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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Mark One) þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended
December 31, 2004
 OR o
    
    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.  Delaware
    
    58-1469127(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)1301 First Avenue, Columbus, Georgia
    
    31901(Address of Principal Executive Offices)
    
    (Zip Code)
 (706) 576-3400
(Registrants Telephone Number, including Area Code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: common stock, par value $.03 per share
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K o Indicate by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a court. Yes þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in
Exchange Act Rule 12b-2). Yes þ No o As
of March 11, 2005, 12,276,002 shares of common stock were outstanding. The aggregate
market value of the shares of common stock, par value $.03 per share,
held by non-affiliates as of
March 5, 2005 was approximately $328,174,698. Documents Incorporated by Reference Specified portions of Carmike Cinemas, Inc.s Proxy Statement relating to the 2005 Annual
Meeting of stockholders are incorporated by reference into Part III.




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Table of Contents  
 Page NumberEXPLANATORY NOTEPART I
    
    3ITEM 1. BUSINESS
    
    3ITEM 2. PROPERTIES
    
    14ITEM 3. LEGAL PROCEEDINGS
    
    14ITEM 4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS AND
EXECUTIVE
OFFICERSOF THE REGISTRANT
    
    15PART II
    
    16ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES
    
    16ITEM 6. SELECTED FINANCIAL DATA
    
    16ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OFOPERATIONS
    
    18ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    30ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    31ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING ANDFINANCIAL DISCLOSURE
    
    65ITEM 9A. CONTROLS AND PROCEDURES
    
    65ITEM 9B. OTHER INFORMATION
    
    66*PART III
    
    66ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    66ITEM 11. EXECUTIVE COMPENSATION
    
    66ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT ANDRELATED STOCKHOLDER MATTERS
    
    66ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    66ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    66PART IV
    
    67ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    67EX-21.1 LIST OF SUBSIDIARIESEX-23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLPEX-23.2 CONSENT OF ERNST & YOUNG LLPEX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 SECTION 906 CERTIFICATION OF CEOEX-32.2 SECTION 906 CERTIFICATION OF CFO
  *Incorporated by reference from Proxy Statement relating to the 2005 Annual Meeting of stockholders. 2




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PART I 
 ITEM 1. BUSINESS. Overview We are one of the largest motion picture exhibitors in the United States. As of December 31,
2004, we owned, operated or had an interest in 282 theatres with 2,188 screens located in 36
states, making us the second largest exhibitor in the country by number of theatres and the fourth
largest by number of screens. We owned 68 of these theatres, leased 212 of these theatres and
operated an additional two theatres under shared ownership. Of our 282 theatres, 243 show films on
a first-run basis and 39 are discount theatres. We target small to mid-size non-urban markets. We estimate that more than 80% of our theatres
are located in communities with populations of fewer than 100,000 people. We believe there are
several benefits of operating in small to mid-size markets, including:  
    Less competition from other exhibitors.We believe a majority of our theatres have
limited competition for patrons. We believe most of our markets are already adequately
screened and our smaller markets in particular cannot support significantly more screens. In
addition, because most of our principal competitors are focused on building megaplexes, we
do not expect many of our markets to be targeted by our competitors for new theatres.
    Lower operating costs.We believe that we benefit from lower labor, occupancy and
maintenance costs than most other large exhibitors. For example, as of December 31, 2004,
approximately 47% of our hourly employees worked for the federal minimum wage. Additionally,
we own 68, or approximately 24%, of our theatres, which we believe provides us with further
cost benefits. We believe the percentage of our owned theatres is among the highest of the
large public theatre exhibitors.
    Fewer alternative entertainment opportunities.In our typical markets, patrons have fewer
entertainment alternatives than in larger markets, where options such as professional sports
and cultural events are more likely to be available.
    Greater access to film product.We believe we are the sole exhibitor in approximately 78%
of our film licensing zones, which we believe provides us with greater flexibility in
selecting films that meet the preferences of patrons in our markets. The following table sets forth geographic information regarding our theatre circuit as of
December 31, 2004: State
    
    Theatres
    
    
    Screens
    
    
    State
    
    
    Theatres
    
    
    ScreensAlabama
    
    
    17
    
    
    
    160
    
    
    New Mexico
    
    
    1
    
    
    
    2Arkansas
    
    
    8
    
    
    
    68
    
    
    New York
    
    
    1
    
    
    
    8Colorado
    
    
    8
    
    
    
    57
    
    
    North Carolina
    
    
    32
    
    
    
    278Delaware
    
    
    1
    
    
    
    14
    
    
    North Dakota
    
    
    6
    
    
    
    37Florida
    
    
    9
    
    
    
    78
    
    
    Ohio
    
    
    6
    
    
    
    39Georgia
    
    
    27
    
    
    
    223
    
    
    Oklahoma
    
    
    10
    
    
    
    52Idaho
    
    
    4
    
    
    
    17
    
    
    Oregon
    
    
    1
    
    
    
    12Illinois
    
    
    1
    
    
    
    2
    
    
    Pennsylvania
    
    
    24
    
    
    
    182Iowa
    
    
    8
    
    
    
    87
    
    
    South Carolina
    
    
    13
    
    
    
    94Kansas
    
    
    1
    
    
    
    12
    
    
    South Dakota
    
    
    5
    
    
    
    35Kentucky
    
    
    9
    
    
    
    45
    
    
    Tennessee
    
    
    27
    
    
    
    220Louisiana
    
    
    3
    
    
    
    22
    
    
    Texas
    
    
    12
    
    
    
    91Maryland
    
    
    1
    
    
    
    8
    
    
    Utah
    
    
    3
    
    
    
    39Michigan
    
    
    1
    
    
    
    5
    
    
    Virginia
    
    
    9
    
    
    
    65Minnesota
    
    
    6
    
    
    
    65
    
    
    Washington
    
    
    1
    
    
    
    12Missouri
    
    
    1
    
    
    
    8
    
    
    West Virginia
    
    
    4
    
    
    
    28Montana
    
    
    13
    
    
    
    74
    
    
    Wisconsin
    
    
    2
    
    
    
    18Nebraska
    
    
    5
    
    
    
    19
    
    
    Wyoming
    
    
    2
    
    
    
    12Totals
    
    
    282
    
    
    
    2,188
 From time to time, we convert weaker performing theatres to discount theatres for the
exhibition of films that have previously been shown on a first-run basis. Many of these theatres
are typically in smaller markets where we are the only exhibitor in the market. At December 31,
2004, we operated 39 theatres with 163 screens as discount theatres. We also operate a very small
number of theatres for the exhibition of first-run films at a reduced admission price. We are the sole exhibitor in many of the small to mid-size markets in which we operate. The
introduction of a competing theatre in these markets could significantly impact the performance of
our theatres. In addition, the type of motion pictures preferred by patrons in these markets is
typically more limited than in larger markets, which increases the importance of selecting films
that will appeal to patrons in our specific theatre markets. 3




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Theatre Development and Operations Development We carefully review small to mid-size markets to evaluate the return on capital of
opportunities to build new theatres or renovate our existing theatres. The circumstances under
which we believe we are best positioned to benefit from building new theatres are in markets in
which:  
    we believe building a new theatre provides an attractive cash flow opportunity;
    we already operate a theatre and could best protect that market by expanding our presence; or
    a film licensing zone is currently underserved by an exhibitor. In general, we do not believe that building theatres in film licensing zones in which
competitors operate provides attractive investment opportunities for us. Our
bankruptcy, as discussed below under the caption Our
Reorganization, and the excessive
number of screens resulting from the industrys overbuilding of theatres in the last few years have
been significant influences on our current growth strategy. We opened three theatres during the
year ended December 31, 2004. If opportunities exist where new construction will be profitable to
us, we will consider building additional theatres in future periods. Additionally, as opportunities
present themselves for consolidation we will evaluate each instance to obtain the highest level of
return on investment. The following table shows information about the changes in our theatre circuit during the
periods presented: AverageScreens/Theatres
    
    
    Screens
    
    
    TheatreTotal at
January 1, 2002
    
    
    323
    
    
    
    2,333
    
    
    
    7.2New Construction
    
    
    0
    
    
    
    0Closures
    
    
    (15
    )
    
    
    (71
    )Total at December 31, 2002
    
    
    308
    
    
    
    2,262
    
    
    
    7.3New Construction
    
    
    2
    
    
    
    31Closures
    
    
    (11
    )
    
    
    (40
    )Total at December 31, 2003
    
    
    299
    
    
    
    2,253
    
    
    
    7.5New Construction
    
    
    3
    
    
    
    41Closures
    
    
    (20
    )
    
    
    (106
    )Total at December 31, 2004
    
    
    282
    
    
    
    2,188
    
    
    
    7.8
 Operations Our theatre operations are under the supervision of our Chief Operating Officer, General
Manager of Operations and four division managers. The division managers are responsible for
implementing our operating policies and supervising our eighteen operating districts. Each
operating district has a district manager who is responsible for overseeing the day-to-day
operations of our theatres. Corporate policy development, strategic planning, site selection and
lease negotiation, theatre design and construction, concession purchasing, film licensing,
advertising, and financial and accounting activities are centralized at our corporate headquarters. We have an incentive bonus program for theatre-level management, which provides for bonuses
based on incremental improvements in theatre profitability, including concession sales. As part of
this program, we evaluate mystery shopper reports on the quality of service, cleanliness and film
presentation at individual theatres. Box office admissions.The majority of our revenues come from the sale of movie tickets. For
the year ended December 31, 2004, box office admissions totaled $331.5 million, or 67% of total
revenues. At December 31, 2004, of our 282 theatres, 243 showed first- 4




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run films, which we license from distributors owned by the major studios, as well as from
independent distributors. The remaining 39 of our theatres featured films at a discount price. Most of the tickets we sell are sold at our theatre box offices immediately before the start
of a film. As of December 31, 2004, at 44 of our theatres, patrons can buy tickets in advance
either over the phone or on the Internet. These alternate sales methods do not currently represent
a meaningful portion of our revenues, nor are they expected to be in the near term. Concessions.Concession sales are our second largest revenue source after box office
admissions, constituting 30% of total revenues for the year ended December 31, 2004. Our strategy
emphasizes quick and efficient service built around a limited menu primarily focused on higher
margin items such as popcorn, candy and soft drinks. In addition, in a limited number of markets,
we offer bottled water, frozen drinks, coffee, ice cream, hot dogs and pretzels in order to respond
to competitive conditions. We actively seek to promote concession sales through the design and
appearance of our concession stands, the introduction of special promotions from time to time, by
reducing wait times and by training our employees to up-sell products. In addition, our management
incentive bonus program includes concession results as a component of determining the bonus awards.
We manage all inventory purchasing centrally with authority required from our central office before
orders may be placed. During 2004, we purchased substantially all of our concession supplies and janitorial supplies
from Showtime Concession, except for beverage supplies. We are by far the largest customer of
Showtime Concession. Our current agreement with Showtime Concession will expire on December 8,
2006. If this relationship were disrupted, we could be forced to negotiate a number of substitute
arrangements with alternative vendors which are likely to be, in the aggregate, less favorable to
us than the current arrangement. During 2004, we purchased our beverage supplies from The Coca-Cola Company. Our current
agreement with The Coca-Cola Company will expire on December 31, 2008. Under the agreement, The
Coca-Cola Company may raise beverage supply costs and, in fact, increased such costs by 3.3%
beginning January 1, 2004 through December 31, 2004.A similar cost increase of 3.7% was
implemented for January 1, 2005 through December 31, 2005. Other revenues.Most of our theatres include electronic video games located in or adjacent to
the lobby. We also generate revenues through on-screen advertising on all of our screens. We
operate two family entertainment centers under the name Hollywood Connection® which feature
multiplex theatres and other forms of family entertainment. These revenue streams comprised the
remaining 3% of our revenue generation for the year ended December 31, 2004. Film Licensing We obtain licenses to exhibit films by directly negotiating with film distributors. We license
films through our booking office located in Columbus, Georgia. Our Senior Vice President  Film, in
consultation with our Chief Executive Officer, directs our motion picture bookings. Prior to
negotiating for a film license, our Senior Vice President  Film and film-booking personnel
evaluate the prospects for upcoming films. The criteria considered for each film include cast,
director, plot, performance of similar films, estimated film rental costs and expected MPAA rating.
Because we only license a portion of newly released first-run films, our success in licensing
depends greatly upon the availability of commercially popular motion pictures, but also upon our
knowledge of the preferences of patrons in our markets and insight into trends in those
preferences. We maintain a database that includes revenue information on films previously exhibited
in our markets. We use this historical information to match new films with particular markets so as
to maximize revenues. The table below depicts the industrys top 10 films for the year ended December 31, 2004
compared to our top 10 films for the same period, based on reported gross receipts: Industry
    
    
    
    
    
    Carmike Cinemas1.
    
    Shrek 2
    
    
    1.
    
    
    The Passion of the Christ2.
    
    Spider-Man 2
    
    
    2.
    
    
    Shrek 23.
    
    The Passion of the Christ
    
    
    3.
    
    
    Spider-Man 24.
    
    The Incredibles
    
    
    4.
    
    
    Harry Potter and the
Prisoner of Azkaban5.
    
    Harry Potter and the Prisoner of Azkaban
    
    
    5.
    
    
    The Incredibles6.
    
    The Day After Tomorrow
    
    
    6.
    
    
    The Day After Tomorrow7.
    
    The Bourne Supremacy
    
    
    7.
    
    
    Shark Tale8
    
    Meet The Fockers
    
    
    8
    
    
    Meet The Fockers9.
    
    Shark Tale
    
    
    9.
    
    
    National Treasure10.
    
    The Polar Express
    
    
    10.
    
    
    The Polar Express
 5




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Film Rental Fees We typically enter into licenses that provide for rental fees based on either firm terms
established prior to the opening of the picture or on a mutually agreed settlement upon the
conclusion of the film run. Under a firm terms formula, we pay the distributor a specified
percentage of the box office receipts, and this percentage declines over the term of the run. Firm
term film rental fees are generally the greater of (1) 60 to 70% of gross box office receipts,
gradually declining to as low as 30% over a period of four to seven weeks or (2) a specified
percentage (e.g., 90%) of the excess gross box office receipts over a negotiated allowance for
theatre expenses (commonly known as a 90-10 arrangement). The settlement process allows for
negotiation based upon how a film actually performs. A firm terms agreement could result in lower
than anticipated film rent if the film outperforms expectations especially with respect to the
films run and, conversely, there is a downside risk when the film underperforms. Many of our
distributors award aggregate percentage terms for the run of the film. Under such an agreement, a
set percentage is paid for the entire run of the film with no adjustments for 90-10s. This
provides an advantage for the exhibitors when a picture has a short run life, where under a firm
term arrangement film rent would be higher. Conversely, the exhibitor is at risk of higher film
rent costs when the film has a longer run life and firm term arrangements would provide for lower
film rent. Film Licensing Zones Film licensing zones are geographic areas established by film distributors where any given
film is allocated to only one theatre within that area. In our markets, these zones generally
encompass three to five miles. In film licensing zones where we have little or no competition, we
obtain film licenses by selecting a film from among those offered and negotiating directly with the
distributor. In competitive film licensing zones, a distributor will allocate its films among the
exhibitors in the zone. When films are licensed under the allocation process, a distributor will
choose which exhibitor is offered a movie and then that exhibitor will negotiate film rental terms
directly with the distributor for the film. Relationship With Distributors We depend on, among other things, the quality, quantity, availability and acceptance by
movie-going customers of the motion pictures produced by the motion picture production companies
and licensed for exhibition to the motion picture exhibitors by distribution companies. Disruption
in the production of motion pictures by the major studios and/or independent producers or poor
performance of motion pictures could have an adverse effect on our business. While there are numerous distributors that provide quality first-run movies to the motion
picture exhibition industry, the following ten major distributors accounted for approximately 86.3%
of our box office admissions for the year ended December 31, 2004: Buena Vista, DreamWorks, Fox,
MGM/UA, Miramax, New Line Cinema, Paramount, Sony, Universal and Warner Brothers. Management Information Systems We have developed a proprietary computer system, which we call IQ-Zero, that is installed in
each of our theatres. IQ-Zero allows us to centralize most theatre-level administrative functions
at our corporate headquarters, creating significant operating leverage. IQ-Zero allows corporate
management to monitor ticket and concession sales and box office and concession staffing on a daily
basis, enabling our theatre managers to focus on the day-to-day operations of the theatre. In addition, it also coordinates payroll, tracks theatre invoices and generates operating
reports analyzing film performance and theatre profitability. IQ-Zero also generates information we
use to quickly detect theft. IQ-2000 is an enhanced version of the IQ-Zero system and has been
installed in our theatres built since 1999. IQ-2000 facilitates new services such as advanced
ticket sales and Internet ticket sales. Its expanded capacity allows for future growth and more
detailed data tracking and trend analysis. There is active communication between the theatres and
corporate headquarters, which allows our senior management to react to vital profit and staffing
information on a daily basis and perform the majority of the theatre-level administrative
functions. Competition The motion picture exhibition industry is fragmented and highly competitive. In markets where
we are not the sole exhibitor, we compete against regional and independent operators as well as the
larger theatre circuit operators. Our operations are subject to varying degrees of competition with respect to film licensing,
attracting customers, obtaining new theatre sites or acquiring theatre circuits. In those areas
where real estate is readily available, there are few barriers preventing competing companies from
opening theatres near one of our existing theatres, which may have a material adverse effect on our
theatres. Competitors have built or are planning to build theatres in certain areas in which we
operate, which have resulted and may continue to result in excess capacity in such areas which
adversely affects attendance and pricing at our theatres in such areas. 6




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From the mid- to late-1990s, industry screen count grew faster than attendance. As a result of
this rapid overbuilding, the total number of screens reached an all-time high of 37,396 in 2000,
according to the MPAA. When the economics of many of these theatres became unsustainable, most
major exhibitors, ourselves included, were required to restructure and to close underperforming
locations. After reaching a low of approximately 35,200 screens, the industry has grown back to
36,162 screens as of December 31, 2004. We believe that the growth rate of the industry is inline
with demand and a positive indicator of the health of the industry. The opening of large multiplexes and theatres with stadium seating by us and certain of our
competitors has tended to, and is expected to continue to, draw audiences away from certain older
and smaller theatres, including theatres operated by us. In addition, demographic changes and
competitive pressures can lead to a theatre location becoming impaired. However, at this time we
are not aware of any such situations. In addition to competition with other motion picture exhibitors, our theatres face competition
from a number of alternative motion picture exhibition delivery systems, such as cable television,
satellite and pay-per-view services and home video systems. The expansion of such delivery systems
could have a material adverse effect upon our business and results of operations. We also compete
for the publics leisure time and disposable income with all forms of entertainment, including
sporting events, concerts, live theatre and restaurants. Regulatory Environment The distribution of motion pictures is in large part regulated by federal and state antitrust
laws and has been the subject of numerous antitrust cases. Certain consent decrees resulting from
such cases bind certain major motion picture distributors and require the motion pictures of such
distributors to be offered and licensed to exhibitors, including us, on a theatre-by-theatre basis.
Consequently, exhibitors such as our company cannot assure themselves of a supply of motion
pictures by entering into long-term arrangements with major distributors but must compete for
licenses on a film-by-film and theatre-by-theatre basis. The Americans with Disabilities Act (ADA), which became effective in 1992, and certain state
statutes and local ordinances, among other things, require that places of public accommodation,
including theatres (both existing and newly constructed), be accessible to patrons with
disabilities. The ADA requires that theatres be constructed to permit persons with disabilities
full use of a theatre and its facilities. Also, the ADA may require certain modifications be made
to existing theatres in order to make them accessible to patrons and employees who are disabled.
For example, we are aware of several lawsuits that have been filed against other exhibitors by
disabled moviegoers alleging that certain stadium seating designs violate the ADA. On June 30, 1998, we executed a settlement agreement with the U.S. Department of Justice under
Title III of the ADA. Under the settlement agreement, we agreed to complete the readily achievable
removal of barriers to accessibility, or alternatives to barrier removal, at two theatres in Des
Moines, Iowa and to distribute to all of our theatres a questionnaire designed to assist our
management in the identification of existing and potential barriers and a threshold determination
of what steps might be available for removal of such existing and potential barriers. We were not
required to pay any damages or fines. We construct new theatres to be accessible to the disabled
and believe we are otherwise in substantial compliance with applicable regulations relating to
accommodating the needs of the disabled. We have a Director of ADA Compliance to monitor our ADA
requirements. Our theatre operations are also subject to federal, state and local laws governing such
matters as construction, renovation and operation of our theatres as well as wages, working
conditions, citizenship, and health and sanitation requirements and licensing. We believe that our
theatres are in material compliance with such requirements. We own, manage and/or operate theatres and other properties which may be subject to certain
U.S. federal, state and local laws and regulations relating to environmental protection, including
those governing past or present releases of hazardous substances. Certain of these laws and
regulations may impose joint and several liability on certain statutory classes of persons for the
costs of investigation or remediation of such contamination, regardless of fault or the legality of
original disposal. These persons include the present or former owner or operator of a contaminated
property and companies that generated, disposed of or arranged for the disposal of hazardous
substances found at the property. Other environmental laws, such as those regulating wetlands, may
affect our site development activities, and some environmental laws, such as those regulating the
use of fuel tanks, could affect our ongoing operations. Additionally, in the course of maintaining
and renovating our theatres and other properties, we periodically encounter asbestos containing
materials that must be handled and disposed of in accordance with federal, state and local laws,
regulations and ordinances. Such laws may impose liability for release of asbestos containing
materials and may entitle third parties to seek recovery from owners or operators of real
properties for personal injury associated with asbestos containing materials. We believe that our
activities are in material compliance with such requirements. 7




