.

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2011      2010      2011      2010  

Average theatres

     235         240         236         242   

Average screens

     2,217         2,244         2,221         2,266   

Average attendance per screen (1)

     6,013         5,576         16,106         16,252   

Average admission per patron (1)

   $ 6.49       $ 6.61       $ 6.51       $ 6.78   

Average concessions and other sales per patron (1)

   $ 3.57       $ 3.36       $ 3.63       $ 3.44   

Total attendance (in thousands) (1)

     13,332         12,511         35,776         36,831   

Total operating revenues (in thousands)

   $ 133,984       $ 123,451       $ 362,103       $ 372,775   

 

  (1) Includes activity from theatres designated as discontinued operations and reported as such in the consolidated statements of operations.

Total revenue increased approximately 8.5% to $134.0 million for the three months ended September 30, 2011 compared to $123.5 million for the three months ended September 30, 2010, due to an increase in total attendance from 12.5 million in the third quarter of 2010 to 13.3 million for the third quarter of 2011 and an increase in average concessions and other sales per patron from $3.36 in the third quarter of 2010 to $3.57 for the third quarter of 2011, partially offset by a decrease in average admissions per patron from $6.61 in the third quarter of 2010 to $6.49 for the third quarter of 2011. Attendance was up period over period due principally to a more favorable movie slate. Average admissions per patron decreased primarily due to increased discounts and promotional activities. Average concessions and other sales per patron increased, primarily due to concession promotions.

Total revenue decreased approximately 2.9% to $362.1 million for the nine months ended September 30, 2011 compared to $372.8 million for the nine months ended September 30, 2010, due to a decrease in total attendance from 36.8 million for the 2010 period to 35.8 million for the 2011 period and a decrease in average admissions per patron from $6.78 for the 2010 period to $6.51 for the 2011 period, partially offset by an increase in average concessions and other sales per patron from $3.44 in the 2010 period to $3.63 in the 2011 period.

Admissions revenue increased approximately 5.6% to $86.4 million for the three months ended September 30, 2011 from $81.9 million for the same period in 2010, due to an increase in total attendance from 12.5 million in the third quarter of 2010 to 13.3 million for the third quarter of 2011, partially offset by a decrease in average admissions per patron from $6.61 in the third quarter of 2010 to $6.49 for the third quarter of 2011.

Admissions revenue decreased approximately 6.0% to $232.7 million for the nine months ended September 30, 2011 from $247.4 million for the same period in 2010, due to a decrease in total attendance from 36.8 million for the nine months ended September 30, 2010 to 35.8 million for the nine months ended September 30, 2011, and a decrease in average admissions per patron from $6.78 in the 2010 period to $6.51 for the 2011 period.

Concessions and other revenue increased approximately 14.4% to $47.5 million for the three months ended September 30, 2011 compared to $41.6 million for the same period in 2010, due to an increase in total attendance from 12.5 million in the third quarter of 2010 to 13.3 million for the third quarter of 2011 and an increase in average concessions and other sales per patron from $3.36 in the third quarter of 2010 to $3.57 for the third quarter of 2011.

 

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Concessions and other revenue increased approximately 3.3% to $129.5 million for the nine months ended September 30, 2011 compared to $125.3 million for the same period in 2010, due to an increase in average concessions and other sales per patron from $3.44 in the 2010 period to $3.63 for the 2011 period, partially offset by a decrease in total attendance from 36.8 million for the nine months ended September 30, 2010 to 35.8 million for the nine months ended September 30, 2011.

We operated 235 theatres with 2,215 screens at September 30, 2011 compared to 240 theatres with 2,241 screens at September 30, 2010.

Operating costs and expenses. The table below summarizes operating expense data for the periods presented.