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Employees As of December 31, 2004, we had approximately 7,821 employees, of which 38 were covered by
collective bargaining agreements and 7,277 were part-time. As of December 31, 2004, approximately
47% of our hourly employees were paid at the federal minimum wage and, accordingly, the minimum wage
largely determines our labor costs for those employees. We believe we are more dependent upon
minimum wage employees than most other motion picture exhibitors. Although our ability to secure
employees at the minimum wage in our smaller markets is advantageous to us because it lowers our
labor costs, we are also more likely than other exhibitors to be immediately and adversely affected
if the minimum wage is raised. Legal Proceedings From time to time, we are involved in routine litigation and legal proceedings in the ordinary
course of our business, such as personal injury claims, employment matters, contractual disputes
and claims alleging ADA violations. Currently, we have approximately $1.0 million reserved for
pending litigation. Beyond this, we have no pending litigation or proceedings that we believe will
have a material adverse effect, either individually or in the aggregate, upon us. In addition, we
emerged from bankruptcy under chapter 11 on January 31, 2002. The chapter 11 filing and our
subsequent reorganization are discussed under Our Reorganization. Trademarks and Trade-Names We own or have rights to trademarks or trade-names that are used in conjunction with the
operations of our theatres. We own Carmike Cinemas® and Hollywood Connection®, C and Design® and
Wynnsong Cinemas® trademarks. In addition, our logo is our trademark. Coca-Cola® is a registered
trademark used in this annual report on Form 10-K and is owned by and belongs to The Coca-Cola
Company. Website Access Our website address is www.carmike.com. You may obtain free electronic copies of our annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments
to those reports, at our website under the heading Corporate Information. These reports are available on our website as soon as reasonably practicable after we
electronically file such material, or furnish it to, the Securities and Exchange Commission. Our Reorganization On August 8, 2000, we and our subsidiaries Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc.
and Military Services, Inc. filed voluntary petitions for relief under chapter 11 of the bankruptcy
code. On January 4, 2002, the United States Bankruptcy Court for the District of Delaware entered
an order confirming our Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy
Code, dated as of November 14, 2001. The plan of reorganization became effective on January 31,
2002. In our reorganization, substantially all of our unsecured and partially secured liabilities as
of August 8, 2000, were subject to compromise or other treatment until the plan of reorganization
was confirmed by the bankruptcy court. Generally, actions to enforce or otherwise effect repayment
of all pre-chapter 11 liabilities as well as all pending litigation against us were stayed while we
continued our business operations as debtors-in-possession. On
February 11, 2005, the Company filed a motion seeking an order
entering a final decree closing the bankruptcy cases. On
March 15, 2005, the United States Bankruptcy Court of the
District of Delaware entered a final decree closing the bankruptcy
cases. Our reorganization resulted from a sequence of events and the unforeseen effect that these
events had in the aggregate on us. Weak film performance during the summer of 2000 contributed to
our lower revenues for that summer, which were significantly below our internal projections. Like
our competitors, we had increased our costs by expending significant funds in building megaplexes
and in making improvements to existing theatres in order to attract and accommodate larger
audiences. Consequently, the effect of poor summer returns was substantial on our efforts to comply
with the financial covenants under our then $200 million revolving credit facility and $75 million
term loan credit agreement, which we sometimes refer to as the pre-reorganization bank facilities.
On June 30, 2000, we were in technical default of certain financial covenants contained in the
pre-reorganization bank facilities and were unable to negotiate amendments with the lenders to
resolve these compliance issues, as we had been able to do in the past. On July 28, 2000, the
agents under the pre-reorganization bank facilities issued a payment blockage notice to us and the
indenture trustee for our 9 3/8% senior subordinated notes due 2009, prohibiting our payment of the
semi-annual interest payment in the amount of $9.4 million due to 8




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the noteholders on August 1, 2000. Faced with, among other things, significant operating
shortfalls, unavailability of credit and problems dealing with our lenders, we voluntarily filed
for bankruptcy in order to continue our business. In the course of our
reorganization, we rejected leases on 136 underperforming theatres and also negotiated modifications to our leases on 35 additional theatres. In addition, we converted
$45.7 million of debt and $55.0 million of preferred stock into an aggregate of 67.8% of our common
stock. The holders of our cancelled Class A and Class B common stock received in the aggregate
22.2% of our common stock under the plan of reorganization. These actions decreased our ongoing
interest obligations. We also agreed to pay, over a five-year period, the claims of our general
unsecured creditors allowed or otherwise undisputed in the bankruptcy case in connection with our
reorganization, plus interest at an annual rate of 9.4%. We estimate that our aggregate liability
as of December 31, 2004 for general unsecured creditors was approximately $1.3 million, which
includes our estimated liability for damages resulting from the rejection of executory contracts
and unexpired leases that have not been allowed or that otherwise remain disputed. We refer to
these claims as disputed claims. As of December 31, 2004, total accrued interest on the disputed
claims was $338,000. If we are unable to resolve the disputed claims with the unsecured creditors,
we may petition the bankruptcy court to resolve them. Risk Factors The following are risk factors for Carmike. Our business will be adversely affected if there is a decline in the number of motion pictures
available for screening or in the appeal of motion pictures to patrons. Our business 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. Our results of operations will vary from period to period based upon the number
and popularity of the motion pictures we show in our theatres. A disruption in the production of
motion pictures by, or a reduction in the marketing efforts of, the major studios and/or
independent producers, a lack of motion pictures, the poor performance of motion pictures in
general 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 substantial lease and debt obligations could impair our financial flexibility and our
competitive position. We now have, and will continue to have, significant debt obligations. Our current long-term
debt obligations are as follows:  
    Our term loan credit agreement provides for borrowings of up to $100.0 million, of which
$99.0 million was outstanding as of December 31, 2004.
    Our revolving credit agreement provides for borrowings of up to $50.0 million. There were
no amounts outstanding as of December 31, 2004.
    Our 7.500% senior subordinated notes, issued as of February 4, 2004, total $150.0 million.
    Amounts owed on our industrial revenue bonds totaled $0.3 million at December 31, 2004.
    As of December 31, 2004, we estimate that our general unsecured creditors will receive an
aggregate of $1.3 million plus interest at an annual rate of 9.4% in resolution of their
allowed claims, with a final maturity date of January 31, 2007. As of December 31, 2004,
total accrued interest on these claims was approximately $338,000. All of these claims are
disputed. We also have, and will continue to have, significant lease obligations. As of December 31,
2004, our total capital, operating and long-term financing obligations for leases with terms over
one year totaled $691.8 million. These obligations could have important consequences for us. For example, they could:  
    limit our ability to obtain necessary financing in the future and make it more difficult
for us to satisfy our lease and debt obligations;
    require us to dedicate a substantial portion of our cash flow to payments on our lease
and debt obligations, thereby reducing the availability of our cash flow to fund working
capital, capital expenditures and other corporate requirements; 9




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
    make us more vulnerable to a downturn in our business and limit our flexibility to plan
for, or react to, changes in our business; and
    place us at a competitive disadvantage compared to competitors that might have stronger
balance sheets or better access to capital by, for example, limiting our ability to enter
into new markets or renovate our theatres. If we are unable to meet our lease and debt obligations, we could be forced to restructure or
refinance our obligations, to seek additional equity financing or to sell assets, which we may not
be able to do on satisfactory terms or at all. As a result, we could default on those obligations. We may not generate sufficient cash flow to meet our needs. Our ability to service our indebtedness and to fund potential capital expenditures for theatre
construction, expansion or renovation will require a significant amount of cash, which depends on
many factors beyond our control. Our ability to make scheduled payments of principal, to pay the
interest on or to refinance our indebtedness is subject to general industry economic, financial,
competitive, legislative, regulatory and other factors that are beyond our control. We cannot
assure you that our business will generate sufficient cash flow from operations to meet our needs. Our business is subject to significant competitive pressures. Large multiplex theatres, which we and some of our competitors built, have tended to and are
expected to continue to draw audiences away from certain older theatres, including some of our
theatres. In addition, demographic changes and competitive pressures can lead to the impairment of
a theatre. Over the last several years, we and many of our competitors have closed a significant
number of theatres. Our competitors or smaller entrepreneurial developers may purchase or lease
these abandoned buildings and reopen them as theatres in competition with us. We face varying degrees of competition from other motion picture exhibitors with respect to
licensing films, attracting customers, obtaining new theatre sites and acquiring theatre circuits.
In those areas where real estate is readily available, there are few barriers preventing competing
companies from opening theatres near one of our existing theatres. Competitors have built and are
planning to build theatres in certain areas in which we operate. In the past, these developments
have resulted and may continue to result in excess capacity in those areas, adversely affecting
attendance and pricing at our theatres in those areas. Even where we are the only exhibitor in a
film licensing zone (and therefore do not compete for films), we still may experience competition
for patrons from theatres in neighboring zones. There have also been a number of consolidations in
the film exhibition industry, and the impact of these consolidations could have an adverse effect
on our business if greater size would give larger operators an advantage in negotiating licensing
terms. Our theatres also compete with a number of other motion picture delivery systems including
cable television, pay-per-view, video disks and cassettes, satellite and home video systems. New
technologies for motion picture delivery (such as video on demand) could also have a material
adverse effect on our business and results of operations. While the impact of these alternative
types of motion picture delivery systems on the motion picture exhibition industry is difficult to
determine precisely, there is a risk that they could adversely affect attendance at motion pictures
shown in theatres. Theatres also face competition from a variety of other forms of entertainment competing for
the publics leisure time and disposable income, including sporting events, concerts, live theatre
and restaurants. Our revenues vary significantly depending upon the timing of the motion picture releases by
distributors. Our business is seasonal, with higher revenues generated during the summer months and year-end
holiday season. While motion picture distributors have begun to release major motion pictures more
evenly throughout the year, the most marketable motion pictures 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. Additionally, the unexpected emergence of a hit film may occur
in these or other periods. As a result, the timing of motion picture releases affects our results
of operations, which may vary significantly from quarter to quarter and year to year. If we do not comply with the covenants in our credit agreements or otherwise default under them, we
may not have the funds necessary to pay all our amounts that could become due. On February 4, 2004, we completed an offering of $150 million of 7.500% senior subordinated
notes due 2014 to institutional investors and entered into senior secured credit facilities
consisting of a $50 million revolving credit facility and a $100 million five- 10




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year term loan. The notes offering and the credit facilities replaced our post-bankruptcy term
loan credit agreement, post-bankruptcy revolving credit agreement and 10 3/8% senior subordinated
notes, which had been in place since our reorganization. Under the indenture that governs the
7.500% senior subordinated notes and the agreements relating to the new senior secured credit
facilities, we are subject to limitations on our ability to incur additional indebtedness, make
capital expenditures and other customary covenants. We may be unable to fund our additional capital needs. Our access to capital may be limited because of our current leverage. In addition, because of
our bankruptcy, we may have difficulty obtaining financing for new development on terms that we
find attractive. Traditional sources of financing new theatres through landlords may be unavailable
for a number of years. The opening of large multiplexes by our competitors and the opening of newer theatres with
stadium seating in certain of our markets have led us to reassess a number of our theatre locations
to determine whether to renovate or to dispose of underperforming locations. Further advances in
theatre design may also require us to make substantial capital expenditures in the future or to
close older theatres that cannot be economically renovated in order to compete with new
developments in theatre design. We are subject to restrictions imposed by our lenders that limit the amount of our capital
expenditures. As a result, we may be unable to make the capital expenditures that we would
otherwise believe necessary. In addition, we cannot assure you that our business will generate
sufficient cash flow from operations, that currently anticipated revenue growth will be realized or
that future capital will be available for us to fund our capital expenditure needs. We may be limited in our ability to utilize, or may not be able to utilize, net operating loss
carryforwards to reduce our future tax liability. As of December 31, 2004, after utilizing approximately $28.5 million for 2004, we had
approximately $84.7 million of federal and state operating loss carryforwards with which to offset
our future taxable income. The federal and state net operating loss carryforwards will begin to
expire in the year 2020. The determination of whether we underwent an ownership change for purposes of section 382 as a
result of the issuance of common stock pursuant to our plan of reorganization (the Plan Stock
Issuance) is subject to a number of highly complex legal issues and factual uncertainties. In our
federal income tax return for 2002, we reported the Plan Stock Issuance as causing a section 382
ownership change, although the matter is not free from doubt and arguments can be advanced to
support the contrary position. Based on our reported tax treatment, we believe that the special
exception in section 382(l)(5) available to debtors in bankruptcy applied, so that our net
operating loss carryforwards did not become subject to a section 382 limitation as a result of the
Plan Stock Issuance. If, however, we underwent a second ownership change within two years following
our date of reorganization  that is, by January 31, 2004  and assuming that the Plan Stock
Issuance caused an ownership change, our net operating losses would have become subject to a
section 382 limitation of zero and their future use effectively would have been eliminated. The
sale of shares in the offering of August, 2004, caused the Company to undergo an ownership change
within the meaning of section 382 (g) of the Internal Revenue Code of 1986, as amended. The
ownership change will subject our net operating loss carryforwards to an annual limitation on their
use, which will restrict our ability to use them to offset our taxable income in periods following
the ownership change. In general, the annual use limitation equals the aggregate value of the
Companys stock at the time of the ownership change multiplied by a specified tax-exempt interest
rate, and is further increased by certain built-in gains recognized during the five-year period
following the ownership change. Such limitation is projected to be $26.9 million per year for the
first five years and will decrease to approximately $15 million per year thereafter. Deterioration in our relationships with any of the major film distributors could adversely affect
our access to commercially successful films and could adversely affect our business and results of
operations. Our business depends to a significant degree on maintaining good relationships with the major
film distributors that license films to our theatres. Deterioration in our relationships with any
of the major film distributors could adversely affect our access to commercially successful films
and adversely affect our business and results of operations. We suffered such deterioration for a
period of time while we were in bankruptcy. When we commenced our bankruptcy, several film
distributors ceased supplying us with new film product in light of their claims against us for
exhibition fees aggregating approximately $37.2 million. Those film distributors recommenced
supplying us with new film product upon our agreeing to pay their claims in full, which we did in
17 weekly installments ending on December 26, 2000. Because the distribution of motion pictures is in large part regulated by federal and state
antitrust laws and has been the subject of numerous antitrust cases, we cannot ensure a supply of
motion pictures by entering into long-term arrangements with major 11




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distributors. Rather, we must compete for licenses on a film-by-film and theatre-by-theatre
basis and are required to negotiate licenses for each film and for each theatre individually. Our success depends on our ability to retain key personnel. We believe that our success is due in part to our experienced management team. We depend in
large part on the continued contribution of our senior management and, in particular, Michael W.
Patrick, our President and Chief Executive Officer. Losing the services of one or more members of
our senior management could adversely affect our business and results of operations. We entered
into a five-year employment agreement with Michael W. Patrick as Chief Executive Officer on January
31, 2002, the term of which extends for one year each December 31, provided that neither we nor Mr.
Patrick chooses not to extend the agreement. We maintain no key man life insurance policies for any
senior officers or managers except for a $1.8 million policy covering Mr. Patrick. We face uncertainties related to digital cinema. If a digital cinema roll-out progresses rapidly, we may not have adequate resources to finance
the conversion costs. Digital cinema is in an experimental stage in the motion picture exhibition
industry. There are multiple parties competing to be the leading manufacturer of digital cinema
technology. However, there are significant obstacles to the acceptance of digital cinema, including
quality of image and costs. Electronic projectors will require substantial investment in
re-equipping theatres. If the conversion process rapidly accelerates, we may have to raise
additional capital to finance the conversion costs associated with it. The additional capital
necessary may not, however, be available to us on terms we deem acceptable. A prolonged economic downturn could materially affect our business by reducing amounts consumers
spend on attending movies. Our business depends on consumers voluntarily spending discretionary funds on leisure
activities. Movie theatre attendance may be affected by prolonged negative trends in the general
economy that adversely affect consumer spending. Any reduction in consumer confidence or disposable
income in general may affect the demand for movies or severely impact the motion picture production
industry such that our business and operations could be adversely affected. Compliance with the Americans with Disabilities Act could require us to incur significant capital
expenditures and litigation costs in the future. The Americans with Disabilities Act of 1990, or the ADA, and certain state statutes and local
ordinances, among other things, require that places of public accommodation, including both
existing and newly constructed theatres, be accessible to customers with disabilities. The ADA
requires that theatres be constructed to permit persons with disabilities full use of a theatre and
its facilities. The ADA may also require that certain modifications be made to existing theatres in
order to make them accessible to patrons and employees who are disabled. We are subject to a
settlement agreement arising from a complaint filed with the U.S. Department of Justice concerning
theatres operated by us in Des Moines, Iowa. As a result of the settlement agreement, we removed
barriers to accessibility at two Des Moines theatres and distributed to all of our theatre managers
a questionnaire designed to assist our central management in identifying existing and potential
barriers and determining what steps might be available for removal of such existing and potential
barriers. We are aware of several lawsuits that have been filed against other motion picture exhibitors
by disabled moviegoers alleging that certain stadium seating designs violated the ADA. If we fail
to comply with the ADA, remedies could include imposition of injunctive relief, fines, awards for
damages to private litigants and additional capital expenditures to remedy non-compliance.
Imposition of significant fines, damage awards or capital expenditures to cure non-compliance could
adversely affect our business and operating results. We are subject to other federal, state and local laws which limit the manner in which we may
conduct our business. Our theatre operations are subject to federal, state and local laws governing matters such as
construction, renovation and operation of our theatres as well as wages, working conditions,
citizenship and health and sanitation requirements and licensing. While we believe that our
theatres are in material compliance with these requirements, we cannot predict the extent to which
any future laws or regulations that regulate employment matters will impact our operations. At
December 31, 2004, approximately 47% of our hourly employees were paid at the federal minimum wage and,
accordingly, the minimum wage largely determines our labor costs for those employees. Increases in
the minimum wage will increase our labor costs. 12




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Disruption of our relationship with our primary concession suppliers could harm our margins on
concessions. We purchase substantially all of our concession supplies, except for beverage supplies, as
well as janitorial supplies from Showtime Concession Supply, Inc. and are by far its largest
customer. In return for our concession supplies, we pay Showtime Concession at set prices that are
based on the type of concession supplied. Our current agreement with Showtime Concession will
expire on December 8, 2006. If this relationship were disrupted, we could be forced to negotiate a
number of substitute arrangements with alternative vendors which are likely to be, in the
aggregate, less favorable to us than the current arrangement. We purchase our beverage supplies from The Coca-Cola Company. On January 1, 2004 we entered
into a new agreement with the Coca-Cola Company. Under the agreement, The Coca-Cola Company may
raise beverage supply costs by 3% to 5% annually beginning January 1, 2004 through the term of the
agreement. If beverage supply costs are increased at a higher rate or we are unable to negotiate
favorable terms with The Coca-Cola Company or a competing beverage supplier when the agreement is
up for renewal, our margins on concessions may be negatively impacted. Our development of new theatres poses a number of risks. We plan to continue to expand our operations through the development of new theatres and the
expansion of existing theatres. Developing new theatres poses a number of risks. Construction of
new theatres may result in cost overruns, delays or unanticipated expenses related to zoning or tax
laws. Desirable sites for new theatres may be unavailable or expensive, and the markets in which
new theatres are located may deteriorate over time. Additionally, the market potential of new
theatre sites cannot be precisely determined, and our theatres may face competition in new markets
from unexpected sources. Newly constructed theatres may not perform up to our expectations. We face significant competition for potential theatre locations and for opportunities to
acquire existing theatres and theatre circuits. Because of this competition, we may be unable to
add to our theatre circuit on terms we consider acceptable. If we determine that assets are impaired, we will be required to recognize a charge to earnings. The opening of large multiplexes and theatres with stadium seating by us and certain of our
competitors has tended to, and is expected to continue to, draw audiences away from certain older
theatres, including some of our theatres. In addition, demographic changes and competitive
pressures can lead to the impairment of a theatre. Whenever events or changes in circumstances
indicate that the carrying amount of an asset or a group of assets may not be recoverable, we
review those assets to be held and used in the business for impairment of long-lived assets and
goodwill. We also periodically review and monitor our internal management reports and the
competition in our markets for indicators of impairment of individual theatres. If we determine
that assets are impaired, we are required to recognize a charge to earnings. We had impairment charges in four of the last five fiscal years totaling $142.1 million. Our
impairment charge recognized for 2001 was significantly larger than in prior years due to the
write-off of leasehold improvements on rejected theatres, the impact of closing owned theatres, the
diminished value of our entertainment centers and the write-down of surplus equipment removed from
closed theatres. Additionally, in 2001 we included equipment in the theatre valuation calculations
based on the reduced capital building program in the future as well as the excess supply of
equipment in inventory. We incurred no impairment charge in 2002. For fiscal years 2003 and 2004,
our impairment charge was $1.1 and $.9 million respectively. Through December 31, 2004, we believe
we have properly tested for impairments. There can be no assurance that we will not take additional
charges in the future related to the impairment of our assets. Our growth strategy includes acquisitions. We may not be able to identify suitable acquisition
candidates, complete acquisitions or integrate acquisitions successfully. We may acquire theatres and/or theatre circuits in order to expand into new markets and to
enhance our position in existing markets nationally. We cannot assure you, however, that we will be
able to successfully identify suitable candidates, negotiate appropriate acquisition terms, obtain
necessary financing on acceptable terms, complete proposed acquisitions, successfully integrate
acquired businesses and theatres into our existing operations or expand into new markets. Once
integrated, acquired operations and theatres may not achieve levels of revenues, profitability or
productivity comparable with those achieved by our existing operations, or otherwise perform as
expected. In addition, future acquisitions may also result in potentially dilutive issuances of equity
securities. We cannot assure you that difficulties encountered with acquisitions will not have a
material adverse effect on our business, financial condition and results of operations. 13




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Our business makes us vulnerable to future fears of terrorism. If future terrorist incidents or threats cause our customers to avoid crowded settings such as
theatres, our attendance would be adversely affected. Our certificate of incorporation and bylaws contain provisions that make it more difficult to
effect a change in control of the Company. Certain provisions of our certificate of incorporation and bylaws and the Delaware General
Corporation Law could have the effect of delaying, deterring or preventing a change in control of
the Company not approved by the Board of Directors, even if the change in control were in the
stockholders interests. Under our certificate of incorporation, our Board of Directors has the
authority to issue up to one million shares of preferred stock and to determine the price, rights,
preferences and privileges of those shares without any further vote or action by our stockholders.
The rights of the holders of common stock will be subject to, and may be adversely affected by, the
rights of the holders of any preferred stock that may be issued in the future. While we have no
present intention to issue shares of preferred stock, an issuance of preferred stock in the future
could have the effect of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. In addition, our bylaws provide that a special meeting of
the stockholders of the Company may only be called by the Chairman, President or Secretary, at the
request in writing of a majority of our Board of Directors or at the request in writing of
stockholders owning at least 66 2/3% of our capital stock then issued and outstanding and entitled
to vote. Further, we are subject to the anti-takeover provisions of section 203 of the Delaware General
Corporation Law, which prohibits us from engaging in a business combination with an interested
stockholder for a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in a prescribed
manner. The application of section 203 could have the effect of delaying or preventing a change of
control that could be advantageous to the stockholders. 
 ITEM 2. PROPERTIES. As of December 31, 2004, we owned 68 of our theatres and leased 212 of our theatres. We
operated an additional two theatres under shared ownership. We typically enter into long-term leases that provide for the payment of fixed monthly
rentals, contingent rentals based on a percentage of revenue over a specified amount and the
payment of property taxes, common area maintenance, insurance and repairs. We, at our option, can
renew a substantial portion of our theatre leases at the then fair rental rate for various periods
with renewal periods of up to 20 years. We own our headquarters building, which has approximately 48,500 square feet, in Columbus,
Georgia. Pursuant to the terms of industrial revenue bonds which were issued in connection with the
construction of the corporate office, our interest in the building is encumbered by a lien in favor
of the Downtown Development Authority of Columbus, Georgia. 
 ITEM 3. LEGAL PROCEEDINGS. From
time to time, we are involved in routine litigation and legal
proceedings in the ordinary course of our business, such as personal
injury claims, employment matters, contractual disputes and claims
alleging ADA violations. The Company has established a reserve of
$1.0 million for potential litigation. The Company relied on the
provisions of Financial Accounting Standard No. 5
Accounting for Contingencies in establishing this
reserve. The Company determined that it was probable that a liability
had been incurred based on the filing of a lawsuit by the EEOC as
described below. Additionally, the Company determined the amount of
the loss could be reasonably estimated based on the demands of the
claimants. Currently, we do not have any pending litigation or
proceedings that we believe will have a material adverse effect,
either individually or in the aggregate, upon us. On or about September 16, 2004, the Equal Employment Opportunity Commission (EEOC) filed a
lawsuit against Carmike in the U.S. District Court, E.D. North Carolina, alleging that seven named
claimants and other similarly situated male employees were sexually harassed by a male supervisor
who worked at the Carmike 15 Theater in Raleigh, North Carolina from February 2003 until his
termination in mid-October 2003. Carmike learned, only after this alleged harasser had stopped
working for Carmike, that he had a criminal record relating to indecent liberties with a minor. In
its lawsuit, the EEOC seeks injunctive and monetary relief, including compensatory and punitive
damages and costs. Carmike filed its answer and defenses to the EEOCs complaint on November 15,
2004. On or about November 4, 2004, a motion to intervene was filed on behalf of five claimants
and family members/guardians of five other claimants. The proposed complaint submitted with the
motion to intervene included claims under state and federal law, including claims of negligent
hiring, promotion, and retention, negligent training and supervision, assault, intentional and
negligent infliction of emotional distress, sexual harassment, and retaliation/constructive
discharge. In the proposed complaint, the intervenors seek injunctive and monetary relief,
including compensatory and punitive damages, attorneys fees, and costs. The motion to 14




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intervene was granted on November 23, 2004 and the intervenors served their complaint on December
9, 2004. Carmike timely answered the intervenors complaint on January 14, 2005. The case is now
in the discovery period. We are prepared to defend these claims vigorously and believe that resolution of these claims
will not have a material adverse effect on our business or financial position. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other matters may arise
from time to time that may have a material adverse effect on our results of operation in a
particular period. On
August 8, 2000, we and our subsidiaries Eastwynn Theatres, Inc.,
Wooden Nickel Pub, Inc. and Military Services, Inc. filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code in
the United States Bankruptcy Court for the District of Delaware. On
January 4, 2002, the Bankruptcy Court entered an order
confirming our Amended Joint Plan of Reorganization under
Chapter 11 of the Bankruptcy Code (the Plan), dated
as of November 14, 2001. The Plan became effective on
January 31, 2002. On February 11, 2005, the Company filed a
motion seeking an order entering a final decree closing the bankruptcy cases.
On March 15, 2005, the United States Bankruptcy Court of the
District of Delaware entered a final decree closing the bankruptcy cases. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the last quarter of the
year ended December 31, 2004. EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth certain information as of March 12, 2005 regarding the executive
officers of Carmike. For purposes of this section, references to Carmike include Carmikes
predecessor, Martin Theatres, Inc. Name
    
    Age
    
    TitleMichael W. Patrick
    
    
    54
    
    
    President, Chief Executive Officer and Chairman of the Board of DirectorsFred W. Van Noy
    
    
    48
    
    
    Senior Vice President, Chief Operating Officer and DirectorMartin A. Durant
    
    
    56
    
    
    Senior Vice President  Finance, Treasurer and Chief Financial OfficerAnthony J. Rhead
    
    
    63
    
    
    Senior Vice President  Film and SecretaryH. Madison Shirley
    
    
    53
    
    
    Senior Vice President  Concessions and Assistant SecretaryGary F. Krannacker
    
    
    42
    
    
    Vice President, General Manager Theatre OperationsPhilip A. Smitley
    
    
    46
    
    
    Assistant Vice President and Controller
 Michael W. Patrickhas served as Carmikes President since October 1981, director since April
1982, Chief Executive Officer since March 1989 and Chairman of the Board of Directors since January
2002. Mr. Patrick also serves as member of the Boards Executive Committee. He joined Carmike in
1970 and served in a number of operational and film booking and buying capacities prior to becoming
President. Mr. Patrick serves as a director of the Will Rogers Institute, and he is a member of the
Board of Trustees of Columbus State University Foundation, Inc. Fred W. Van Noyjoined Carmike in 1975.
He served as a District Manager from 1984 to 1985 and
as Western Division Manager from 1985 to 1988, when he became Vice President  General
Manager. December 1997, he was elected to the position of Senior Vice President  Operations. In November
2000, he became Senior Vice President and Chief Operating Officer. Mr. Van Noy is also a member of
Carmikes Board of Directors. Martin A. Durantjoined Carmike in July 1999 as Senior Vice President  Finance, Treasurer and
Chief Financial Officer. Prior to joining Carmike, Mr. Durant was Senior Vice President  Corporate
Services for AFLAC Incorporated, a Columbus, Georgia based international holding company, for a
period of ten years. Prior to his position with AFLAC he was President of a venture capital firm
located in Florida. Mr. Durant began his career with KPMG Peat Marwick and is a Certified Public
Accountant. Anthony J. Rheadjoined Carmike in June 1981 as manager of the booking office in Charlotte,
North Carolina. In July 1983, Mr. Rhead became Vice
President  Film, in December 1997, he was elected
Senior Vice President  Film and in January 2002 he was elected Senior Vice President  Film and
Secretary. Prior to joining Carmike, he worked as a film booker for Plitt Theatres, Inc. from 1973
to 1981. H. Madison Shirleyjoined Carmike in 1976 as a theatre manager. He served as a District
Manager from 1983 to 1987 and as Director of Concessions from 1987 until 1990. He became Vice
President  Concessions in 1990 and Senior Vice President  Concessions and Assistant Secretary in
December 1997. Gary F. Krannackerjoined Carmike in May 1994 as District Manager. In October 1995, he was
promoted to Regional Manager. In February 1998,
Mr. Krannacker was promoted to Mid-West Division
Manager. He became General Manager-Operations in 2003 15




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and was elected to his current position of Vice President-General Manager, Theatre Operations
in 2004. Prior to joining Carmike, Mr. Krannacker worked in the theatre industry at Cinema World
Theatres for sixteen years. Philip A. Smitleyjoined Carmike in April 1997 as Controller. In January 1998, he was elected
to his present position of Assistant Vice President and Controller. In March 1999, he assumed the
duties of interim Chief Financial Officer pending the appointment of Martin A. Durant in July 1999.
Prior to joining Carmike, Mr. Smitley was Divisional Controller  Transportation of Burnham Service
Corporation, a trucking company. On March 22, 2002, Mr. Smitley filed a personal voluntary petition
for relief under Chapter 7 of the Federal Bankruptcy Code in the United States Bankruptcy Court of
the Middle District of Alabama. This petition was discharged on August 2, 2002. All of the executive officers were serving as our executive officers or those of our
subsidiaries when we filed our voluntary petition for relief under the bankruptcy code. 
 PART II 
  ITEM 5.
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES. Our common stock is
currently traded on the Nasdaq National Market under the symbol CKEC. The last reported sale price of
the common stock on March 11, 2005 was $34.28 per share. The
table below sets forth the high and low closing prices of our common stock from January 1, 2003
through December 31, 2004: 2004
    
    High
    
    
    LowFourth Quarter
    
    $
    39.01
    
    
    $
    34.90Third Quarter
    
    
    39.00
    
    
    
    32.68Second Quarter
    
    
    41.84
    
    
    
    33.80First Quarter
    
    
    38.95
    
    
    
    31.29
 2003
    
    High
    
    
    LowFourth Quarter
    
    $
    36.53
    
    
    $
    26.25Third Quarter
    
    
    27.44
    
    
    
    20.76Second Quarter
    
    
    23.66
    
    
    
    19.30First Quarter
    
    
    23.14
    
    
    
    18.58
 As
of March 11, 2005, there were approximately 252 record holders of our common stock and
there were no shares of any other class of stock issued and outstanding. During fiscal year 2004, we did not make any sales of unregistered equity securities. Beginning the second quarter of 2004, our Board of Directors declared a quarterly
dividend of $0.175 per share. We intend to pay quarterly dividends for the foreseeable future at
our boards discretion, subject to many considerations, including limitations imposed by covenants
in the indenture for our 7.500% senior subordinated notes and our credit facilities, operating
results, capital requirements and other factors. See Item 7, Managements Discussion and Analysis
of Financial Condition and Results of Operations  Liquidity and Capital Resources  Material
Credit Agreement and Covenant Compliance. 
 ITEM 6. SELECTED FINANCIAL DATA. The consolidated selected historical financial and other data below should be read in
conjunction with Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations and with the consolidated financial statements and notes thereto. The selected
historical financial and other data for each of the three fiscal years in the period ended December
31, 2002 are derived from our consolidated financial statements which have been audited by Ernst &
Young LLP, Independent Registered Public Accounting Firm. The selected historical financial and
other data for the two fiscal years ended December 31, 2004 and
2003 are derived from our consolidated
financial statements which have been audited by PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm. During the period from August 8, 2000 through January 31, 2002, we operated as a
debtor-in-possession under chapter 11 of the bankruptcy code. Our results of operations during the
reorganization period were significantly affected by the bankruptcy proceeding 16




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##### Table of Contents



and are therefore not comparable in all respects with our results for other periods. In
addition, the per share data for all periods prior to 2002 reflect the shares of our previously
outstanding classes of common stock, which were cancelled when our reorganization became effective.
The results from those periods are not comparable to the years ended
December 31, 2004 and 2003,
which are based on a different number of shares of our new class of common stock issued when the
reorganization became effective. For the Year Ended December 31,2000(1)
    
    
    2001 (1)
    
    
    2002 (1)
    
    
    2003
    
    
    2004(in millions except per share and operating data)Statement of Operations Data:Revenues:Admissions
    
    $
    315.4
    
    
    $
    311.8
    
    
    $
    342.8
    
    
    $
    332.1
    
    
    $
    331.5Concessions and other (2)
    
    
    143.9
    
    
    
    145.1
    
    
    
    163.6
    
    
    
    161.0
    
    
    
    163.0Total revenues (2)
    
    
    459.3
    
    
    
    457.0
    
    
    
    506.5
    
    
    
    493.1
    
    
    
    494.5Costs and expenses:Film exhibition costs
    
    
    185.2
    
    
    
    171.2
    
    
    
    189.3
    
    
    
    180.4
    
    
    
    174.5Concession costs
    
    
    21.0
    
    
    
    20.2
    
    
    
    19.2
    
    
    
    18.0
    
    
    
    16.9Other theatre operating costs
    
    
    192.7
    
    
    
    177.8
    
    
    
    178.4
    
    
    
    176.8
    
    
    
    179.1General and administrative expenses
    
    
    6.9
    
    
    
    8.8
    
    
    
    15.0
    
    
    
    15.3
    
    
    
    19.3Depreciation and amortization expenses (3)
    
    
    43.5
    
    
    
    42.7
    
    
    
    33.7
    
    
    
    32.8
    
    
    
    33.8Impairment of long-lived assets (4)
    
    
    21.3
    
    
    
    118.8
    
    
    
    
    
    
    
    1.1
    
    
    
    0.9Gain on sales of property and equipment (2)
    
    
    (3.0
    )
    
    
    
    
    
    
    (0.7
    )
    
    
    (3.0
    )
    
    
    (1.1
    )Total costs and expenses
    
    
    467.5
    
    
    
    539.6
    
    
    
    434.9
    
    
    
    421.4
    
    
    
    423.4Operating income (loss)
    
    
    (8.2
    )
    
    
    (82.6
    )
    
    
    71.6
    
    
    
    71.7
    
    
    
    71.1Interest expense
    
    
    32.4
    
    
    
    9.1
    
    
    
    105.5
    
    
    
    42.9
    
    
    
    26.1Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.3Income (loss) before reorganization costs and income taxes
    
    
    (40.7
    )
    
    
    (91.7
    )
    
    
    (33.9
    )
    
    
    28.8
    
    
    
    35.6Reorganization costs
    
    
    7.0
    
    
    
    19.5
    
    
    
    20.5
    
    
    
    (4.1
    )
    
    
    (12.4
    )Income (loss) before income taxes
    
    
    (47.7
    )
    
    
    (111.2
    )
    
    
    (54.5
    )
    
    
    32.9
    
    
    
    48.0Income tax expense (benefit)
    
    
    25.5
    
    
    
    
    
    
    
    (14.7
    )
    
    
    (73.5
    )
    
    
    18.2Net income (loss)
    
    
    (73.2
    )
    
    
    (111.2
    )
    
    
    (39.8
    )
    
    
    106.4
    
    
    
    29.8Preferred stock dividends
    
    
    1.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) available to common stockholders
    
    $
    (74.7
    )
    
    $
    (111.2
    )
    
    $
    (39.8
    )
    
    $
    106.4
    
    
    $
    29.8Weighted average common shares outstanding (in thousands):Basic
    
    
    11,344
    
    
    
    11,344
    
    
    
    9,195
    
    
    
    8,991
    
    
    
    11,704Diluted
    
    
    11,344
    
    
    
    11,344
    
    
    
    9,195
    
    
    
    9,448
    
    
    
    12,480Earnings (loss) per common share:Basic
    
    $
    (6.59
    )
    
    $
    (9.80
    )
    
    $
    (4.32
    )
    
    $
    11.83
    
    
    $
    2.55Diluted
    
    $
    (6.59
    )
    
    $
    (9.80
    )
    
    $
    (4.32
    )
    
    $
    11.26
    
    
    $
    2.39Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.525Balance Sheet Data:Cash and cash equivalents
    
    $
    52.5
    
    
    $
    94.2
    
    
    $
    53.5
    
    
    $
    41.2
    
    
    $
    56.9Property and equipment, net (4)
    
    
    640.3
    
    
    
    491.6
    
    
    
    475.2
    
    
    
    460.3
    
    
    
    469.5Total assets
    
    
    774.7
    
    
    
    651.3
    
    
    
    583.6
    
    
    
    634.6
    
    
    
    643.7Total debt (5)
    
    
    65.0
    
    
    
    68.3
    
    
    
    431.0
    
    
    
    393.1
    
    
    
    323.4Liabilities subject to compromise
    
    
    529.2
    
    
    
    508.1
    
    
    
    37.4
    
    
    
    21.5
    
    
    
    1.3Retained earnings (deficit)
    
    
    (29.7
    )
    
    
    (141.3
    )
    
    
    (180.7
    )
    
    
    (74.3
    )
    
    
    (50.9
    )Total stockholders equity
    
    $
    129.5
    
    
    $
    18.0
    
    
    $
    27.8
    
    
    $
    140.2
    
    
    $
    258.5Other Financial Data:Net cash provided by (used in) operating activities
    
    $
    26.1
    
    
    $
    50.7
    
    
    $
    16.2
    
    
    $
    53.3
    
    
    $
    59.4Net cash provided by (used in) investing activities
    
    $
    (15.6
    )
    
    $
    (1.0
    )
    
    $
    (14.6
    )
    
    $
    (12.2
    )
    
    $
    (35.4
    )Net cash provided by (used in) financing activities
    
    $
    46.3
    
    
    $
    (8.0
    )
    
    $
    (42.4
    )
    
    $
    (53.3
    )
    
    $
    (8.3
    )Capital expenditures
    
    $
    44.9
    
    
    $
    9.2
    
    
    $
    18.1
    
    
    $
    18.9
    
    
    $
    38.6Operating Data:Theatres at
period end (6)
    
    
    352
    
    
    
    323
    
    
    
    308
    
    
    
    299
    
    
    
    282Screens at
period end (6)
    
    
    2,438
    
    
    
    2,333
    
    
    
    2,262
    
    
    
    2,253
    
    
    
    2,188Average screens in operation
    
    
    2,643
    
    
    
    2,386
    
    
    
    2,274
    
    
    
    2,252
    
    
    
    2,207Average screens per theatre
    
    
    6.9
    
    
    
    7.2
    
    
    
    7.3
    
    
    
    7.5
    
    
    
    7.8Total attendance (in thousands)
    
    
    67,804
    
    
    
    64,621
    
    
    
    69,997
    
    
    
    67,189
    
    
    
    63,260Average ticket price
    
    $
    4.65
    
    
    $
    4.83
    
    
    $
    4.90
    
    
    $
    4.93
    
    
    $
    5.17Average concession sales per patron
    
    $
    1.98
    
    
    $
    2.10
    
    
    $
    2.17
    
    
    $
    2.18
    
    
    $
    2.33
  (1)
    See notes 1, 2 and 3 of the
notes to our audited annual consolidated financial statements with
respect to our bankruptcy and financial reporting in accordance with Statement of Position
90-7. See note 2 of notes to audited annual consolidated financial statements with respect to
reorganization costs incurred while in bankruptcy. See note 11 of the
notes to our audited annual
consolidated financial statements for income taxes relative to valuation allowances for
deferred income tax debits.(2)
    Gain on sales of property and equipment for the years ended December 31, 2000, 2001 and 2002
as filed with the SEC, was previously reported in concessions and
other revenues. It has been reclassed in the foregoing table.(3)
    Goodwill amortization of $1.5 million is included for the years ended December 31, 2000 and
2001. 17