 

     Three Months Ended
September 30,
          Nine Months Ended
September 30,
       
($’s in thousands)    2011      2010     % Change     2011      2010     % Change  

Film exhibition costs

   $ 47,182       $ 45,240        4      $ 126,140       $ 138,881        (9

Concession costs

   $ 5,716       $ 4,704        22      $ 14,958       $ 13,721        9   

Other theatre operating costs

   $ 54,491       $ 54,907        (1   $ 153,484       $ 160,906        (5

General and administrative expenses

   $ 4,458       $ 4,365        2      $ 13,687       $ 13,669        n/m   

Severance agreement charges

   $ —         $ —          —        $ 845       $ —         
n/m
  

Depreciation and amortization

   $ 8,260       $ 7,947        4      $ 23,948       $ 23,857       
n/m
  

Loss (gain) on sale of property and equipment

   $ 47       $ (658     n/m      $ 108       $ (649     n/m   

Write-off of note receivable

   $ —         $ —          —        $ 750       $ —          n/m   

Impairment of long-lived assets

   $ 18       $ 220        n/m      $ 1,342       $ 3,832        (65

Film exhibition costs. Film exhibition costs fluctuate in direct relation to the increases and decreases in admissions revenue and the mix of aggregate and term film deals. Film exhibition costs as a percentage of revenues are generally higher for periods with more blockbuster films. Film exhibition costs for the three months ended September 30, 2011 increased to $47.2 million as compared to $45.2 million for the three months ended September 30, 2010 primarily resulting from increased attendance partially offset by a reduction in advertising expenses. As a percentage of admissions revenue, film exhibition costs for the three months ended September 30, 2011 decreased to 54.6% as compared to 55.2% for the three months ended September 30, 2010 primarily as a result of lower film rent on 3-D and top-tier films and a reduction in advertising expenses. Film exhibition costs for the nine months ended September 30, 2011 decreased to $126.1 million as compared to $138.9 million for the nine months ended September 30, 2010 primarily due to lower attendance. As a percentage of admissions revenue, film exhibition costs for the nine months ended September 30, 2011 were 54.2% as compared to 56.1% for the nine months ended September 30, 2010, primarily as a result of lower film rent on 3-D and top-tier films in 2011 and a reduction in advertising expense in the first nine months of 2011.

Concession costs. Concession costs fluctuate with changes in concessions revenue and product sales mix and changes in our cost of goods sold. Concession costs increased to approximately $5.7 million for the three months ended September 30, 2011 from $4.7 million for the three months ended September 30, 2010 due primarily to increased attendance and higher average concessions and other revenues per patron. As a percentage of concessions and other revenues, concession costs for the three months ended September 30, 2011 were 12.0% as compared to 11.3% for the three months ended September 30, 2010. Concession costs increased to approximately $15.0 million for the nine months ended September 30, 2011, compared to $13.7 million for the nine months ended September 30, 2010 due to higher average concessions and other revenues per patron. As a percentage of concessions and other revenues, concession costs were 11.6% for the nine months ended September 30, 2011 and 10.9% for the nine months ended September 30, 2010. The increase in concession costs as a percentage of concessions and other revenues for the three and nine months ended September 30, 2011 compared to the three and nine months ended September 30, 2010 is primarily due to an increase in the cost of concession supplies, discounts and other promotional activities and lower concession rebates.

Other theatre operating costs. Other theatre operating costs for the three months ended September 30, 2011 decreased to $54.5 million as compared to $54.9 million for the three months ended September 30, 2010. The decrease in our other theatre operating costs was primarily the result of decreases in repairs and maintenance costs and insurance costs. Other theatre operating costs for the nine months ended September 30, 2011 decreased to $153.5 million as compared to $160.9 million for the nine months ended September 30, 2010. The decrease in other theatre operating costs was primarily the result of decreases in salaries and wages expense, theatre occupancy costs resulting from lower percentage rent obligations, repairs and maintenance expenses, taxes and licenses and insurance costs. Taxes and licenses were negatively impacted in the nine months ended September 30, 2010 by the recording of sales and use taxes totaling approximately $1.0 million identified as a result of an audit. The underpayment of such taxes occurred in 2005 and 2006.

 

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General and administrative expenses. General and administrative expenses remained consistent for the three and nine months ended September 30, 2011 compared to the three and nine months ended September 30, 2010. General and administrative expenses for the three months ended September 30, 2011 and 2010 were $4.5 and $4.4 million, respectively. General and administrative expenses for the nine months ended September 30, 2011 and 2010 were $13.7 million.

Severance agreement charge. During the nine months ended September 30, 2011, we recorded a severance charge of $0.8 million. These charges were related to the departure of our former Senior Vice President, General Counsel and Secretary (see Note 12 to the Interim Financial Statements).

Depreciation and amortization. Depreciation and amortization expenses were $8.3 million and $7.9 million, respectively, for the three months ended September 30, 2011 and 2010. The increase in depreciation and amortization expense during the 2011 period is primarily due to the reassessment of the useful lives of certain assets. Depreciation and amortization expenses remained consistent for the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010. Depreciation and amortization expenses were $23.9 million for the nine months ended September 30, 2011 and 2010.

Net gain (loss) on sales of property and equipment. We recognized a loss of $47,000 on the sale of property and equipment for the three months ended September 30, 2011, as compared to a gain of $658,000 for the three months ended September 30, 2010. We recognized a loss of $108,000 on the sale of property and equipment for the nine months ended September 30, 2011, as compared to a gain of $649,000 for the nine months ended September 30, 2010.

Write-off of note receivable. For the nine months ended September 30, 2011, we wrote off a note receivable of $750,000. The loss is the result of an uncollectible note receivable on a theatre sold in August 2008. We did not write off any note receivables for the nine months ended September 30, 2010.

Impairment of long-lived assets. Impairment of long-lived assets for the three months ended September 30, 2011 decreased to $18,000 from $0.2 million for the three months ended September 30, 2010. Impairment of long-lived assets for the nine months ended September 30, 2011 decreased to $1.3 million from $3.8 million for the nine months ended September 30, 2010. The impairment charges for the three and nine months ended September 30, 2011 were primarily the result of deterioration in the operating results of an impaired theatre and a decline in market value of a previously closed theatre.

Operating income (loss). Operating income for the three months ended September 30, 2011 increased 105.4% to $13.8 million as compared to operating income of $6.7 million for the three months ended September 30, 2010. As a percentage of revenues, operating income for the three months ended September 30, 2011 was 10.3% as compared to 5.4% for the three months ended September 30, 2010. This fluctuation is primarily a result of an increase in total revenue resulting from increased attendance as described above, a reduction in impairment charges and a reduction in other theatre operating expenses. Operating income for the nine months ended September 30, 2011 increased 44.6% to $26.8 million as compared to $18.6 million for the nine months ended September 30, 2010. As a percentage of revenues, operating income for the nine months ended September 30, 2011 was 7.4% as compared to 5.0% for the nine months ended September 30, 2010. These fluctuations are primarily a result of the factors described above.

Interest expense, net. Interest expense, net for the three months ended September 30, 2011 decreased 8.4% to $8.0 million from $8.8 million for the three months ended September 30, 2010. Interest expense, net for the nine months ended September 30, 2011 decreased 5.9% to $25.8 million as compared to $27.5 million for the nine months ended September 30, 2010. The decrease for the three and nine months ended September 30, 2011 was primarily related to a decrease in the average debt outstanding.

Income tax. During the three and nine months ended September 30, 2011, we recorded income tax expense of $3.9 million and $11.3 million, respectively, as compared to income tax benefit of $2.4 million and $2.0 million during the three and nine months ended September 30, 2010, respectively. The increase in our income tax provision for the nine months ended September 30, 2011 is due primarily to the current tax expense associated with the $30 million Screenvision payment received in January 2011 (as discussed in Note 9 - Screenvision Transaction in the Interim Financial Statements) and the inability to recognize an associated deferred tax benefit, due to our ongoing assessment that the realization of our deferred tax assets is unlikely. At September 30, 2011 and December 31, 2010, our consolidated deferred tax assets were $75.9 million, before the effects of any valuation allowance. We regularly assess whether it is more likely than not that our deferred tax asset balance will be recovered from future taxable income, taking into account such factors as our earnings history, carryback and carryforward periods and tax planning strategies. When evidence exists that indicates that recovery is uncertain, a valuation allowance is established against the deferred tax asset, increasing our income tax expense in the period that such determination is made.