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##### Table of Contents



(4)
    See notes 2, 3, and 4 of notes to audited annual consolidated financial statements with
respect to impairments of long-lived assets and restructuring charges.(5)
    Includes current maturities of long-term indebtedness, capital lease obligations and
long-term trade payables; excludes long-term trade payables and liabilities subject to
compromise.(6)
    These amounts exclude theatres which we closed upon approval of the bankruptcy court as
follows: 84 theatres and 394 screens through December 31, 2000; an additional 17 theatres and
81 screens through December 31, 2001; and an additional eight theatres and 44 screens through
December 31, 2002.(7)
    Due to rounding, certain amounts do not total properly. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of our financial condition and operating results should be read in
conjunction with Item 6. Selected Financial and Other Data and our audited annual consolidated
financial statements and accompanying notes. Results of Operations Financial Reporting During Reorganization In connection with our bankruptcy proceedings, we were required to report in accordance with
Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy
Code,(SOP 90-7). SOP 90-7 requires, among other things, (i) that pre-petition liabilities that
are subject to compromise be segregated in our consolidated balance sheet as liabilities subject to
compromise and (ii) the identification of all transactions and events that are directly associated
with our reorganization in the consolidated statement of operations. Seasonality Typically, movie studios release films with the highest expected revenues during the summer
and the holiday period between Thanksgiving and Christmas, causing seasonal fluctuations in
revenues. However, movie studios are increasingly introducing more popular film titles throughout
the year. In addition, in years where Christmas falls on a weekend day, our revenues are typically
lower because our patrons generally have shorter holiday periods away from work or school. Revenues We derive almost all of our revenues from box office admissions and concession sales. We
recognize admissions revenues when movie tickets are sold at the box office, and concession sales
revenues when the products are sold in the theatre. Admissions and concession sales revenues depend
primarily upon attendance, ticket price and the price and volume of concession sales. Our
attendance is affected by the quality and timing of movie releases and our ability to obtain films
that appeal to patrons in our markets. We record proceeds from the sale of gift cards and other
advanced sale-type certificates in current liabilities and recognize admission and concession
revenue when a holder redeems a gift card or other advanced sale-type certificate. We recognize
unredeemed gift cards and other advanced sale-type certificates upon expiration. Expenses Film exhibition costs vary according to box office admissions and are accrued based on the
specified splits of receipts in firm term agreements with movie distributors. The agreements
usually provide for a decreasing percentage of box office admissions to be paid to the movie studio
over the first few weeks of the movies run, subject to a floor for later weeks. Where firm terms
do not apply, film exhibition costs are accrued based on estimates of the final settlement that is
agreed between us and the movie studio after the completion of the movies run. Concession cost of sales are incurred as products are sold. We purchase substantially all of
our beverage supplies from The Coca-Cola Company. We purchase substantially all of our other
concession supplies from a single vendor of which we are the principal customer. 18




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##### Table of Contents



Other theatre operating costs include labor, utilities and occupancy, and facility lease
expenses. Labor costs have both a variable and fixed cost component. During non-peak periods, a
minimum number of staff is required to operate a theatre facility. However, to handle attendance
volume increases, theatre staffing and thus salaries and wages vary in relation to revenues.
Utilities, repairs and maintenance services also have variable and fixed costs components. Our
occupancy expenses and property taxes are primarily fixed costs, as we are generally required to
pay applicable taxes, insurance and fixed minimum rent. Our general and administrative expenses include costs not specific to theatre operations, and
are composed primarily of corporate overhead. Net Operating Losses As of December 31, 2004, after utilizing approximately $28.5 million for 2004, we had
approximately $84.7 million of federal and state operating loss carryforwards with which to offset
our future taxable income. The federal and state net operating loss carryforwards will begin to
expire in the year 2020. The
Company is limited in using its net operating losses. Such limitation is projected to be $26.9 million
per year for the first five years (beginning 2004) and will decrease to approximately $15 million
per year thereafter. Our
ability to utilize such net operating losses is also subject to
certain uncertainties regarding the application of Section 382
of the Internal Revenue Code of 1986, as amended, to prior changes in
ownership of the Company, including the change resulting from the
Companys reorganization in January 2002. See Risk Factors
 We may be limited in our ability to utilize, or may not be
able to utilize, net operating loss carryforwards to reduce our
future tax liability for more information regarding these
uncertainties. Operating Statement Information The following table sets forth for the periods indicated the percentage of total revenues
represented by certain items reflected in our consolidated statements of operations: For the Year EndedDecember 31,2004
    
    
    2003
    
    
    2002Revenues:Admissions
    
    
    67.0
    %
    
    
    67.3
    %
    
    
    67.6
    %Concessions and other
    
    
    33.0
    
    
    
    32.7
    
    
    
    32.4Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Costs and expenses:Film exhibition costs (1)(2)
    
    
    52.6
    %
    
    
    54.3
    %
    
    
    55.2
    %Concessions costs (2)
    
    
    10.4
    
    
    
    11.2
    
    
    
    11.8Other theatre operating costs
    
    
    36.2
    
    
    
    35.9
    
    
    
    35.2General and administrative
    
    
    3.9
    
    
    
    3.1
    
    
    
    3.0Depreciation
    
    
    6.8
    
    
    
    6.6
    
    
    
    6.7Gain on sales of property and equipment
    
    
    (0.2
    )
    
    
    (0.6
    )
    
    
    (0.1
    )Impairment of long-lived assets
    
    
    0.2
    
    
    
    0.2
    
    
    
    Total costs and expenses
    
    
    85.6
    
    
    
    85.3
    
    
    
    85.9Operating income (loss)
    
    
    14.4
    
    
    
    14.5
    
    
    
    14.1Interest expense
    
    
    5.3
    
    
    
    8.7
    
    
    
    20.8Loss on extinguishment of debt
    
    
    1.9
    
    
    
    
    
    
    
    Income (loss) before reorganization costs and income taxes
    
    
    7.2
    
    
    
    5.8
    
    
    
    (6.7
    )Reorganization costs
    
    
    (2.5
    )
    
    
    (0.8
    )
    
    
    4.1Income (loss) before income taxes
    
    
    9.7
    
    
    
    6.7
    
    
    
    (10.8
    )Income tax expense (benefit)
    
    
    3.7
    
    
    
    (14.9
    )
    
    
    (2.9
    )6.0
    %
    
    
    21.6
    %
    
    
    (7.9
    )%
  (1)
    Film exhibition costs include advertising expenses net of co-op reimbursements.(2)
    All costs are expressed as a percentage of total revenues, except film exhibition costs,
which are expressed as a percentage of admissions revenues, and concession costs, which are
expressed as a percentage of concession and other revenues. 19




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##### Table of Contents



Year Ended December 31, 2004 Compared to Year Ended December 31, 2003 Revenues. The Company collects substantially all of its revenues from the sales of admission tickets and
concessions. The table below provides a comparative summary of the operating data for this revenue
generation. For Years ended December 312004
    
    
    2003Average theatres
    
    
    288
    
    
    
    303Average screens
    
    
    2,207
    
    
    
    2,252Average attendance per screen
    
    
    28,661
    
    
    
    29,830Average admission price
    
    $
    5.17
    
    
    $
    4.93Average concession price
    
    $
    2.33
    
    
    $
    2.18Total attendance (in thousands)
    
    
    63,260
    
    
    
    67,189Total revenues (in thousands)
    
    $
    494,475
    
    
    $
    493,085
 Total revenues increased 0.3%
for the year ended December 31, 2004 compared to the year ended
December 31, 2003, due to increased revenues from concessions and other revenues, generally offset
by decreased admission sales. Admissions decreased 0.2% to $331.5 million in 2004 from $332.1
million in 2003 due to a 5.8% decrease in overall attendance partially offset by a 4.9% increase in
average ticket price. Concessions and other revenue increased 1.2% to $163.0 million in 2004 from
$161.0 million in 2003 due to a 6.9% increase in concession sales per patron and a $0.7 million
increase in other revenues. Other revenues consist of game machine revenue, screen advertising,
family entertainment center revenue and other miscellaneous items. Due to higher year-over-year
revenues and lower screen count, our revenues per average screen increased 2.3% to $224,048 from
$218,954. We operated and 282 theatres with 2,188 screens at December 31, 2004 and 299 theatres with
2,253 screens at December 31, 2003. Cost of operations. The table below summarizes operating expense data for the periods presented. For the years ended December 31% varianceFavorable(in thousands)
    
    2004
    
    
    2003
    
    
    (Unfavorable)Film exhibition costs
    
    $
    174,473
    
    
    $
    180,403
    
    
    
    3.3
    %Concession costs
    
    $
    16,881
    
    
    $
    17,985
    
    
    
    6.1
    %Other theatre operating costs
    
    $
    179,127
    
    
    $
    176,781
    
    
    
    (1.3
    %)General and administrative expenses
    
    $
    19,302
    
    
    $
    15,335
    
    
    
    (25.9
    %)Depreciation expenses
    
    $
    33,801
    
    
    $
    32,764
    
    
    
    (3.2
    %)(Gain)/loss on sales of property and equipment
    
    $
    (1,051
    )
    
    $
    (3,023
    )
    
    
    (65.2
    %)Impairment of long-lived assets
    
    $
    892
    
    
    $
    1,148
    
    
    
    22.3
    %
 Film exhibition costs fluctuate in direct relation to the increases and decreases in
admissions revenue. Film exhibition costs for the year ended December
31, 2004 declined as compared to the year ended December 31, 2003 due to the drop in admission revenue as well as
a higher percentage of aggregate percentage deals which lowered overall film rent expenses.
Aggregate arrangements fix the film rent percentage as opposed to typical graduated scale
contracts. Aggregate percentage deals on short-run films tend to have an overall lower percentage
cost for the film. As a percentage of admissions revenue, film exhibition costs were to 52.6% for
the year ended December 31, 2004, as compared to 54.3% for the year ended December 31, 2003. 20




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##### Table of Contents



Concessions costs fluctuate with the changes in concessions revenue. As a percentage of
concessions and other revenues, concession costs were 10.4% for the year ended December 31, 2004 as
compared to 11.2% for the year ended December 31, 2003. This reduction was due to slightly
higher concession prices as well as improved terms with our concession suppliers. Other theatre operating costs for the year ended December 31, 2004 increased due to increases
in rent, utilities and repair costs compared to the year ended December 31, 2003, as well as the
establishment of a reserve of $1.0 million for potential litigation. For more information
concerning this reserve see Item 3 Legal Proceedings. General and administrative expenses for the year ended December 31, 2004 increased compared to
the year ended December 31, 2003 due to professional fees related to Sarbanes-Oxley compliance and
overall increases in other expenses. Depreciation and amortization expenses for the year ended December 31, 2004 increased compared
to the year ended December 31, 2003. This increase reflects the effect of purchases of fixed
assets related to the opening of three new theatres in 2004 as well as construction related to
retrofits and maintenance-related capital expenditures. Gain on sales of property and equipment for the year ended December 31, 2004 decreased
compared to the year ended December 31, 2003 due to lower sales of surplus property. We sold two
previously closed theatres and two parcels of land during the year ended December 31, 2004 compared
to 10 theatres and three parcels of land during the year ended December 31, 2003. Operating
Income.Operating income for the year ended December 31,
2004 decreased 0.8% to
$71.1 million compared to $71.7 million for the year ended December 31, 2003. As a percentage of
revenues, the operating income for the year ended December 31,
2004 was 14.4% compared to 14.5% for
the year ended December 31, 2003. Interest
expense. Interest expense for the year ended December 31,
2004 decreased 39.2% to
$26.1 million from $42.9 million for the year ended December 31, 2003. The decrease is related
directly to lower indebtedness and interest rates obtained through
our debt refinancing, and a result of the resolution of liabilities
subject to compromise the Company reversed approximately $4.5 million of interest expense recorded on disputed claims. Loss on extinguishment of debt.On February 4, 2004, the Company refinanced its debt which
resulted in the write-off of $1.8 million of loan fees related to the post-bankruptcy credit
facilities and a pre-payment premium on the retirement of the 10.375% senior subordinated notes of
$7.5 million. Reorganization
costs. Reorganization costs for the year ended December 31, 2004 consisted of a
credit of $12.4 million, compared to a credit of $4.1 million for the year ended
December 31, 2003.
These credits are the result of changes in estimates on liabilities subject to compromise,
partially offset by professional and other expenses. On February 11,
2005, the Company filed a motion seeking an order entering a final
decree closing the bankruptcy cases. On March 15, 2005, the United
States Bankruptcy Court of the District of Delaware entered a final
decree closing the bankruptcy cases. Income tax expense. We recognized an income tax expense of $18.2 million for the year ended
December 31, 2004, representing a combined federal and state tax rate of 37.5%, compared to an
income tax benefit of $73.5 million for the year ended December 31, 2003. During the quarter
ended December 31, 2003, we determined that the available positive evidence carried more weight than the
historical negative evidence and concluded it was more likely than not that the net deferred tax
assets would be realized in future periods. Therefore, the $78.4 million valuation allowance was
released creating an income tax benefit for 2003. The positive evidence management considered
included operating income for 2002 and 2003, our subsequent stock offering and refinancing,
resulting in significant prospective interest expense reduction, and anticipated operating income
and cash flows for future periods in sufficient amounts to realize the net deferred tax assets. Year Ended December 31, 2003 Compared to Year Ended December 31, 2002 Revenues. The Company collects substantially all of its revenues from the sales of admission tickets and
concessions. The table below provides a comparative summary of the operating data for this revenue
generation. 21




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##### Table of Contents



For Years ended December 312003
    
    
    2002Average theatres
    
    
    303
    
    
    
    311Average screens
    
    
    2,252
    
    
    
    2,274Average attendance per screen
    
    
    29,830
    
    
    
    30,784Average admission price
    
    $
    4.93
    
    
    $
    4.90Average concession price
    
    $
    2.18
    
    
    $
    2.17Total attendance (in thousands)
    
    
    67,189
    
    
    
    69,997Total revenues (in thousands)
    
    $
    493,085
    
    
    $
    506,507
 Total revenues decreased 2.6% for the year ended December 31, 2003 compared to the year
ended December 31, 2002 due to decreases in total attendance, which decreased both admission and
concessions revenue, generally offset by increases in per patron
pricing. Admissions revenue decreased
3.1% to $332.1 million in 2003 from $342.8 million in 2002
due to a 4.0% decrease in overall
attendance and a 0.6% increase in average ticket price. Concessions and other revenue decreased
1.6% to $161.0 million in 2003 from $163.7 million in 2002 due to the
attendance decrease, and a 0.5% increase in concession sales per patron
which were partially offset by a $2.5 million increase in other revenues.
Other revenues consist of game machine revenue, screen advertising, family entertainment center
revenue and other miscellaneous items. As a result, our revenues per average screen decreased 1.7%
to $218,954 from $222,738. We operated 299 theatres with 2,253 screens at December 31, 2003 and 308 theatres with 2,262
screens at December 31, 2002. Cost of operations. The table below summarizes operating expense data for the periods presented. For the years ended December 31% varianceFavorable(in thousands)
    
    2003
    
    
    2002
    
    
    (Unfavorable)Film exhibition costs
    
    $
    180,403
    
    
    $
    189,265
    
    
    
    4.7
    %Concession costs
    
    $
    17,985
    
    
    $
    19,233
    
    
    
    6.5
    %Other theatre operating costs
    
    $
    176,781
    
    
    $
    178,376
    
    
    
    0.9
    %General and administrative expenses
    
    $
    15,335
    
    
    $
    14,983
    
    
    
    (2.3
    %)Depreciation and amortization expenses
    
    $
    32,764
    
    
    $
    33,738
    
    
    
    2.9
    %(Gain)/loss on sales of property and equipment
    
    $
    (3,023
    )
    
    $
    (681
    )
    
    
    343.9
    %Impairment of long-lived assets
    
    $
    1,148
    
    
    $
    
    
    
    
    n/a
 Film exhibition costs fluctuate in direct relation to the increases and decreases in
admissions revenue. Film exhibition costs declined due to the drop in revenue as well a higher
percentage of aggregate percentage deals which lowered the overall film rent expenses. As a
percentage of admissions revenue, film exhibition costs were 54.3% for the year ended December 31,
2003 as compared to 55.2% for the year ended December 31, 2002. Concessions costs fluctuate with the changes in concessions revenue. As a percentage of
concessions and other revenues, concession costs were 11.2% for the year ended December 31, 2003 as
compared to 11.8% for the year ended December 31, 2002. Other theatre operating costs for the year ended December 31, 2003 decreased due to cost
control measures taken during lower business volumes. General and administrative expenses for the year ended December 31, 2003 increased compared to
the year ended December 31, 2002 due to increased valuation of deferred stock compensation. 22




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##### Table of Contents



Depreciation and amortization for the year ended December 31, 2003 remained relatively flat
compared to the year ended December 31, 2002. Gain on sales of property and equipment for the year ended December 31, 2003 increased
compared to the year ended December 31, 2002 due to higher sales of surplus property. We sold 10
theatres and three parcels of land during the year ended December 31, 2003 compared to five
theatres and two parcels of land during the year ended December 31, 2002. Operating
Income.Operating income for the year ended December 31, 2003 decreased 0.1% to
$71.7 million compared to $71.6 million for the year ended December 31, 2002. As a percentage of
revenues, the operating income for the year ended December 31,
2003 was 14.5% compared to 14.1% for
the year ended December 31, 2002. Interest expense. Interest expense for the year ended December 31, 2003 decreased 60.0% to
$42.2 million from $105.5 million for the year ended December 31, 2002. The decrease is due to
interest payments made on January 31, 2002 in conjunction with our emergence from Chapter 11. Reorganization costsReorganization costs for 2003 consisted of a credit of $4.8 million as
a result of changes in estimates on liabilities subject to compromise, partially offset by $0.7
million of professional and other expenses. We incurred reorganization costs of $20.5 million in
2002, including $8.0 million of professional fees and $8.9 million in non-cash transactions related
to the extinguishment of pre-bankruptcy debt and other items totaling $3.6 million. Income tax expense (benefit). For the period ending December 31, 2004, the Company recognized
an income tax expense of $18.2 million. Additionally, we will pay approximately $569 thousand in
alternative minimum taxes for the year ended December 31, 2004. During the quarter ended December
31, 2003, we determined the available positive evidence carried more weight than the historical
negative evidence and concluded it was more likely than not that the net deferred tax assets would
be realized in future periods. Therefore, the $78.4 million valuation allowance was released
creating an income tax benefit for 2003. The positive evidence management considered included
operating income for 2003 and 2002, our subsequent stock offering and refinancing, resulting in
significant prospective interest expense reduction, and anticipated operating income and cash flows
for future periods in sufficient amounts to realize the net deferred tax assets. We recognized an
income tax benefit of $73.5 million in 2003. The income tax benefit recorded in 2002 is the result
of the Job Creation and Worker Assistance Act of 2002, which allowed for additional carryback of
net operating losses resulting in a cash refund of approximately $14.7 million. As is customary,
the Internal Revenue Service reviews refunds of this size. This review was completed on November
25, 2003 with no adjustments made by the Internal Revenue Service. The new provision also
temporarily suspends the 90% limitation found in Internal Revenue Code Section 56(d)(1) on the use
of net operating loss carrybacks arising in tax years ending in 2001 and 2002 for alternative
minimum tax purposes. Liquidity and Capital Resources General Our revenues are collected in cash and credit card payments. Because we receive our revenues
in cash prior to the payment of related expenses, we have an operating float which partially
finances our operations. We had working capital of $3.0 million as of December 31, 2004 compared to
a working capital deficit of $22.1 million at December 31, 2003. The change in working capital is
primarily due to our refinancing completed on February 4, 2004.
See Note 10- Debt of the Notes to
Consolidated Financial Statements. At December 31, 2004,
we had available borrowing capacity of $50 million under our revolving
credit facility and approximately $56.9 million in cash and cash equivalents on hand. The
material terms of our revolving credit facility are described below in Material Credit Agreements
and Covenant Compliance. Net cash provided by
operating activities was $59.4 million for the year ended December 31,
2004 compared to net cash provided by operating activities of $53.3 million for the year ended
December 31, 2003. This change is due to increased profit from operations related primarily to
lower interest expenses, offset by changes in accounts payable, payments to general unsecured
creditors and other reorganization items. Net cash used in investing
activities was $35.4 million
for the year ended December 31, 2004 compared to net cash used in investing activities of $12.2
million for the year ended December 31, 2003 due to increased construction of new theatres. For the
year ended December 31, 2004 net cash used in financing activities was $8.3 million compared to
$53.3 million for the year ended December 31, 2003 due to our refinancing. Net cash provided by operating activities was $53.3 million for the year ended December 31,
2003 compared to net cash provided by operating activities of $16.3 million for the year ended
December 31, 2002. This change is due to increased profit from operations related primarily to
lower interest expenses, offset by changes in accounts payable, payments to general unsecured
creditors and other 23




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reorganization items. Net cash used in investing activities was $12.2 million for the year
ended December 31, 2003 compared to net cash used in investing activities of $14.6 million for the
year ended December 31, 2002. For the year ended December 31, 2003 net cash used in financing
activities was $53.3 million compared to $42.4 million for the year ended December 31, 2002. Our liquidity needs are funded by operating cash flow, sales of surplus assets, availability
under our credit agreements and short term float. The exhibition industry is very seasonal with the
studios normally releasing their premiere film product during the holiday season or 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 film product, any time during the
calendar year, will have the most dramatic impact on our cash needs. We
plan to make the maximum capital expenditures allowed under the
revolving credit facility for the foreseeable future. The
revolving credit facility currently limits capital expenditures to
$50 million annually, plus the carryover of any unused portion for the life
of the facility. We anticipate
we will add approximately 141
screens during the course of 2005 and close approximately 35 screens in older theatres where
leases will not be renewed. The expenses associated with exiting these closed theatres typically
relate to costs associated with removing owned equipment and is not
material to our operations. Our ability to service our indebtedness will require a significant amount of cash. Our ability
to generate this cash will depend largely on future operations. Based upon our current level of
operations, we believe that cash flow from operations, available cash, sales of surplus assets and
borrowings under our credit agreements will be adequate to meet our liquidity needs for the next
twelve months. However, the possibility exists that, if our liquidity needs are not met and we are
unable to service our indebtedness, we could come into technical default under any of our debt
instruments, causing the agents or trustees for those instruments to declare all payments due
immediately or, in the case of the senior debt, to issue a payment blockage to the more junior
debt. A similar situation contributed to the circumstances that led us to file our voluntary
petition for relief under chapter 11 in August 2000, as described in Our Reorganization. We cannot make assurances that our business will continue to generate significant cash flow to
fund our liquidity needs. We are dependent to a large degree on the publics acceptance of the
films released by the studios. We are also subject to a high degree of competition and low barriers
of entry into our industry. In the future, we may need to refinance all or a portion of our
indebtedness on or before maturity. We cannot make assurances that we will be able to refinance any
of our indebtedness or raise additional capital through other means, on commercially reasonable
terms or at all. If we have insufficient cash flow to fund our liquidity needs and are unable to
refinance our indebtedness or raise additional capital, we could come into technical default under
our debt instruments as described below. In addition, we may be unable to pursue growth
opportunities in new and existing markets and to fund our capital expenditure needs. Material Credit Agreements and Covenant Compliance As described below, our credit and leasing facilities contain certain restrictive provisions
which, among other things, limit additional indebtedness, limit capital expenditures, limit the
payment of dividends and other defined restricted payments, require that certain debt to
capitalization ratios be maintained and require minimum levels of defined cash flows. Revolving Credit Facility On February 4, 2004, we entered into a revolving credit facility with Goldman Sachs Credit
Partners L.P. as sole lead arranger, sole book runner and sole syndication agent and Wells Fargo
Foothill, Inc. as administrative agent and collateral agent. The revolving credit facility provides
for borrowings of up to $50.0 million. The interest rate for borrowings under the revolving credit
facility is set from time to time at our option (subject to certain conditions set forth in the
revolving credit facility) at either: (1) a specified base rate plus 2.25% or (2) LIBOR plus 3.25%
per annum. The final maturity date of the facility is August 4, 2008. The revolving credit facility contains covenants which, among other things, limit our ability,
and that of our restricted subsidiaries, to:  
    pay dividends or make any other restricted payments;
    create liens on our assets;
    make certain investments;
    dispose of interests in our subsidiaries;
    consolidate, merge, transfer or sell assets or acquire properties or businesses; 24




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
    enter into transactions with our affiliates; and
    engage in any sale-leaseback or similar transaction involving any of our assets. Our revolving credit facility generally prohibits us from incurring additional indebtedness or
materially amending the terms of any agreement relating to existing indebtedness without lender
approval. In particular, our revolving credit agreement generally prohibits us from incurring
additional indebtedness other than purchase money debt or capital leases less than $10.0 million,
acquired debt less than $10.0 million or subordinated debt or other unsecured debt less than $2.5
million, in each case subject to compliance with financial covenants. Subsequent
to December 31, 2004, we executed Amendment No. 1 to our revolving credit
facility. This amendment modified the definition of
Consolidated Capital Expenditures and increased the amount allowable as
capital expenditures from
$35 million to $40 million for the year ended December 31, 2004 and
$50 million annually, plus the
carryover of any unused portion for the remaining life of the credit
facility. Had we not
negotiated this amendment we would have been in default under the maximum consolidated capital
expenditures financial covenant for the year ended December 31, 2004. The revolving credit facility also contains financial covenants that require us to maintain
specified ratios of consolidated total debt to adjusted EBITDA (no greater than 4.50 to 1.00) and
adjusted EBITDA to consolidated cash interest expense (not less than 2.00 to 1.00). The terms
governing each of these ratios are defined in the revolving credit facility. Borrowings under the revolving credit facility are pledged by first priority security
interests in substantially all of our tangible and intangible assets, including the capital stock
of our subsidiaries. All of our subsidiaries guaranteed our obligations under the revolving credit
facility. Term Loan Facility On February 4, 2004, we entered into a term loan facility with Goldman Sachs Credit Partners
L.P. as sole lead arranger, sole book runner and sole syndication agent and National City Bank as
administrative agent and collateral agent. The term loan facility provides for borrowings of $100.0
million, which were drawn on the closing of the facility. The interest rate for the borrowings
under the term loan facility is equal to, at our option, (1) a specified base rate plus 2.25% or
(2) LIBOR plus 3.25% per annum. The final maturity date of the loan is February 4, 2009. Under the
facility we are required to make annual principal amortization payments of $1.0 million or $250,000
per quarter. The term loan facility contains certain negative covenants that, among other things, limit our
ability, and that of our restricted subsidiaries, to:  
    pay dividends or make any other restricted payments;
    create liens on our assets;
    make certain investments;
    dispose of interests in our subsidiaries;
    consolidate, merge, transfer or sell assets or acquire properties or businesses;
    enter into transactions with our affiliates; and
    engage in any sale-leaseback or similar transaction involving any of our assets. Under our term loan facility, we are generally permitted to incur additional debt so long as
we maintain a ratio of adjusted EBITDA to consolidated fixed charges of greater than or equal to
2.00 to 1.00. Notwithstanding this limitation, we are also permitted to incur other indebtedness,
including purchase money debt and capital leases less than $12.5 million, acquired debt of less
than $12.5 million and other unsecured debt of up to $7.5 million. The lenders under the term loan facility have a second priority security interest in
substantially all our tangible and intangible assets, including the capital stock of our
subsidiaries. All of the security interests and liens that secure the term loan facility are junior
and 25




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##### Table of Contents



subordinate to the liens and security interests of the collateral agent under the revolving
facility. Our subsidiaries guaranteed our obligations under the term loan facility. We may voluntarily pre-pay the term loan, in whole or in part, at (1) 103.0% of the amount
repaid if such repayment occurs on or prior to the first anniversary of the closing of the term
loan facility; (2) 102.0% of the amount repaid if such repayment occurs after the first anniversary
but before the second anniversary; (3) 101.0% of the amount repaid if such repayment occurs
after the second anniversary but before the third anniversary and (4) 100% of the amount repaid if
such repayment occurs after the third anniversary. Upon a change in control, as defined in the term loan facility agreement, subject to certain
exceptions, we are required to offer to repurchase from each lender all or any portion of each
lenders term loans at a purchase price equal to 101% of the principal amount thereof plus accrued
and unpaid interest to the date of purchase. 7.500% Senior Subordinated Notes On February 4, 2004, we completed an offering of $150.0 million in aggregate principal amount
of 7.500% senior subordinated notes due February 15, 2014 to institutional investors. The indenture contains covenants, which, among other things, limit our ability, and that of
our restricted subsidiaries, to:  
    make restricted payments;
    create liens on our assets;
    consolidate, merge or otherwise transfer or sell all or substantially all of our assets;
    engage in certain sales of less than all or substantially all of our assets;
    incur additional indebtedness;
    issue certain types of stock; and
    enter into transactions with affiliates. In addition, under the terms of the indenture governing the notes, we are prohibited from
incurring any subordinated debt that is senior in any respect in right of payment to the notes. We
completed an exchange of the notes for registered notes with the same terms in August, 2004. Upon a change of control, as defined in the indenture, subject to certain exceptions, we are
required to offer to repurchase from each holder all or any part of each holders notes at a
purchase price of 101% of the aggregate principal amount thereof plus accrued and unpaid interest
to the date of purchase. The indenture contains customary events of default for agreements of that type, including
payment defaults, covenant defaults and bankruptcy defaults. If any event of default under the
indenture occurs and is continuing, then the trustee or the holders of at least 25% in principal
amount of the then outstanding notes may declare all the notes to be due and payable immediately. Our subsidiaries have guaranteed the notes and such guarantees are junior and subordinated to
the subsidiary guarantees of our senior debt on the same basis as the notes are junior and
subordinated to the senior debt. Interest at 7.500% per annum from the issue date to maturity is
payable on the notes each February 15 and August 15. The notes are redeemable at our option under
certain conditions. In conjunction with this refinancing, we wrote-off loan fees relating to the post-bankruptcy
credit facilities of $1.8 million and paid pre-payment premiums to retire the 10 3/8% senior
subordinated notes in the amount of $7.8 million. 26




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##### Table of Contents



Contractual Obligations As of December 31, 2004, our long-term debt obligations, obligations to general unsecured
creditors pursuant to the plan of reorganization and future minimum payments under capital leases
and operating leases with terms over one year and the agreement with our chief executive officer
(except as indicated) were as follows: Payments Due by Period (in thousands)One Year
    
    
    
    
    
    
    
    
    
    
    After 5or Less
    
    
    2-3 Years
    
    
    4-5 Years
    
    
    Years
    
    
    TotalTerm loan credit agreement (1)
    
    $
    1,000
    
    
    $
    2,000
    
    
    $
    96,000
    
    
    $
    
    
    
    $
    99,000Revolving credit agreement (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.500% senior subordinated notes (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    150,000Long-term interest payments
    
    
    17,061
    
    
    
    33,947
    
    
    
    28,600
    
    
    
    46,046
    
    
    
    125,654General unsecured creditors
    
    
    
    
    
    
    1,348
    
    
    
    
    
    
    
    
    
    
    
    1,348Industrial revenue bond
    
    
    315
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315Long-term
financing obligations (4)
    
    
    5,328
    
    
    
    10,656
    
    
    
    10,656
    
    
    
    57,758
    
    
    
    84,398Capital lease obligations
    
    
    6,756
    
    
    
    13,268
    
    
    
    13,228
    
    
    
    64,646
    
    
    
    97,898Operating
leases (5)
    
    
    40,304
    
    
    
    74,915
    
    
    
    68,971
    
    
    
    306,352
    
    
    
    490,542Employment
agreement with Chief Executive Officer (6)
    
    
    850
    
    
    
    921
    
    
    
    
    
    
    
    
    
    
    
    1,771Total contractual cash obligations
    
    $
    71,614
    
    
    $
    137,055
    
    
    $
    217,455
    
    
    $
    624,802
    
    
    $
    1,050,926
  (1)
    The term loan has a maturity date of February 4, 2009.(2)
    The revolving credit agreement has a maturity date of August 4, 2008.(3)
    The maturity date for the 7.500% senior subordinated notes is February 15, 2014.(4)
    Long-term financing obligations excludes $19.0 million related to non-cash financing
obligations offset by long-term financing assets.(5)
    Within the operating leases is a commitment to enter into a transaction that will be accounted
for as a financing obligation in the amount of $6.3 million. The Company is required to make payments on this lease prior to the
closing of the financing.(6)
    The employment agreement with our Chief Executive Officer provides for compensation of
$850,000 per year for five years commencing January 31, 2002. The above table does not include
bonus payments of up to 50% of his base salary if certain performance goals are achieved. Off-Balance Sheet Arrangements As of December 31, 2004, we did not have any off-balance sheet financing transactions or
arrangements other than disclosed in the table above. Asset Impairments In 2004 and 2003, we identified impairments of asset values for certain theatres which we
reflected as operating expenses in our consolidated financial statements. Based on our analysis, no
such charges were required in 2002. The table below sets out certain information concerning these impairments: in millions( except number of theatres and screens)
    
    2004
    
    
    2003Annual impairment charge included in operations
    
    $
    0.9
    
    
    $
    1.1Reduction in carrying values
    
    
    4.0
    
    
    
    3.0Reduction in accumulated depreciation and amortization expenses
    
    $
    (3.1
    )
    
    $
    (1.9
    )Number of theatres affected
    
    
    9
    
    
    
    4Number of screens affected
    
    
    30
    
    
    
    27
 The impairment charges in 2004 and 2003 were primarily caused by reductions in estimated
theatre cash flows due to the impact of new or increased competition on certain older,
auditorium-style theatres, negative evaluation of the operating results produced from theatres
previously converted to discount theatres, or our inability to improve a marginal theatres
operating results to a level that would support the carrying value of the long-lived assets. Critical Accounting Policies The preparation of our financial statements requires our management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the period. On an on-going basis, we evaluate our estimates and
judgments, 27




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including those related to leasing transactions, depreciation of property and equipment,
income taxes, litigation and other contingencies and, in particular, those related to impairment of
long-lived assets including goodwill. We base our estimates and judgments on historical experience
and on various other factors that we believe to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions and conditions and such difference could be material. All critical
accounting estimates have been discussed with our audit committee. We believe the following critical accounting policies, among others, affect our more
significant judgments and estimates used in the preparation of our consolidated financial
statements in accordance with accounting principles generally accepted in the United States. Property and Equipment Property and equipment are carried at cost, net of accumulated depreciation, or cost adjusted
for recognized impairments. Assets held for disposal are reported at the lower of the assets
carrying amount or its fair value less costs to sell. Amortization of assets recorded under capital
leases is included with depreciation expense in the accompanying consolidated statements of
operations. We
compute depreciation on a straight-line basis as follows: Building and improvements
    
    20-30 yearsLeasehold improvements*
    
    15-30 yearsLeasehold interests*
    
    15-30 yearsCapital leases*
    
    15-30 yearsLong-term financing assets
    
    30 yearsEquipment
    
    5-15 years
  *
    Number of years is based on the terms of the applicable lease Impairment of Long-lived Assets, Including Goodwill Goodwill is the excess of the purchase price over the fair value of net assets acquired in
business combinations accounted for as a purchase. The provisions of SFAS 142, Goodwill and Other
Intangible Assets, were adopted on January 1, 2002. The provisions prohibit the amortization of
goodwill and indefinite-lived intangible assets and require that these assets be tested
periodically for impairment at least annually. We consider all of our consolidated operations to
be our reporting unit for SFAS 142 purposes. The Company tests goodwill for impairment during the
fourth quarter of its fiscal year (or on an interim basis should an event occur that may reduce the
fair value of the reporting unit below its carrying value). As of December 31, 2004 and 2003, our
financial statements included acquisition related goodwill of $23.4 million, net of previous
amortization. We account for our property and equipment in accordance with the Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets(SFAS
No. 144). We review our property and equipment for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. We periodically
review and monitor our internal management reports and the competition in our markets for
indicators of impairment. We consider a trend of operating results that are not in line with
managements expectations to be the primary indicator of potential impairment. An additional
impairment indicator used by management is the existence of competition in a market, either from
third parties or from our own expansion. For purposes of SFAS No. 144, assets are evaluated for
impairment at the theatre level except when multiple theatres are located in the same geographic
area. Management believes this is the lowest level for which there are identifiable cash flows. We
deem there to be an impairment if a forecast of undiscounted future operating cash flows directly
related to the theatre or market, including estimated disposal value if any, is less than its
carrying amount. If there is a determination of an impairment, the loss is measured as the amount
by which the carrying amount of the theatre or market exceeds its fair value. Fair value is based
on managements estimates which are based on using the best information available, including prices
for similar theatres or the results of valuation techniques such as discounting estimated future
cash flows. Considerable judgment is necessary to estimate discounted future cash flows.
Accordingly, actual results could vary significantly from such estimates. See Asset Impairments above for additional information regarding the effects on the 2004 and
2003 consolidated financial statements. 28




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Bankruptcy Matters As debtors-in-possession, we had the right, subject to bankruptcy court approval and certain
other limitations, to assume or reject executory contracts and unexpired leases during our
reorganization. Any damages resulting from rejection of executory contracts or unexpired leases
were treated as general unsecured claims in our reorganization. During our reorganization, we
received approval from the bankruptcy court to reject theatre leases on 136 of our theatre
locations. We estimate that our aggregate liability at December 31, 2004 for general unsecured
creditors is approximately $1.3 million, which includes our estimated liability for damages
resulting from the rejection of executory contracts and unexpired leases which we have not already
paid. As of December 31, 2004, total accrued interest on those claims was $338,000. All of these
claims are disputed. As such, we cannot presently determine with certainty the ultimate liability
that may result; however, the bankruptcy court still maintains jurisdiction over certain matters
related to the implementation of the plan of reorganization, including the unresolved disputed
claims. We have made our best estimate of such liability given the facts available at this time. If
we are unable to resolve these claims with the unsecured creditors we may petition the bankruptcy
court to resolve them. On February 11, 2005, the Company filed a
motion seeking an order entering a final decree closing the
bankruptcy cases. On March 15, 2005, the United States Bankruptcy
Court of the District of Delaware entered a final decree closing the
bankruptcy cases. Leases We operate most of our theatres under non-cancelable operating lease agreements. These leases
generally provide for the payment of fixed monthly rentals, property taxes, common area
maintenance, insurance and repairs. Certain of these leases provide for escalating lease payments
over the terms of the leases. Moreover, certain leases also include contingent rental fees based on
a percentage of sales. At our option, we can renew a substantial portion of our theatre leases, at
the then fair rental rate, for various periods with the maximum renewal period generally totaling
10-20 years. For financial statement purposes, the total amount of base rentals over the terms of
the leases is charged to expense on the straight-line method over the initial lease terms. Rental
expense in excess of lease payments is recorded as a deferred rental liability and is amortized to
rental expense over the remaining term of the lease. Percentage Rent Several leases have a contingent component called percentage rent. Percentage rent is based on
a percentage of defined revenue factors over a fixed breakpoint for the lease year as described
within the lease. We accrue for this contingent liability monthly based on the trailing twelve
months activity of the affected theatre. Payment of this liability is defined within the lease and
the accrual is reconciled at the end of the lease year. Financing Obligations The Company
is considered the owner of certain assets during construction under the provisions
of Emerging Issues Task Force No. 97-10, as we pay directly for a substantial portion of the construction costs. Once
construction is completed, we consider the requirements under
Financial Accounting Standards No. 98 for sale treatment, and if the
arrangement does not meet such requirements, we record the reimbursement of some of the
construction costs from the landlord as a financing obligation. The obligation is amortized over
the lease term based on the rent payments designated in the contract. Income Taxes The Company
accounts for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS No. 109).
Under the SFAS No. 109, the
liability method is used in accounting for income taxes. In 2000, we established a valuation allowance in accordance with the provisions of Statement
of SFAS No. 109, Accounting for Income Taxes. We periodically review the
adequacy of the valuation allowance and recognize the benefits of deferred tax assets only as
reassessment indicates that it is more likely than not that the deferred tax assets will be
realized. For the year ended December 31, 2003, we determined that it is more likely than not that
the deferred tax assets will be realized in the future. Accordingly, the valuation of approximately
$78.4 million was released and a deferred tax asset of
$72.0 million was recognized. If our profitability significantly
decreases it could negatively impact our ability to utilize the
deferred tax asset. Impact of Recently Issued Accounting Standards On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 123(R), Share Based Payment (SFAS 123(R)). SFAS 123(R)
revises FASB Statement of Financial Accounting Standards No. 123, Accounting for stock-based
Compensation and requires companies to expense the fair value of employee stock options and other
forms of stock-based compensation. In addition, FAS 123(R) supercedes Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25), and amends FASB
Statement of Financial Accounting Standards No. 95, Statement of Cash
Flows (SFAS 95). 29