The effective tax rate from continuing operations for the three months ended September 30, 2011 was 55.8%. The effective tax rate differs from the statutory tax rate primarily due to temporary differences between the financial reporting basis and tax basis of our assets and liabilities. The effective tax rate from continuing operations for the nine months ended September 30, 2011 was 564.2%, which differs from the statutory tax rate primarily due to the current tax expense associated with the $30 million cash

 

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payment received from Screenvision in January 2011 (see Note 9) and the inability to recognize an associated deferred tax benefit, due to our ongoing assessment that the realization of our deferred tax assets is unlikely.

Income (loss) from discontinued operations, net of tax benefit. Theatres are generally considered for closure due to an expiring lease term, underperformance, or the opportunity to better deploy invested capital. During the three months ended September 30, 2011 and 2010, we closed one theatre in each period, and for the nine months ended September 30, 2011 and 2010, we closed five and seven theatres, respectively. With respect to these closures during the three months ended September 30, 2011 and 2010, we classified one theatre and no theatres, respectively, in each period as discontinued operations, and for the nine months ended September 30, 2011 and 2010 we classified five theatres and one theatre, respectively, as discontinued operations. We reported the results of these operations, including gains or losses on disposal, as discontinued operations. The operations and cash flow of these theatres have been eliminated from our operations, and we will not have any continuing involvement in their operations.

Liquidity and Capital Resources

General

We typically maintain current liabilities in excess of our current assets which results in a working capital deficit. We are able to operate with a substantial working capital deficit because our operating revenues are primarily received on a cash basis. Rather than maintain significant cash balances that would result from this pattern of operating cash flows, we utilize operating cash flows in excess of those required for investing activities to make discretionary payments on our debt balances. We had a working capital deficit of $21.2 million as of September 30, 2011 compared to a working capital surplus of $4.0 million at December 31, 2010. The working capital surplus at December 31, 2010 resulted from a $30.0 million receivable from Screenvision related to the October 2010 modification of our existing theatre exhibition agreement. We received these funds in January 2011 and used $15.0 million of the funds to prepay debt outstanding under our term loan.

At September 30, 2011, we had available borrowing capacity of $30 million under our revolving credit facility and approximately $19.0 million in cash and cash equivalents on hand as compared to $13.1 million in cash and cash equivalents at December 31, 2010. The material terms of our revolving credit facility (including limitations on our ability to freely use all the available borrowing capacity) are described below in “Credit Agreement and Covenant Compliance.”

Net cash provided by operating activities was $49.5 million for the nine months ended September 30, 2011 compared to net cash provided by operating activities of $11.9 million for the nine months ended September 30, 2010. This increase in our cash provided by operating activities was due primarily to the collection of the $30.0 million receivable from Screenvision and an increase in accounts payable and accrued expenses as compared to the prior period. Net cash used in investing activities was $14.9 million for the nine months ended September 30, 2011 compared to $6.7 million for the nine months ended September 30, 2010. The increase in our net cash used in investing activities is primarily due to an increase in cash used for the purchases of property and equipment, the acquisition of one theatre in July 2011 and our capital contribution to SV Holdco in September 2011(as described in Note 9-Screenvision Transaction), partially offset by a decrease in proceeds from sales of property and equipment. Capital expenditures were $12.3 million and $10.9 million for the nine months ended September 30, 2011 and 2010, respectively. Capital expenditures for the 2011 period were primarily due to the construction of new theatres scheduled to open during the fourth quarter of 2011, additional 3-D rollouts, Big D renovations (as described below), theatre renovations and upgrades to computer equipment. Capital expenditures for the 2010 period related primarily to additional 3-D rollouts, Big D renovations and theatre renovations. Net cash used in financing activities was $28.7 million for the nine months ended September 30, 2011 compared to $26.5 million for the nine months ended September 30, 2010. The increase in our net cash used in financing activities is primarily due to the repayment of $25.0 million on our term loan during the nine months ended September 30, 2011, partially offset by the incurrence of $9.0 million of debt issuance costs in the first nine months of 2010.

Our liquidity needs are funded by operating cash flow and availability under our senior secured credit agreement. The exhibition industry is seasonal with the studios normally releasing their premiere film product during the holiday season and summer months. This seasonal positioning of film product makes our needs for cash vary significantly from quarter to quarter. Additionally, the ultimate performance of the films any time during the calendar year will have a dramatic impact on our cash flow.