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##### Table of Contents



SFAS 123(R) requires
companies to use fair value to measure stock-based compensation
awards and cease using the intrinsic value method of
accounting, which APB No. 25 allowed,
and resulted in no expense for many awards of stock options where the exercise price of the option
equaled the price of the underlying stock at grant date. The fair value of the award is not
remeasured after its initial estimation on the grant date (except under specific circumstances). SFAS 123(R)
must be adopted no later than for periods beginning after June 15, 2005. Based on our
valuation under the Black-Scholes option valuation model, presently
used by the Company and still appropriate under SFAS 123(R), the
Company estimates additional deferred compensation expense from
adoption to be approximately $1.0 million for the years ended
December 31, 2005 and 2006. The Company will evaluate other
valuation methods, prior to implementation, to determine the most
accurate for the Company. Recent Developments None Information About Forward-Looking Statements This annual report contains forward-looking statements within the meaning of the federal
securities laws. 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. Statements that
are not historical facts, including statements about our beliefs and expectations, are
forward-looking statements. Forward-looking statements include statements preceded by, followed by
or that include the words, believes, expects, anticipates, plans, estimates or similar
expressions. These statements include, among others, statements regarding our strategies, sources
of liquidity, and the opening of new theatres during 2004. Forward-looking statements are only predictions and are not guarantees of performance. These
statements are based on beliefs and assumptions of our management, which in turn are based on
currently available information. Important assumptions relating to the forward-looking statements
include, among others, assumptions regarding expected pricing levels, competitive conditions and
general economic conditions. These assumptions could prove inaccurate. The forward-looking
statements also involve risks and uncertainties, which could cause actual results to differ
materially from those contained in any forward-looking statement. Many of these factors are beyond
our ability to control or predict. Such factors include, but are not limited to, the following:  
    the availability of suitable motion pictures for exhibition in our markets;
    competition in our markets;
    competition with other forms of entertainment;
    the effect of our leverage on our financial condition; and
    other factors, including the risk factors discussed on pages 14 through 22 in this annual report. We believe these forward-looking statements are reasonable; however, undue reliance should not
be placed on any forward-looking statements, which are based on current expectations. Further,
forward-looking statements speak only as of the date they are made, and we undertake no obligation
to update publicly any of them in light of new information or future events. 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We are exposed to various market risks. We have floating rate debt instruments and, therefore,
are subject to the market risk related to changes in interest rates. Interest paid on our debt is
largely subject to changes in interest rates in the market. Our
revolving credit facility and
our five-year term loan credit facility are based on a structure that is priced over an index
or LIBOR rate option. An increase of 1% in interest rates would increase the interest expense on
our $100 million term loan credit agreement, $1 million on an annual basis. If our $50 million
revolving credit agreement was fully drawn a 1% increase in interest rates would increase interest
expense $500,000 on an annual basis. The interest rate on our 7.500% senior subordinated notes is
fixed and changes in interest rates will have no effect on annual interest expense. A substantial number of our theatre leases have increases contingent on Consumer Price Index
(CPI) changes. A 1.0% change in CPI would not have a material effect on rent expense. 30




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Consolidated Financial Statements for the year ended December 31, 2004. Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting FirmReport of Ernst & Young LLP, Independent Registered Public Accounting FirmConsolidated Balance SheetsConsolidated Statements of OperationsConsolidated Statements of Cash FlowsConsolidated Statements of Stockholders EquityNotes to Consolidated Financial Statements
 31




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Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders
of Carmike Cinemas, Inc. : In our opinion, the
consolidated financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of
Carmike Cinemas, Inc. and its subsidiaries at December 31, 2004
and 2003, and the results of their operations and their cash flows
for the years then ended in conformity with accounting principles
generally accepted in the United States of America. These financial
statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion. PricewaterhouseCoopers LLP
Atlanta, Georgia
March 15, 2005 32




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Report Of Independent Registered Public Accounting Firm Board of Directors and Shareholders
Carmike Cinemas, Inc. We have audited the accompanying consolidated statement of operations, stockholders equity and
cash flows of Carmike Cinemas, Inc. and subsidiaries for the year
ended December 31, 2002. Our audit also included the financial
statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements and schedule based on our audit. We conducted our audit in accordance with auditing standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated results of operations and cash
flows of Carmike Cinemas, Inc. and subsidiaries for the year ended
December 31, 2002, in conformity with United States generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the
financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in
Note 1 to the consolidated financial statements, in 2002 the Company ceased amortization of goodwill
in accordance with Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets. Ernst & Young LLP Atlanta, Georgia
 
March 3, 2003 except for
the restatement for lease accounting as described
in the Companys Form 10-K/A filed on December 6, 2004,
as to which date is December 6, 2004 33




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CONSOLIDATED BALANCE SHEETS
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands, except for share data) December 31,2004
    
    
    2003Assets:Current assets:Cash and cash equivalents
    
    $
    56,944
    
    
    $
    41,236Accounts and notes receivable
    
    
    1,464
    
    
    
    2,061Inventories
    
    
    1,459
    
    
    
    1,577Prepaid expenses
    
    
    6,252
    
    
    
    6,956Total current assets
    
    
    66,119
    
    
    
    51,830Other assets:Investment in and advances to partnerships
    
    
    2,092
    
    
    
    6,952Deferred income tax asset
    
    
    54,414
    
    
    
    72,036Assets held for sale
    
    
    6,534
    
    
    
    8,932Other
    
    
    21,027
    
    
    
    11,189Total other assets
    
    
    84,067
    
    
    
    99,109Property and equipment:Land
    
    
    47,639
    
    
    
    44,561Construction
in progress
    
    
    19,696
    
    
    
    8,362Building and improvements
    
    
    149,503
    
    
    
    143,924Leasehold improvements
    
    
    215,263
    
    
    
    214,251Leasehold interest
    
    
    5,531
    
    
    
    5,841Capital leases and long-term financing assets
    
    
    72,841
    
    
    
    66,641Equipment
    
    
    198,092
    
    
    
    185,413Total property and equipment
    
    
    708,565
    
    
    
    668,993Accumulated depreciation
    
    
    (238,437
    )
    
    
    (208,670
    )Property and equipment, net of accumulated depreciation
    
    
    470,128
    
    
    
    460,323Goodwill, net of accumulated amortization
    
    
    23,354
    
    
    
    23,354Total assets
    
    $
    643,668
    
    
    $
    634,616Liabilities and stockholders equity:Current liabilities:Accounts payable
    
    $
    22,710
    
    
    $
    27,362Dividends payable
    
    
    2,128
    
    
    
    Accrued expenses
    
    
    35,582
    
    
    
    44,413Current maturities of long-term indebtedness, capital leases and long-term financing obligations
    
    
    2,872
    
    
    
    2,162Total current liabilities
    
    
    63,292
    
    
    
    73,937Long-term liabilities:Long-term debt, less current maturities
    
    
    248,000
    
    
    
    323,050Capital lease and long-term financing obligations, less current maturities
    
    
    72,530
    
    
    
    67,889Long-term trade payables, less current maturities
    
    
    
    
    
    
    7,988320,530
    
    
    
    398,927Liabilities Subject to Compromise
    
    
    1,348
    
    
    
    21,521Stockholders equity:Preferred stock, $1.00 par value, authorized 1,000,000 shares, none outstanding at December 31,
2004 and 2003
    
    
    
    
    
    
    Common stock, $0.03 par value, authorized 20,000,000 shares, issued and outstanding 12,162,622
shares and 9,148,012 shares at December 31, 2004 and 2003, respectively.
    
    
    365
    
    
    
    275Paid-in capital
    
    
    308,990
    
    
    
    214,270Accumulated deficit
    
    
    (50,857
    )
    
    
    (74,314
    )258,498
    
    
    
    140,231Total liabilities and stockholders equity
    
    $
    643,668
    
    
    $
    634,616
 See accompanying notes. 34




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CONSOLIDATED STATEMENTS OF OPERATIONS
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands, except per share data) Years Ended December 31,2004
    
    
    2003
    
    
    2002Revenues:Admissions
    
    $
    331,479
    
    
    $
    332,070
    
    
    $
    342,839Concessions and other
    
    
    162,996
    
    
    
    161,015
    
    
    
    163,668494,475
    
    
    
    493,085
    
    
    
    506,507Costs and expenses:Film exhibition costs
    
    
    174,473
    
    
    
    180,403
    
    
    
    189,265Concession costs
    
    
    16,881
    
    
    
    17,985
    
    
    
    19,233Other theatre operating costs
    
    
    179,127
    
    
    
    176,781
    
    
    
    178,376General and administrative expenses
    
    
    19,302
    
    
    
    15,335
    
    
    
    14,983Depreciation expenses
    
    
    33,801
    
    
    
    32,764
    
    
    
    33,738Gain on sales of property and equipment
    
    
    (1,051
    )
    
    
    (3,023
    )
    
    
    (681
    )Impairment
charge of long-lived assets
    
    
    892
    
    
    
    1,148
    
    
    
    423,425
    
    
    
    421,393
    
    
    
    434,914Operating income
    
    
    71,050
    
    
    
    71,692
    
    
    
    71,593Interest expense (Contractual interest was $50,215 for the year ended December 31, 2002)
    
    
    26,104
    
    
    
    42,874
    
    
    
    105,520Loss on extinguishment of debt
    
    
    9,313
    
    
    
    
    
    
    
    Income (loss) before reorganization costs and income taxes
    
    
    35,633
    
    
    
    28,818
    
    
    
    (33,927
    )Reorganization
costs (benefits)
    
    
    (12,397
    )
    
    
    (4,109
    )
    
    
    20,547Income (loss) before income taxes
    
    
    48,030
    
    
    
    32,927
    
    
    
    (54,474
    )Income tax expense (benefit)
    
    
    18,191
    
    
    
    (73,463
    )
    
    
    (14,706
    )Net income (loss) available for common stockholders
    
    $
    29,839
    
    
    $
    106,390
    
    
    $
    (39,768
    )Weighted average shares outstanding:Basic
    
    
    11,704
    
    
    
    8,991
    
    
    
    9,195Diluted
    
    
    12,480
    
    
    
    9,448
    
    
    
    9,195Income (loss) per common share:Basic
    
    $
    2.55
    
    
    $
    11.83
    
    
    $
    (4.32
    )Diluted
    
    $
    2.39
    
    
    $
    11.26
    
    
    $
    (4.32
    )Dividends declared
    
    $
    .53
    
    
    $
    
    
    
    $
    
 See accompanying notes. 36




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CONSOLIDATED STATEMENTS OF CASH FLOWS
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands) Years Ended December 31,2004
    
    
    2003
    
    
    2002Operating activitiesNet income (loss)
    
    $
    29,839
    
    
    $
    106,390
    
    
    $
    (39,768
    )Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation and amortization
    
    
    33,801
    
    
    
    32,764
    
    
    
    33,738Interest expense
    
    
    1,693
    
    
    
    668
    
    
    
    Impairment charge
    
    
    892
    
    
    
    1,148
    
    
    
    Deferred income taxes
    
    
    17,592
    
    
    
    (73,963
    )
    
    
    Non-cash deferred compensation
    
    
    5,757
    
    
    
    6,023
    
    
    
    3,614Non-cash reorganization items
    
    
    (12,552
    )
    
    
    (5,940
    )
    
    
    13,528Gain on sales of property and equipment
    
    
    (1,051
    )
    
    
    (3,023
    )
    
    
    (681
    )Changes in operating assets and liabilities:Accounts and notes receivable and inventories
    
    
    715
    
    
    
    (111
    )
    
    
    (427
    )Prepaid expenses and other assets
    
    
    (11,720
    )
    
    
    (6,043
    )
    
    
    9,697Accounts payable
    
    
    (4,760
    )
    
    
    (4,584
    )
    
    
    5,420Accrued expenses and other liabilities
    
    
    (809
    )
    
    
    (66
    )
    
    
    (8,849
    )Net cash provided by operating activities
    
    
    59,397
    
    
    
    53,263
    
    
    
    16,272Investing activitiesPurchases of property and equipment
    
    
    (38,644
    )
    
    
    (18,928
    )
    
    
    (18,068
    )Proceeds from sale of property and equipment
    
    
    4,577
    
    
    
    6,722
    
    
    
    3,475Acquisition
of partnership
    
    
    (1,333
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (35,400
    )
    
    
    (12,206
    )
    
    
    (14,593
    )Financing activitiesConsolidated Debt:Additional borrowing, net of debt issuance costs
    
    
    250,263
    
    
    
    
    
    
    
    21,705Repayments of long-term debt (including
prepayment penalties)
    
    
    (341,894
    )
    
    
    (50,754
    )
    
    
    (64,061
    )Repayments of capital lease and long-term
financing obligations
    
    
    (1,455
    )
    
    
    (1,395
    )
    
    
    (1,470
    )Prepaid financing costs
    
    
    
    
    
    
    (1,163
    )
    
    
    (1,163
    )Issuance of common stock
    
    
    89,052
    
    
    
    
    
    
    
    Dividends paid
    
    
    (4,255
    )
    
    
    
    
    
    
    Proceeds from long-term financing obligations
    
    
    
    
    
    
    
    
    
    
    2,614Net cash used in financing activities
    
    
    (8,289
    )
    
    
    (53,312
    )
    
    
    (42,375
    )Increase (decrease) in cash and cash equivalents
    
    
    15,708
    
    
    
    (12,255
    )
    
    
    (40,696
    )Cash and cash equivalents at beginning of year
    
    
    41,236
    
    
    
    53,491
    
    
    
    94,187Cash and cash equivalents at end of year
    
    $
    56,944
    
    
    $
    41,236
    
    
    $
    53,491
 See accompanying notes. 37




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CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands) Series A CumulativeConvertible Exchangeable
    
    
    Class A commonPreferred stock
    
    
    stockShares
    
    
    Amount
    
    
    Shares
    
    
    AmountBalance at January 1, 2002
    
    
    550
    
    
    
    550
    
    
    
    10,018
    
    
    
    301Emergence from bankruptcy
    
    
    (550
    )
    
    
    (550
    )
    
    
    (10,018
    )
    
    
    (301
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2004
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
 See accompanying notes. 38




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##### Table of Contents



Class B common stock
    
    
    Treasury stock
    
    
    New common stock
    
    
    
    
    
    
    Retained Earnings
    
    
    TotalShares
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Paid-in Capital1,371
    
    
    41
    
    
    
    (45
    )
    
    
    (441
    )
    
    
    
    
    
    
    
    
    
    
    158,771
    
    
    
    (140,936
    )
    
    
    18,286(1,371
    )
    
    (41
    )
    
    
    45
    
    
    
    441
    
    
    
    8,991
    
    
    
    270
    
    
    
    45,866
    
    
    
    
    
    
    
    45,685
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,768
    )
    
    
    (39,768
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    3
    
    
    
    3,612
    
    
    
    
    
    
    
    3,615
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,088
    
    
    
    273
    
    
    
    208,249
    
    
    
    (180,704
    )
    
    
    27,818
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,390
    
    
    
    106,390
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    2
    
    
    
    6,021
    
    
    
    
    
    
    
    6,023
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,148
    
    
    
    275
    
    
    
    214,270
    
    
    
    (74,314
    )
    
    
    140,231
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,015
    
    
    
    90
    
    
    
    88,963
    
    
    
    
    
    
    
    89,053
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,839
    
    
    
    29,839
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,382
    )
    
    
    (6,382
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,757
    
    
    
    
    
    
    
    5,757
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    12,163
    
    
    $
    365
    
    
    $
    308,990
    
    
    $
    (50,857
    )
    
    $
    258,498
 39




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CARMIKE CINEMAS, INC. and SUBSIDIARIES
December 31, 2004 NOTE 1    SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation On August 8, 2000 (the Petition Date), Carmike and its subsidiaries, Eastwynn Theatres, Inc.
(Eastwynn), Wooden Nickel Pub, Inc. (Wooden Nickel) and Military Services, Inc. (Military
Services) (collectively the Company) filed voluntary petitions for relief under Chapter 11 (the
Chapter 11 Cases) of the United States Bankruptcy Code. In connection with the Chapter 11 Cases,
the Company was required to report in accordance with Statement of Position 90-7, Financial
Reporting by Entities in Reorganization under the Bankruptcy Code,(SOP 90-7). SOP 90-7 requires,
among other things, (i) that pre-petition liabilities that are subject to compromise be segregated
in the Companys consolidated balance sheet as liabilities subject to compromise and (ii) the
identification of all transactions and events that are directly associated with the reorganization
of the Company in the Consolidated Statements of Operations. Carmikes plan of reorganization was
approved on January 4, 2002 and became effective on January 31, 2002. On February 11,
2005, the Company filed a motion seeking an order entering a final
decree closing the bankruptcy cases. On March 15, 2005, the
United States Bankruptcy Court of the District of Delaware entered a
final decree closing the bankruptcy cases. Description of Business The primary business of the Company is the operation of motion picture theatres which generate
revenues principally through admissions and concessions sales. The Company considers itself to be
in a single segment. Substantially all revenues are received in cash and are recognized as income
at the point of sale. Ten major distributors in the motion picture industry produced films which
accounted for approximately 86.3%, 99.8% and 97.7% of the Companys admission revenues in 2004,
2003 and 2002, respectively. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been eliminated in
consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make certain estimates and assumptions that affect the
reported amounts in the financial statements and accompanying notes. Actual results could differ
from those estimates and such difference could be material.
Managements most significant estimates are insurance reserves, bonus
accruals, impairments, property and income taxes and liabilities
subject to compromise. Cash and Cash Equivalents Cash equivalents are highly liquid investments with original maturities of three months or less at
the date of purchase and consist primarily of money market accounts and deposits. Deposits with
banks are federally insured in limited amounts. Debt Issuance Costs Upon emergence from Chapter 11, all of the debt issuance costs relating to the pre-petition debt
were written off to reorganization costs. The debt issuance costs relating to the new debt were
capitalized and are being amortized to interest expense over the term of the related debt. Inventories Inventories, principally concessions and theatre supplies, are stated at the lower of cost
(first-in, first-out method) or market. Investments in Unconsolidated Affiliates Our investments in privately held entities are accounted for under either the equity or
consolidation method, whichever is appropriate for the particular investment. The appropriate
method is determined by our ability to exercise significant influence over the investee, through
either quantity of voting stock or other means. We regularly review our investments for impairment
issues and propriety of current accounting treatment. The primary method we use to determine
whether or not impairment exists is to compare the valuation of our investment with the underlying
value of the entity in which we have an investment. We can determine the underlying value of the
entity based on a number of factors, including the execution of business strategy and the steps
that it has and is taking in the execution of that strategy, and the entitys subsequent financing
activity. If we determine that impairment exists, we would recognize 40




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the loss in other income (expense) in accordance with SFAS 115, Accounting for Certain Investments
in Debt and Equity Securities. Investments in which we maintain a 20% to 50% interest, or otherwise have the ability to
exercise significant influence, are accounted for under the equity method. Investments in which we
have less than a 20% interest and over which we do not have the ability to exercise significant
influence are carried at the lower of cost or estimated realizable value. We monitor both equity
and cost basis investments for other than temporary declines in value and make reductions in
carrying values when appropriate. Property and Equipment Property and equipment are carried at cost or cost adjusted for recognized impairments. Assets held
for disposal are reported at the lower of the assets carrying amount or its fair value less costs
to sell. Amortization of assets recorded under capital leases is included with depreciation expense
in the accompanying consolidated statements of operations. Depreciation is computed on
a straight-line basis as follows: Building and improvements
    
    20-30 yearsLeasehold improvements*
    
    15-30 yearsLeasehold interests*
    
    15-30 yearsCapital leases*
    
    15-30 yearsLong-term financing assets
    
    30 yearsEquipment
    
    5-15 years
   *
    Number of years is based on the term of the applicable lease
 Depreciation expense for the years ended December 31, 2004, 2003 and 2002 was $33.8 million, $33.4
million and $33.7 million, respectively. Goodwill Goodwill is the excess of the purchase price over the fair value of net assets acquired in
business combinations accounted for as a purchase. The provisions of SFAS 142, Goodwill and Other
Intangible Assets, were adopted on January 1, 2002. The provisions prohibit the amortization of
goodwill and indefinite-lived intangible assets and require that these assets be tested
periodically for impairment at least annually. We consider all of our consolidated operations to
be our reporting unit for SFAS 142 purposes. The Company tests goodwill for impairment during the
fourth quarter of its fiscal year (or on an interim basis should an event occur that may reduce the
fair value of the reporting unit below its carrying value.). As of December 31, 2004 and 2003, our
financial statements included acquisition- related goodwill of $23.4 million, net of previous
amortization. Assets Held for Sale Certain assets have been identified for disposition, a portion of which is undeveloped land.
The value of these assets are reported in the assets held for sale pending the completion of their sale and are
held at the lower of their carrying amount or fair value less costs
to sell. The carrying value of these assets are reviewed annually as to
relative market conditions and are used in accordance with
SFAS No. 144. Disposition of these assets is contingent on
current market conditions and we cannot be assured that they will be
sold at a value equal to or greater than the current carrying value. Deferred
Revenue The
Company records proceeds from the sale of gift cards and other
advanced sale-type certificates in current liabilities and recognized
admission and concession revenue when a holder redeems a gift card or
other advanced sale-type certificate. We recognize unredeemed gift
cards and other advanced sale-type certificates upon expiration. Impairment of Property and Equipment The Company accounts for its property and equipment in accordance with the Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144). The Company reviews its property and equipment for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company annually reviews and monitors its internal management reports and the
competition in its markets for indicators of impairment. The Company considers a trend of operating results that are not in agreement with managements
expectations to be its primary indicator of potential impairment. An additional impairment
indicator used by management is the existence of competition in a 41




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market, either from third parties or from the Companys own expansion. For purposes of SFAS No.
144, property and equipment are evaluated for impairment at the theatre level except when multiple
theatres are located in the same geographical area. The Company deems a theatre or market to be
impaired if a forecast of undiscounted future operating cash flows directly related to the theatre
or market, including estimated disposal value if any, is less than its carrying amount. If a
theatre or market is determined to be impaired, the loss is measured as the amount by which the
carrying amount of the theatres within the market exceeds its fair value. Fair value is based on
managements estimates, which are based on using the best information available, including prices
for similar theatres or the results of valuation techniques such as discounting estimated future
cash flows. Considerable judgment is necessary to estimate discounted future cash flows.
Accordingly, actual results could vary significantly from such estimates. Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS No. 109). Under SFAS No. 109, the liability
method is used in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rate and laws that will be in effect when
the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance
if it is more likely than not that some portion or all of the deferred tax asset will not be
realized. For the year ended December 31, 2003, the Company determined that it is more likely than
not that certain deferred tax assets will be realized in the future and accordingly, it was
appropriate to release the valuation allowance and recognize a tax benefit of $73.5 million. Advertising The company expenses
advertising costs when incurred. Advertising expense represents less
than two percent of our operating expenses each year. Stock Based Compensation In
December 2002, the FASB issued SFAS No. 148, Accounting for Stock Based
Compensation-Transition and Disclosure (SFAS No. 148). SFAS No. 148 amends the disclosure
requirements of SFAS No. 123, Accounting for Stock-based
Compensation (SFAS No. 123), to require
prominent disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method used on reported
results. SFAS No. 148 was effective for financial statements of
the Company for fiscal years ending 2002 and for
interim periods beginning on January 1, 2003. 42




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The Company accounts for its stock-based compensation plans under Accounting Principles Board
Opinion No. 25, Accounting for stock Issued to Employees(APB No. 25). Reflected in the 2004,
2003 and 2002 Statement of Operations is $5.8, $6.0 and $3.6 million, respectively, of stock-based
employee compensation cost related to the stock grants ($3.2, $3.2 and $2.9 million, respectively,
from fixed accounting and $2.6, $2.8 and $.07 million, respectively, from variable accounting.) The Black-Scholes option valuation model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions including the expected stock
price volatility. Because the Companys employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in managements opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee stock options. For
SFAS No. 123 purposes, the fair value of each option grant and stock based award has been estimated
as of the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions: 2004
    
    
    2003
    
    
    2002Expected life (years)
    
    
    9.0
    
    
    
    9.0
    
    
    
    9.0Risk-free interest rate
    
    
    4.34
    %
    
    
    4.34
    %
    
    
    4.19
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    0.40
    
    
    
    0.40
    
    
    
    0.40
 The estimated fair value of the options granted during 2003 was $12.12 per share. Had compensation
cost been determined consistent with SFAS No. 123, utilizing the assumptions detailed above, the
Companys pro forma net income (loss) and pro forma basic income (loss) per share would have
increased (decreased) to the following amounts (in thousands, except share data): 43




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2004
    
    
    2003
    
    
    2002Net income (loss):As reported
    
    $
    29,839
    
    
    $
    106,390
    
    
    $
    (39,768
    )Plus: expense recorded on deferred stock compensation, net of related tax effects
    
    
    3,598
    
    
    
    3,764
    
    
    
    2,304Deduct: Total stock-based employee compensation expense determined under fair value
based method for all awards, net of related tax effects
    
    
    (3,748
    )
    
    
    (2,983
    )
    
    
    (2,720
    )Pro forma  for SFAS No. 123
    
    $
    29,689
    
    
    $
    107,171
    
    
    $
    (40,184
    )Basic net earnings (loss) per share:As reported
    
    $
    2.55
    
    
    $
    11.83
    
    
    $
    (4.32
    )Pro forma  for SFAS No. 123
    
    $
    2.53
    
    
    $
    11.92
    
    
    $
    (4.37
    )Diluted net earnings (loss) per share:As reported
    
    $
    2.39
    
    
    $
    11.26
    
    
    $
    (4.32
    )Pro forma  for SFAS No. 123
    
    $
    2.38
    
    
    $
    11.34
    
    
    $
    (4.37
    )
 Earnings Per Share Earnings per share is presented in conformity
with Statement of Financial Accounting Standards No. 128,
Earnings Per Share (SFAS No. 128), for all periods presented.
In accordance with SFAS No.
128, basic net loss per common share has been computed using the weighted-average number of shares
of common stock outstanding during the period. Diluted earnings per share is computed by dividing
net income by the weighted average number of common shares outstanding plus common stock
equivalents for each period. Stock grants to acquire shares of common stock under the 2002 Stock Plan were not
included in 2002 as their effect would be antidilutive. The number of
antidilutive shares were 180,000 and 152,000 for years 2003 and 2002,
respectively. There were no antidilutively shares in 2004. For Year Ended December 31,(in
000s except per share data)
    
    2004
    
    
    2003
    
    
    2002Weighted average shares outstanding
    
    
    11,863
    
    
    
    9,150
    
    
    
    9,292Less restrictive stock issued
    
    
    (159
    )
    
    
    (159
    )
    
    
    (97
    )11,704
    
    
    
    8,991
    
    
    
    9,195Dilutive Shares:Restricted stock
    
    
    139
    
    
    
    66
    
    
    
    Stock grants
    
    
    594
    
    
    
    378
    
    
    
    Stock options
    
    
    43
    
    
    
    13
    
    
    
    12,480
    
    
    
    9,448
    
    
    
    9,195Earnings per share:Basic
    
    $
    2.55
    
    
    $
    11.83
    
    
    $
    (4.32
    )Diluted
    
    $
    2.39
    
    
    $
    11.26
    
    
    $
    (4.32
    )
 Leases The Company has various non-cancelable operating lease agreements. The theatre leases
generally provide for the payment of fixed monthly rentals, property taxes, common area
maintenance, insurance and repairs. Certain of these leases provide for escalating lease payments
over the terms of the leases. Moreover, certain leases also include contingent rental fees based on
a percentage of sales. The Company, at its option, can renew a substantial portion of its theatre
leases, at the then fair rental rate, for various periods with the maximum renewal period generally
totaling 15-20 years. For financial statement purposes, the total amount of base rentals over the
term of the leases is charged to expense on the straight-line method over the lease terms. Rental
expense in excess of lease payments is recorded as a deferred rental liability. Financing Obligations The Company is
considered the owner of certain assets during construction under the provisions
of EITF 97-10, as we pay directly for a substantial portion of the construction costs. Once
construction is completed, we consider the requirements under SFAS 98 for sale treatment, and if the
arrangement does not meet such requirements, we record the reimbursement of some of the
construction costs from the landlord as a financing obligation. The obligation is amortized over
the lease term based on the rent payments designated in the contract. 44




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##### Table of Contents



Derivatives The Company recognizes all derivative financial instruments, such as interest rate swap
contracts, in the consolidated financial statements at fair value. Changes in the fair value of
derivative financial instruments are either periodically recorded in income or in stockholders
equity as a component of comprehensive income depending on whether the derivative financial
instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or
cash flow hedge. If an interest rate swap agreement is terminated, any resulting gain or loss would
be deferred and amortized to interest expense over the remaining life of the hedged debt
instrument. In the event of early extinguishment of a designated debt obligation, any realized or
unrealized gain or loss from the swap would be recognized to income coincident with the
extinguishment. As of December 31, 2004 the Company had no derivative financial instruments. Benefit Plans The Company has a non-qualified deferred compensation plan for certain of its executive
officers. Under this plan, the Company contributes ten percent of the employees taxable
compensation to a secular trust designated for the employee. The Company also has a benefit plan
for certain non-executive employees, of which contributions to the plans are at the discretion of
the Companys executive management. Contributions related to these plans are not material to the
Companys results of operations. Reclassifications Certain amounts in the accompanying consolidated financial statements have been reclassified to
conform to the current years presentation. Recent Accounting Pronouncements On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 123(R) , Share Based Payment (SFAS 123(R)). SFAS 123(R)
revises FASB Statement of Financial Accounting Standards No. 123, Accounting for stock-based
Compensation and requires companies to expense the fair value of employee stock options and other
forms of stock-based compensation. In addition, SFAS 123(R) supercedes Accounting Principles Board
(APB) Opinion No. 25, Accounting for stock Issued to Employees (APB 25), and amends FASB
Statement of Financial Accounting Standards No. 95, Statement of Cash Flows (SFAS 95). SFAS 123(R) requires companies to (1) use fair value to measure stock-based compensation
awards and (2) cease using the intrinsic value method of accounting., which APB No. 25 allowed,
and resulted in no expense for many awards of stock options where the exercise price of the option
equaled the price of the underlying stock at grant date. The fair value of the award is not
remeasured after its initial estimation on the grant date (except
under specific circumstances). SFAS
123(R) must be adopted no later than for periods beginning after
June 15, 2005. Based on our valuation under the Black-Scholes
option valuation model, presently used by the Company and still
appropriate under SFAS 123(R), the Company estimates additional
deferred compensation expense from adoption to be approximately
$1.0 million for the years ended December 31, 2005 and
2006. The Company will evaluate other valuation methods, prior to
implementation, to determine the most accurate for the Company. NOTE 2  PROCEEDINGS UNDER CHAPTER 11 In the Chapter 11 Cases, discussed in Note 1, substantially all unsecured and partially
secured liabilities as of the Petition Date were subject to compromise or other treatment until a
plan of reorganization was confirmed by the bankruptcy court. Generally, actions to enforce or
otherwise effect repayment of all pre-chapter 11 liabilities as well as all pending litigation
against the Company were stayed while the Company continued their business operations as
debtors-in-possession. The Company could not pay pre-petition debts without prior bankruptcy court approval during
the Chapter 11 Cases. Immediately after the commencement of the Chapter 11 Cases, the Company
sought and obtained several orders from the bankruptcy court which were intended to stabilize its
business and enable the Company to continue operations as debtors-in-possession. The most
significant of these orders: (i) permitted the Company to operate its consolidated cash management
system during the Chapter 11 Cases in substantially the same manner as it was operated prior to the
commencement of the Chapter 11 Cases; (ii) authorized payment of pre-petition wages, vacation pay
and employee benefits and reimbursement of employee business expenses; (iii) authorized payment of
pre-petition sales and use taxes owed by the Company; (iv) authorized the Company to pay up to $2.3
million of pre-petition obligations to critical vendors, common carriers and workers compensation
insurance to aid the Company in maintaining operation of its theatres and approximately $37 million
to film distributors; and (v) authorized debt service payments for the loan related to Industrial
Revenue Bonds issued by the Downtown Development Authority of Columbus, Georgia. 45




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##### Table of Contents



As debtors-in-possession, the Company had the right during the reorganization period, subject
to bankruptcy court approval and certain other limitations, to assume or reject executory contracts
and unexpired leases. In this context, assumption means that the Company agrees to perform its
obligations and cure all existing defaults under the contract or lease, and rejection means that
the Company is relieved from its obligations to perform further under the contract or lease but is
subject to a claim for damages for the breach thereof. Any damages resulting from rejection of
executory contracts and unexpired leases were treated as general unsecured claims in the Chapter 11
Cases. During the Chapter 11 Cases, the Company received approval from the bankruptcy court to
reject theatre leases relating to 136 theatre locations. The Company estimated the ultimate
liability that may result from rejecting leases and reported it as Liabilities Subject to
Compromise in the balance sheet. However, the ultimate liability may differ from such estimates
based on settlements of claims that have or may be filed in the future. As a result of the Chapter 11 Cases, no principal or interest payments were made on unsecured
pre-petition debt. On October 27, 2000, the Company received bankruptcy court approval to make debt
service payments for the loan related to Industrial Revenue Bonds issued by the Downtown
Development Authority of Columbus, Georgia. The Company reached an agreement with its creditor
constituencies that provides for the payment of cash collateral and adequate protection, as those
terms are defined in the Bankruptcy Code. The Company made payments to the secured lenders in the
amount of $8,272,821 on March 5, 2001 and made payments of $500,000 per month as adequate
protection payments. All of these payments are treated as principal payments under the creditor
agreement. Additionally, after the Petition Date, the Company could not declare dividends for its
Preferred stock. Preferred stock dividends of $7.0 million and $2.3 million were in arrears at
December 31, 2001 and 2000. The terms of the Preferred stock agreement provided, with respect to
dividend arrearages, that the dividend accrual rate increases to 8.5%. In view of the Company
having ceased making scheduled dividend payments on the Preferred stock after the Petition Date,
the holders of the Preferred stock designated two additional directors to the Companys Board of
Directors. Also, during the Chapter 11 Cases, the Company reached an agreement to restructure its
master lease facility with MoviePlex Realty Leasing, L.L.C. (MoviePlex) and entered into the
Second Amended and Restated Master Lease, dated as of September 1, 2001 (the  Master Lease).
Under the Master Lease, Carmike entered into a 15-year lease for the six MoviePlex properties with
an option to extend the term for an additional five years. The original MoviePlex Lease was
terminated and prepetition defaults of $493,680 under the original MoviePlex Lease were paid. The
initial first twelve months base rent for the six theatres is an aggregate of $5.4 million per
annum ($450,000 per month), subject to periodic increases thereafter and certain additional rent
obligations such as percentage rent. All past due rent, additional rent, and/or other sums due to MoviePlex under the terms of the
Master Lease bear interest from the date which is five days from the date the amounts were due
until paid by Carmike at the rate of 2% above the published prime rate of Wachovia Bank, N.A. Under
the Master Lease, Carmike pays all real estate taxes with respect to the leased premises. When the plan of reorganization became effective on January 31, 2002, Carmike filed with the
Secretary of State for the State of Delaware the Amended and Restated Certificate of Incorporation,
which cancelled all then existing Class A and Class B common stock and preferred stock of the
Company and established authorized capital stock of twenty million (20,000,000) shares of
reorganized Carmike common stock, par value $.03 per share, and one million (1,000,000) shares of
reorganized Carmike Preferred stock, par value $1.00 per share. The
Company currently at December 31, 2004 had 12,162,622 shares of reorganized Carmike common stock outstanding. Material features of the plan of reorganization were:  
    The plan of reorganization provided for the issuance or reservation for future issuance
of ten million (10,000,000) shares of reorganized Carmike common stock in the aggregate.
    The holders of Carmikes cancelled Class A and Class B common stock received in the
aggregate 22.2% (2,211,261) of the ten million (10,000,000) shares of reorganized Carmike
common stock.
    The holders of Carmikes cancelled Series A preferred stock received in the aggregate
41.2% (4,120,000) of the ten million (10,000,000) shares of reorganized Carmike common
stock.
    Certain holders of $45,685,000 in aggregate principal amount of the cancelled 9 3/8%
Senior Subordinated Notes due 2009 issued by Carmike prior to the Chapter 11 Cases (the
Original Senior Subordinated Notes) received in the aggregate 26.6% (2,660,001) of the ten
million (10,000,000) shares of reorganized Carmike common stock.
    Carmike reserved one million (1,000,000) shares of the reorganized Carmike common stock
for issuance under the 2002 stock Plan. Under the 2002 stock Plan, 780,000 have been
authorized for issuance to Michael W. Patrick pursuant to his employment agreement and
220,000 shares have been authorized for issuance to seven other members of senior
management. 46




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##### Table of Contents




    The holders of Bank Claims in the Chapter 11 Cases received Bank Debt and cash in the
amount of approximately $35 million plus accrued and unpaid post-petition interest on the
Bank Claims from January 15, 2002 to the Reorganization Date. Bank Claims consisted of
claims of certain banks arising under: (i) the Amended and Restated Credit Agreement, dated
as of January 29, 1999, and amended as of March 31, 2000 and (ii) the Term Loan Credit
Agreement dated as of February 25, 1999, as amended as of July 13, 1999, and further amended
as of March 31, 2000, and certain related documents. Bank Debt consisted of borrowings of
approximately $254 million and bears interest, at the greater of: (a) at the option of
Carmike, (i) a specified base rate plus 3.5% or (ii) LIBOR plus 4.5%; or (b) 7.75% per
annum.
    Carmike issued $154,315,000 of its former 10 3/8% Senior Subordinated Notes due 2009 in
exchange for $154,315,000 aggregate principal amount of the claims in the Chapter 11 Cases
concerning the Original Senior Subordinated Notes.
    Leases covering 136 of Carmikes underperforming theatres were rejected. Lease
terminations and settlement agreements are being negotiated for the resolution of lease
termination claims, and the restructuring of lease obligations.
    General unsecured creditors will receive payments in the aggregate of approximately $53.8
million with an annual interest rate of 9.4% in resolution of their allowed claims in
Carmikes reorganization, including claims for damages resulting from the rejection of
executory contracts and unexpired leases. Of these claims, $1.3 million are disputed as of
December 31, 2004. As such, the Companys ultimate liability for these claims is uncertain
and is subject to bankruptcy court resolution. The Company has paid, adjusted by stipulation
or changed estimates, as of December 31, 2004, approximately
$52.5 million of these claims. Changes in estimates are the
result of ongoing negotiations with creditors. On the effective date of the reorganization, the Company entered into a term loan credit
agreement (the Post-Bankruptcy Credit Agreement), which governed the terms of the post-bankruptcy
Bank Debt. The Companys subsidiaries guaranteed the Companys obligations under the
Post-Bankruptcy Credit Agreement. The lenders under the Post-Bankruptcy Credit Agreement had (i) a
second priority, perfected lien on owned real property and, to the extent landlord approval was
obtained or not required, leased real property of the Company and its subsidiaries; (ii) a second
priority, perfected security interest in the equity interests of Company subsidiaries or 50% owned
entities; and (iii) a second priority, security interest in substantially all personal property and
specified small receivables owned by the Company and its subsidiaries. All of the security
interests and liens that secured the post-bankruptcy Bank Debt under the Post-Bankruptcy Credit
Agreement were junior and subordinate to the liens and security interests of the collateral agent
under the Post-Bankruptcy Revolving Credit Agreement. The reorganization value of the assets of the Company immediately before the effective date of
the reorganization was greater than the total of all post-petition liabilities and allowed claims
and the plan of reorganization does not result in a change in ownership as defined by Statement of
Position 90-7; accordingly, the Company will continue to recognize its results on the historical
basis of accounting. Reorganization costs for the periods ended December 31, 2004, 2003 and 2002, respectively, are as
follows (in thousands): December 31,2004
    
    
    2003
    
    
    2002Write-off of origination fees
    
    $
    
    
    
    $
    
    
    
    $
    8,994Professional fees
    
    
    30
    
    
    
    282
    
    
    
    8,049Gains on sale of assets
    
    
    
    
    
    
    
    
    
    
    (15
    )Interest income
    
    
    
    
    
    
    
    
    
    
    (92
    )Theatre disposition expenses
    
    
    
    
    
    
    
    
    
    
    592Change in estimates on claims
    
    
    (12,552
    )
    
    
    (4,754
    )
    
    
    Other
    
    
    125
    
    
    
    363
    
    
    
    3,019Total reorganization costs
    
    $
    (12,397
    )
    
    $
    (4,109
    )
    
    $
    20,547
 47




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##### Table of Contents



Cash used in reorganization activities for 2004, 2003 and 2002 are as follows (in thousands): 2004
    
    
    2003
    
    
    2002Professional fees
    
    $
    (30
    )
    
    $
    (282
    )
    
    $
    (8,773
    )Retention payments
    
    
    
    
    
    
    
    
    
    
    (283
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    15Payment of pre-petition liabilities
    
    
    (9,300
    )
    
    
    (11,885
    )
    
    
    (8,528
    )Interest income
    
    
    
    
    
    
    
    
    
    
    107Other
    
    
    (125
    )
    
    
    
    
    
    
    (1,486
    )$
    (9,455
    )
    
    $
    (12,167
    )
    
    $
    (18,948
    )
 NOTE 3  LIABILITIES SUBJECT TO COMPROMISE The principal categories of obligations classified as Liabilities Subject to Compromise under
the Chapter 11 Cases are identified below. The amounts in total may vary significantly from the
stated amounts of proofs of claims filed with the bankruptcy court, and may be subject to future
adjustments depending on bankruptcy court action, further developments with respect to potential
disputed claims, and determination as to the value of any collateral securing claims or other
events. A summary of the principal categories of claims classified as Liabilities Subject to Compromise at
December 31, 2004 and 2003 are as follows (in thousands): December 31,2004
    
    
    2003Disputed unsecured claims
    
    $
    1,348
    
    
    $
    20,424Disputed priority claims
    
    
    
    
    