We from time to time close older theatres or do not renew the leases, and the expenses associated with exiting these closed theatres typically relate to costs associated with removing owned equipment for redeployment in other locations and are not material to our operations. In the first nine months of 2011, we closed five of our underperforming theatres and estimate closing up to seven theatres for the full year 2011.

We plan to make up to $25 million in capital expenditures for calendar year 2011. Pursuant to our January 2010 senior secured credit agreement, the aggregate capital expenditures that we may make, or commit to make for any fiscal year is limited to $25 million, provided that up to $5 million of the unused capital expenditures in a fiscal year may be carried over to the succeeding

 

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fiscal year. We anticipate opening one new build-to-suit theatre during the fourth quarter of 2011. In 2010, we began installing our own large digital format screen in select theatres. The Big D-Large Format Digital Experience includes a larger screen, enhanced sound and premium seating accommodations. We intend to roll out additional Big D-Large Format Digital Experience auditoriums during the remainder of 2011.

We actively seek ways to grow our circuit through acquisitions. On October 21, 2011, we completed our acquisition of MNM Theatres for $9.25 million, plus additional consideration that is contingent upon MNM’s earnings performance over the next three years.

Credit Agreement and Covenant Compliance

On January 27, 2010, we entered into a Credit Agreement (the “Credit Agreement”), by and among us, as borrower, and several banks and other financial institutions or entities from time to time parties to the Credit Agreement, as lenders. Our long-term debt obligations consist of the following:

 

   

a $265.0 million six year term loan facility (issued at a $2.6 million discount) that matures on January 27, 2016 and

 

   

a $30.0 million three year revolving credit facility that matures on January 27, 2013.

The proceeds were used to repay our $170.0 million seven year term loan that was due in May 2012 with a then outstanding balance of $139.6 million and the $185.0 million seven year delayed-draw term loan facility that was due in May 2012 with a then outstanding balance of $111.2 million. The $30.0 million revolving credit facility replaced our prior $50.0 million revolving credit facility that was scheduled to mature in May 2010.

The interest rate for borrowings under the term loan facility is LIBOR (subject to a 2.00% floor) plus a margin of 3.50%, or the Base Rate (as defined in the Credit Agreement) (subject to a 3.00% floor) plus a margin of 2.50%, as we may elect. The Credit Agreement (as amended) provides that if our leverage ratio exceeds 4.50 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by 25 basis points (0.25%), and if our leverage ratio exceeds 5.00 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by an additional 25 basis points (0.25%).

The interest rate for borrowings under the revolving credit facility was initially LIBOR (subject to a 2.00% floor) plus an initial margin of 4.00%, or Base Rate (subject to a 3.00% floor) plus margin of 3.00%, as we might elect. The applicable margins are subject to adjustment based on our ratio of total debt to EBITDA as reflected in our quarterly or annual financial statements, with the margins ranging from 3.50% to 4.00% on LIBOR based loans, and from 2.50% to 3.00% on Base Rate based loans. In addition, we are required to pay commitment fees on the unused portion of the revolving credit facility. The commitment fee rate was initially 0.75% per annum, and is also subject to adjustment based on our ratio of total debt to EBITDA, with the rates ranging from 0.50% to 0.75%.

The Credit Agreement requires that mandatory prepayments be made from (1) 100% of the net cash proceeds from certain asset sales, dispositions or issuances of certain debt obligations, (2) 100% of the net cash proceeds from sales-leaseback transactions, and (3) various percentages (ranging from 0% to 75% depending on our consolidated leverage ratio) of excess annual cash flow as defined in the Credit Agreement. In addition, the first amendment to the Credit Agreement imposes a prepayment fee of 1% of the amount prepaid in connection with certain refinancings and repricings occurring prior to March 3, 2012.

The senior secured term loan and revolving credit facilities are guaranteed by each of our subsidiaries and secured by a perfected first priority security interest in substantially all of our present and future assets.

Debt Covenants

The Credit Agreement contains covenants which, among other things, limit our ability, and that of our subsidiaries, to:

 

   

pay dividends or make any other restricted payments to parties other than us;

 

   

incur additional indebtedness and financing obligations;

 

   

create liens on our assets;

 

   

make certain investments;

 

   

sell or otherwise dispose of our assets other than in the ordinary course of business;

 

   

consolidate, merge or otherwise transfer all or any substantial part of our assets;

 

   

enter into transactions with our affiliates; and

 

   

engage in businesses other than those in which we are currently engaged or those reasonably related thereto.

 

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The Credit Agreement imposes an annual limit of $25.0 million on our ability to make capital expenditures, plus a carryforward of $5.0 million of any unused capital expenditures from the prior year. In addition to the dollar limitation, we may not make any capital expenditure if any default or event of default under the Credit Agreement has occurred and is continuing, or if a breach of the financial covenants contained in the Credit Agreement would result on a pro forma basis after giving effect to the capital expenditure.

Debt Service

Based upon our current level of operations, we believe that cash flow from operations and available cash and available borrowings under our Credit Agreement will be adequate to meet our liquidity needs for foreseeable future.

We are required to make principal repayments of our term loan borrowings in consecutive quarterly installments, each in the amount of $0.5 million with the balance of $202.2 million due at final maturity on January 27, 2016. Any amounts that may become outstanding under our revolving credit facility would be due and payable on January 27, 2013.

Debt Covenant Compliance

The Credit Agreement contains financial covenants that require us to maintain a ratio of funded debt to adjusted EBITDA (“leverage ratio”) below a specified maximum ratio, a ratio of adjusted EBITDA to interest expense (“interest coverage ratio”) above a specified minimum ratio and a ratio of total adjusted debt (adjusted for certain leases and financing obligations) to adjusted EBITDA plus rental expense (“EBITDAR ratio”) below a specified maximum ratio.

Leverage Ratio- The maximum leverage ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 5.50 to 1.00 for any four quarter period ending March 31, 2011 through June 30, 2012; (b) 5.00 to 1.00 for any four quarter period ending September 30, 2012 through December 31, 2012; (c) 4.50 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 4.25 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 4.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

Interest Coverage Ratio- The minimum interest coverage ratio as of the last day of any four consecutive fiscal quarters may not be less than: (a) 1.50 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 1.60 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 1.75 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 1.85 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 2.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

EBITDAR Ratio- The maximum EBITDAR ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 8.00 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 7.50 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 7.00 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 6.75 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 6.50 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

As of September 30, 2011, we were in compliance with all of the financial covenants in the amended Credit Agreement. As of September 30, 2011, our leverage, interest coverage, and EBITDAR ratios were 3.18, 2.55, and 5.77, respectively.

Our financial results depend to a substantial degree on the availability of suitable motion pictures for screening in our theatres and the appeal of such motion pictures to patrons in our specific theatre markets. The complete motion picture release schedule for 2012 and beyond is not yet known. Based on current projections and our current financial covenant ratios, we believe that we will remain in compliance with our financial covenants for the foreseeable future. However, it is possible that we may not comply with some or all of our financial covenants in the future.

We could seek waivers or additional amendments to the Credit Agreement if a violation did occur. However, we can provide no assurance that we will successfully obtain such waivers or amendments from our lenders. If we are unable to comply with some or all of the financial or non-financial covenants and if we fail to obtain future waivers or amendments to the Credit Agreement, the lenders may terminate our revolving credit facility with respect to additional advances and may declare all or any portion of the obligations under the revolving credit facility and the term loan facility due and payable.

Other events of default under the Credit Agreement include:

 

   

our failure to pay principal on the loans when due and payable, or our failure to pay interest on the loans or to pay certain fees and expenses (subject to applicable grace periods);

 

   

the occurrence of a change of control (as defined in the Credit Agreement);

 

   

a breach or default by us or our subsidiaries on the payment of principal of any other indebtedness in an aggregate amount greater than $10 million;

 

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a breach of representations or warranties in any material respect; or

 

   

a failure to perform other obligations under the Credit Agreement and the security documents for the senior secured credit facilities (subject to applicable cure periods).

Contractual Obligations

We did not have any material changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010.

Forward-Looking Information

Certain items in this report are considered forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the SEC or in connection with oral statements made to the press, potential investors or others. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “plan,” “estimate,” “expect,” “project,” “anticipate,” “intend,” “believe” and other words and terms of similar meaning in connection with discussion of future operating or financial performance. These statements include, among others, statements regarding our future operating results, our strategies, sources of liquidity, debt covenant compliance, the availability of film product, our capital expenditures, and the opening and closing of theatres. These statements are based on the current expectations, estimates or projections of management and do not guarantee future performance. The forward-looking statements also involve risks and uncertainties, which could cause actual outcomes and results to differ materially from what is expressed or forecasted in these statements. As a result, these statements speak only as of the date they were made and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our actual results and future trends may differ materially depending on a variety of factors, including:

 

   

general economic conditions in our regional and national markets;

 

   

our ability to comply with covenants contained in our senior credit agreement;

 

   

our ability to operate at expected levels of cash flow;

 

   

financial market conditions including, but not limited to, changes in interest rates and the availability and cost of capital;

 

   

our ability to meet our contractual obligations, including all outstanding financing commitments;

 

   

the availability of suitable motion pictures for exhibition in our markets;

 

   

competition in our markets;

 

   

competition with other forms of entertainment;

 

   

the effect of leverage on our financial condition;

 

   

prices and availability of operating supplies;

 

   

impact of continued cost control procedures on operating results;

 

   

the impact of asset impairments;

 

   

the impact of terrorist acts;

 

   

changes in tax laws, regulations and rates;

 

   

financial, legal, tax, regulatory, legislative or accounting changes or actions that may affect the overall performance of our business; and

 

   

other factors, including the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010, under the caption “Risk Factors”.

Other important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are specified elsewhere in this report and our other SEC reports, accessible on the SEC’s website at www.sec.gov and our website at www.carmike.com.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from the information provided under “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2010.

 

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures, as defined in Rules 13a–15(e) and 15d–15(e) under the Exchange Act, include controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including the chief executive officer and the chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met.

As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10–Q. This evaluation was carried out under the supervision and with the participation of our management, including our chief executive officer and chief financial officer. Based on this evaluation, these officers have concluded that, as of September 30, 2011, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the three months ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

For information relating to the Company’s legal proceedings, see Note 7 “Commitments and Contingencies,” under Part I, Item 1 of this Quarterly Report on Form 10-Q.

 

ITEM 1A. RISK FACTORS

For information regarding factors that could affect the Company’s results of operations, financial condition and liquidity, see the risk factors discussed under “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. See also “Forward-Looking Statements,” included in Part I, Item 2 of this Quarterly Report on Form 10-Q. There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

 

ITEM 4. RESERVED

 

ITEM 5. OTHER INFORMATION

None.

 

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ITEM 6. EXHIBITS

Listing of exhibits

 

Exhibit
Number

    

Description

      3.1       Amended and Restated Certificate of Incorporation of Carmike Cinemas, Inc. (filed as Exhibit 3.1 to Carmike’s Amendment to Form 8-A filed January 31, 2002 and incorporated herein by reference).
      3.2       Certificate of Amendment to amended and Restated Certificate of Incorporation of Carmike Cinemas, Inc, (filed as Exhibit 3.1 to Carmike’s Current Report on Form 8-K filed May 21, 2010 and incorporated herein by reference).
      3.3       Amended and Restated By-Laws of Carmike Cinemas, Inc. (filed as Exhibit 3.1 to Carmike’s Current Report on Form 8-K filed on January 22, 2009 and incorporated herein by reference).
    11       Computation of per share earnings (provided in Note 8 of the notes to condensed consolidated financial statements included in this report under the caption “Net Income (Loss) Per Share”).
    31.1       Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    31.2       Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    32.1       Certificate of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    32.2       Certificate of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  101       The following financial information for Carmike, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.

 

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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: November 7, 2011

  By:  

/s/ S. David Passman III

    S. David Passman III
    President, Chief Executive Officer and Director
    (Principal Executive Officer)

Date: November 7, 2011

  By:  

/s/ Richard B. Hare

    Richard B. Hare
    Senior Vice President—Finance, Treasurer and Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

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