    
    1,097$
    1,348
    
    
    $
    21,521
 NOTE 4  IMPAIRMENT OF PROPERTY AND EQUIPMENT The
impairment charges of $0.9 million and $1.1 million in 2004 and 2003, respectively, were
primarily attributable to changes in competition
in some of our markets. These changes caused a decrease in profitability in nine and four theatres,
which operate 30 and 27 screens, respectively, to a point below the carrying value of the
long-lived assets. There was no impairment of long-lived assets during the year ended December 31,
2002. NOTE 5  INVESTMENTS IN UNCONSOLIDATED AFFILIATES The
Company purchased the remaining equity interest in its unconsolidated
affiliates located in South Carolina. The purchase of this equity was
approximately $3.5 million in cash and assumed liabilities and
as of the year ended December 31, 2004 has consolidated all
affiliates. The Company has a 50% equity interest in a partnership that operates two theatres in Mason
City, Iowa, which is not consolidated into our statement of operations. 48




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NOTE 6  OTHER ASSETS Other assets are as follows: December 31,2004
    
    
    2003Loan/lease origination fees
    
    $
    17,298
    
    
    $
    7,723Deposits and binders
    
    
    3,689
    
    
    
    3,440Other
    
    
    40
    
    
    
    26$
    21,027
    
    
    $
    11,189
 NOTE 7  PROPERTY AND EQUIPMENT The Company did not obtain any property or equipment under capital leases during 2004 or 2003. The
Company recorded one long-term financing arrangement totalling
$6.2 million in 2004 and two
long-term financing arrangements for $4.6 million in 2003. The following amounts related to capital lease and long-term financing assets are included in
property and equipment (in thousands): December 31,2004
    
    
    2003Buildings and improvements
    
    $
    72,841
    
    
    $
    66,641Less accumulated amortization
    
    
    (16,506
    )
    
    
    (14,079
    )$
    56,335
    
    
    $
    52,562
 NOTE 8  CAPITALIZED INTEREST AND CASH PAID FOR INTEREST The Company capitalized interest in connection with its construction of long-lived assets. Interest
incurred and interest capitalized are as follows (in thousands): Interest
    
    
    Interest
    
    
    InterestYears ended December 31,
    
    Expensed
    
    
    Paid
    
    
    Capitalized2004
    
    $
    24,411
    
    
    $
    28,874
    
    
    $
    1,0512003
    
    
    42,206
    
    
    
    43,944
    
    
    
    6972002
    
    
    105,520
    
    
    
    107,158
    
    
    
    292
 NOTE 9  ACCRUED EXPENSES Accrued expenses include the following (in thousands): December 31,2004
    
    
    2003Deferred revenues
    
    $
    5,999
    
    
    $
    8,682Deferred and other accrued rents
    
    
    7,659
    
    
    
    8,891Property taxes
    
    
    5,695
    
    
    
    5,596Accrued interest
    
    
    4,904
    
    
    
    10,403Accrued salaries
    
    
    4,781
    
    
    
    4,117Sales tax
    
    
    2,944
    
    
    
    2,867Other accruals
    
    
    3,600
    
    
    
    3,857$
    35,582
    
    
    $
    44,413
 49




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NOTE 10  DEBT Debt consisted of the following (in thousands): December 31,2004
    
    
    2003Revolving credit facility
    
    $
    
    
    
    $
    Post-bankruptcy term loan
    
    
    
    
    
    
    168,735New term loan
    
    
    99,000
    
    
    
    10.375% senior subordinated notes
    
    
    
    
    
    
    154,3157.500% senior subordinated notes
    
    
    150,000
    
    
    
    Industrial revenue bonds; payable in equal
installments through May 2006,
with interest rates ranging from 5 3/4% to 7%
    
    
    315
    
    
    
    707249,315
    
    
    
    323,757Current maturities
    
    
    (1,315
    )
    
    
    (707
    )$
    248,000
    
    
    $
    323,050
 2004 Financing Transactions Revolving Credit Facility On February 4, 2004, we entered into a revolving credit facility with Goldman Sachs Credit
Partners L.P. as sole lead arranger, sole book runner and sole syndication agent and Wells Fargo
Foothill, Inc. as administrative agent and collateral agent. The revolving credit facility provides
for borrowings of up to $50.0 million. The interest rate for borrowings under the revolving credit
facility is set from time to time at our option (subject to certain conditions set forth in the
revolving credit facility) at either: (1) a specified base rate plus 2.25% or (2) LIBOR plus 3.25%
per annum. The final maturity date of the facility is August 4, 2008. The revolving credit facility contains covenants which, among other things, limit our ability,
and that of our restricted subsidiaries, to:  
    pay dividends or make any other restricted payments;
    create liens on our assets;
    make certain investments;
    dispose of interests in our subsidiaries;
    consolidate, merge, transfer or sell assets or acquire properties or businesses;
    enter into transactions with our affiliates; and
    engage in any sale-leaseback or similar transaction involving any of our assets. Our revolving credit facility generally prohibits us from incurring additional indebtedness or
materially amending the terms of any agreement relating to existing indebtedness without lender
approval. In particular, our revolving credit agreement generally prohibits us from incurring
additional indebtedness other than purchase money debt or capital leases less than $10.0 million,
acquired debt less than $10.0 million or subordinated debt or other unsecured debt less than $2.5
million, in each case subject to compliance with financial covenants. Subsequent
to December 31, 2004, we executed Amendment No. 1 to our revolving credit facility. This amendment modified the definition of
Consolidated Capital Expenditures and increased the amount allowable as capital expenditures from
$35 million to $40 million for the year ended December 31, 2004 and $50 million annually, plus the
carryover of any unused portion for the remaining life of the credit
facility. Had we not
negotiated this amendment we would have been in default under the maximum consolidated capital
expenditures financial covenant for the year ended December 31, 2004. 50




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Our failure to comply with any of these covenants, including compliance with the financial
ratios, is an event of default under the revolving credit facility, in which case, the agent may,
and if requested by the lenders holding a certain minimum percentage of the commitments shall,
terminate the revolving credit facility with respect to additional advances and may declare all or
any portion of the obligations due and payable. Other events of default under the revolving credit
facility include:  our failure to pay principal or interest on the loans when due and payable, or our failure to pay certain expenses;  the occurrence of a change of control, as defined in the agreement; or  a breach or default by us or our subsidiaries under the term loan facility, the indenture
relating to the 7.500% senior subordinated notes or other debt exceeding $2.5 million in any single
case, or $5.0 million in the aggregate. Borrowings under the revolving credit facility are secured by first priority security interests in
substantially all of our tangible and intangible assets, including the capital stock of our
subsidiaries. All of our subsidiaries guaranteed our obligations under the revolving credit
facility. Term Loan Facility On February 4, 2004, we entered into a term loan facility with Goldman Sachs Credit Partners
L.P. as sole lead arranger, sole book runner and sole syndication agent and National City Bank as
administrative agent and collateral agent. The term loan facility provides for borrowings of $100.0
million, which were drawn on the closing of the facility. The interest rate for the borrowings
under the term loan facility is equal to, at our option, (1) a specified base rate plus 2.25% or
(2) LIBOR plus 3.25% per annum. The final maturity date of the loan is February 4, 2009. Under the
facility we are required to make principal amortization payments of $250,000 per quarter. The term loan facility contains certain negative covenants that, among other things, limit our
ability, and that of our restricted subsidiaries, to:  pay dividends or make any other restricted payments;  create liens on our assets;  make certain investments;  dispose of interests in our subsidiaries;  consolidate, merge, transfer or sell assets or acquire properties or businesses;  enter into transactions with our affiliates; and  engage in any sale-leaseback or similar transaction involving any of our assets. Under our term loan facility, we are generally permitted to incur additional debt so long as
we maintain a ratio of adjusted EBITDA to consolidated fixed charges of greater than or equal to
2.00 to 1.00. Notwithstanding this limitation, we are also permitted to incur other indebtedness,
including purchase money debt and capital leases less than $12.5 million, acquired debt of less
than $12.5 million and other unsecured debt of up to $7.5 million. The lenders under the term loan facility have a second priority security interest in
substantially all our tangible and intangible assets, including the capital stock of our
subsidiaries. All of the security interests and liens that secure the term loan facility are junior
and subordinate to the liens and security interests of the collateral agent under the revolving
facility. Our subsidiaries guaranteed our obligations under the term loan facility. 51




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We may voluntarily pre-pay the term loan, in whole or in part, at (1) 103.0% of the amount
repaid if such repayment occurs on or prior to the first anniversary of the closing of the term
loan facility; (2) 102.0% of the amount repaid if such repayment occurs after the first anniversary
but before the second anniversary; (3) 101.0% of the amount repaid if such repayment occurs
after the second anniversary but before the third anniversary and (4) 100% of the amount repaid if
such repayment occurs after the third anniversary. Upon a change in control, as defined in the term loan facility agreement, subject to certain
exceptions, we are required to offer to repurchase from each lender all or any portion of each
lenders term loans at a purchase price equal to 101% of the principal amount thereof plus accrued
and unpaid interest to the date of purchase. 7.500% Senior Subordinated Notes On February 4, 2004, we completed an offering of $150.0 million in aggregate principal amount
of 7.500% senior subordinated notes due February 15, 2014 to institutional investors. The indenture contains covenants, which, among other things, limit our ability, and that of
our restricted subsidiaries, to:  make restricted payments;  create liens on our assets;  consolidate, merge or otherwise transfer or sell all or substantially all of our assets;  engage in certain sales of less than all or substantially all of our assets;  incur additional indebtedness;  issue certain types of stock; and  enter into transactions with affiliates. In addition, under the terms of the indenture governing the notes, we are prohibited from incurring
any subordinated debt that is senior in any respect in right of payment to the notes. We completed
an exchange of the notes for registered notes with the same terms in August, 2004. Upon a change of control, as defined in the indenture, subject to certain exceptions, we are
required to offer to repurchase from each holder all or any part of each holders notes at a
purchase price of 101% of the aggregate principal amount thereof plus accrued and unpaid interest
to the date of purchase. The indenture contains customary events of default for agreements of that type, including
payment defaults, covenant defaults and bankruptcy defaults. If any event of default under the
indenture occurs and is continuing, then the trustee or the holders of at least 25% in principal
amount of the then outstanding notes may declare all the notes to be due and payable immediately. Our subsidiaries have guaranteed the notes and such guarantees are junior and subordinated to
the subsidiary guarantees of our senior debt on the same basis as the notes are junior and
subordinated to the senior debt. Interest at 7.500% per annum from the issue date to maturity is
payable on the notes each February 15 and August 15. The notes are redeemable at our option under
certain conditions. In conjunction with this refinancing, we wrote-off loan fees relating to the post-bankruptcy
credit facilities of $1.8 million and paid pre-payment premiums to retire the 10 3/8% senior
subordinated notes in the amount of $7.8 million. Our long-term debt obligations and obligations to general unsecured creditors pursuant to the plan
of reorganization were as follows: After 5One Year
    
    
    2 Years
    
    
    3 Years
    
    
    4 Years
    
    
    5 Years
    
    
    Years
    
    
    TotalTerm loan credit agreement (1)
    
    $
    1,000
    
    
    $
    1,000
    
    
    $
    1,000
    
    
    $
    1,000
    
    
    $
    95,000
    
    
    $
    
    
    
    $
    99,000Revolving credit agreement (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.500% senior subordinated notes (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    150,000General unsecured creditors
    
    
    
    
    
    
    
    
    
    
    1,348
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,348Industrial revenue bond
    
    
    315
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315Total contractual cash obligations
    
    $
    1,315
    
    
    $
    1,000
    
    
    $
    2,348
    
    
    $
    1,000
    
    
    $
    95,000
    
    
    $
    150,000
    
    
    $
    250,663
 52




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Payments are reflected in
accordance with SFAS No. 6 as discussed in Item 7,
Managements Discussion and Analysis of Financial Condition and
Results of Operations, Liquidity and Capital Resources under the section General.(1)
    The term loan has a maturity date of February 4, 2009.(2)
    The revolving credit agreement has a maturity date of August 4, 2008.(3)
    The maturity date for the 7.500% senior subordinated notes is February 15, 2014.The Company has evaluated the market value of its fixed-interest debt as of December 31, 2004,
and reflects its value at cost. The fair value
was approximately $152.3 million as of December 31, 2004. NOTE 11  INCOME TAXES As of December 31, 2004 and 2003, the Company had net deferred tax assets of approximately
$54.4 million and $72.0 million, respectively. The net deferred tax asset as of December 31, 2002
was fully offset by a valuation allowance of $78.4 million. For the period ended December 31, 2003,
the Company determined that it is more likely than not that certain deferred tax assets will be
realized in the future and accordingly, it was appropriate to release the valuation allowance and
recognize a tax benefit of $73.5 million. The positive evidence management considered included
operating income for 2002 and 2003, its subsequent stock offering and refinancing resulting in
significant prospective interest expense reduction and anticipated operating income and cash flows
for future periods in sufficient amounts to realize the net deferred tax assets. The income tax benefit recorded in 2002 was the result of the Job Creation and Worker Assistance
Act of 2002, which allowed for additional carryback of net operating losses resulting in a cash
refund of approximately $14.7 million. For the years ended December 31, 2004 and 2003, the Companys
alternative minimum tax provision was $569,000 and $500,000, respectively. The provision for income tax expense (benefit) is summarized as follows (in thousands): December 31,2004
    
    
    2003
    
    
    2002Current:Federal
    
    $
    569
    
    
    $
    500
    
    
    $
    (14,706
    )State
    
    
    
    
    
    
    
    
    
    
    Deferred:Federal
    
    
    16,419
    
    
    
    (69,032
    )
    
    
    State
    
    
    1,173
    
    
    
    (4,931
    )
    
    
    Total provision
    
    $
    18,161
    
    
    $
    (73,463
    )
    
    $
    (14,706
    )
 The consolidated income tax provision was different from the amount computed using the U.S.
statutory income tax rate for the following reasons (in thousands): December 31,2004
    
    
    2003
    
    
    2002Pre-tax book income (loss)
    
    $
    48,030
    
    
    $
    32,927
    
    
    $
    (54,474
    )Federal tax expense (benefit)
    
    
    16,811
    
    
    
    11,524
    
    
    
    (18,521
    )State tax expense (benefit)
    
    
    1,201
    
    
    
    824
    
    
    
    (1,198
    )Permanent items
    
    
    149
    
    
    
    (4,556
    )
    
    
    2,972Other
    
    
    
    
    
    
    (2,869
    )
    
    
    (21
    )Change in Valuation Allowance
    
    
    
    
    
    
    (78,386
    )
    
    
    2,062Total tax expense (benefit)
    
    $
    18,161
    
    
    $
    (73,463
    )
    
    $
    (14,706
    )
 53




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##### Table of Contents



Significant components of the Companys deferred tax assets (liabilities) are as follows (in
thousands): December 31,2004
    
    
    2003Alternative minimum tax credit carryforwards
    
    $
    838
    
    
    $
    500Net operating loss carryforwards
    
    
    31,773
    
    
    
    37,139Tax basis of property, equipment and intangible assets over book basis
    
    
    11,497
    
    
    
    18,908Deferred compensation
    
    
    5,773
    
    
    
    3,627Deferred rent
    
    
    1,674
    
    
    
    1,557Disputed claims
    
    
    506
    
    
    
    8,070Other
    
    
    1,232
    
    
    
    1,232Compensation accruals
    
    
    1,121
    
    
    
    1,003Net deferred tax asset/(liability)
    
    $
    54,414
    
    
    $
    72,036
 During 2004, the Company utilized net operating losses of approximately $28.5 million, respectively
and has $84.7 million of federal and state operating loss carryforwards with which to offset our
future taxable income. The federal and state operating loss carryforwards begin to expire in the
year 2020. In addition, the Companys alternative minimum tax credit carryforward has an indefinite
carryforward life. NOTE 12  STOCKHOLDERS EQUITY At December 31, 2001, the Companys authorized capital consisted of 22.5 million shares of
Class A common stock, $.03 par value, 5 million shares of Class B common stock, $.03 par value, and
one million shares of Series A preferred stock, $1.00 par value. Each share of Class A common stock
entitled the holder to one vote per share, whereas a share of Class B common stock entitled the
holder to ten votes per share. Each share of Class B common stock was entitled to cash dividends,
when declared, in an amount equal to 85% of the cash dividends payable on each share of Class A
common stock. Class B common stock was convertible at any time by the holder into an equal number
of shares of Class A common stock. The
Series A preferred stock paid quarterly cash dividends at an annual rate of 5.5% and was
convertible at the option of the holder, into the Companys Class A common stock at $25.00 per
share (subject to anti-dilution adjustments). The Series A preferred stock was not subject to
mandatory redemption or sinking fund provisions but did have involuntary liquidation rights for $55
million. Each share of the Series A preferred stock was convertible into four shares of the Class A
common stock. During the course of the Chapter 11 Cases, the Company could not declare dividends
for its preferred stock. Dividends of $9.3 million on Preferred stock were in arrears at December
31, 2001. The terms of the preferred stock agreement provided that the dividend rate increased to
8.5% for arrearages. Upon emergence from Chapter 11 on January 31, 2002, both Class A and Class B common stock, as well
as the Series A preferred stock, were cancelled and shares of common stock were issued. The common
stock, $0.03 par value, consists of 20 million authorized shares, of which approximately 9 million
were outstanding as of December 31, 2003. Of the 20 million authorized shares, one million shares
were reserved for issuance under the 2002 Stock Plan. Additionally, the
Company has new preferred stock, $1.00 par value, with one million authorized
shares, of which no shares were outstanding as of December 31, 2004. The Company had shares of Class A common stock in 2001 and has shares of common stock in 2002 and
2003 reserved for future issuance as follows (in thousands): December 31,2004
    
    
    2003
    
    
    20022002 Stock Plan
    
    
    829
    
    
    
    841
    
    
    
    903Directors Incentive Plan
    
    
    60
    
    
    
    60
    
    
    
    65Employee Incentive Plan
    
    
    170
    
    
    
    170
    
    
    
    5001,059
    
    
    
    1,071
    
    
    
    1,468
 See Note 2Proceedings Under Chapter 11 54




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##### Table of Contents



Stock Plans Upon emergence from Chapter 11, the Companys Board of Directors approved a new management
incentive plan, the Carmike Cinemas, Inc. 2002 Stock Plan (the 2002 Stock Plan). The Board of
Directors has approved the grant of 780,000 shares under the 2002 stock Plan to Michael W. Patrick,
the Companys Chief Executive Officer. Pursuant to the terms of Mr. Patricks employment agreement
dated January 31, 2002 these shares will be delivered in three equal installments on January 31,
2005, 2006 and 2007 unless, prior to the delivery of any such installment, Mr. Patricks employment
is terminated for Cause (as defined in his employment agreement) or he has violated certain
covenants set forth in such employment agreement. In May 2002, the Companys Stock Option Committee
(which administered the 2002 stock Plan prior to August 2002) approved grants of the remaining
220,000 shares to a group of seven other members of senior management. These shares are to be
earned over a three year period, commencing with the year ended December 31, 2002, with the shares
being earned as the executive achieves specific performance goals set for the executive to be
achieved during each of these years. In some instances the executive may earn partial amounts of
his or her stock grant based on graded levels of performance. Shares earned each year will vest and
be receivable approximately two years after the calendar year in which they were earned, provided,
with certain exceptions, the executive remains an employee of the Company. One of the seven grants
to senior executives includes a grant of 35,000 shares to a former employee of the Company. Pursuant to an agreement with the former employee, the Company will deliver to the former
employee the 17,000 shares earned in connection with his performance in 2002. These 17,000 shares
vested on January 31, 2005. Of the 220,000 shares granted to members of senior management, 69,250
shares were earned for the year ended December 31, 2002 and 14,250 shares were forfeited. However,
the Compensation Committee (currently named the Compensation and Nominating Committee) approved two
additional grants of 5,500 shares to two members of senior management on March 7, 2003, which
shares are deemed to be earned and subject only to vesting requirements. For the year ended
December 31, 2003, 62,980 shares were earned and 15,520 shares were forfeited. On May 21, 2004, the
Compensation, Nominating and Corporate Governance Committee approved one additional grant of 1,130
shares, which vest on January 31, 2006, to one member of senior management. For the year ended
December 31, 2004, 33,000 shares were earned and 8,000 shares were forfeited. On October 11, 2004,
the Compensation, Nominating and Corporate Governance Committee approved one additional grant of
10,000 shares, vested on January 15, 2005, to one member of senior management. Therefore, of the original 220,000 shares granted to members of senior management, 204,360
shares are deemed to have been earned, subject only to vesting requirements, 15,640 shares have
been forfeited (after adjusting for the grant of previously forfeited shares). The Company has
included in stockholders equity $15.4 million and $9.6 million at December 31, 2004 and December
31, 2003, respectively, related to the 2002 stock Plan. On May 31, 2002, the Board of Directors adopted the Carmike Cinemas, Inc. Non-Employee
Directors Long-Term Stock Incentive Plan (the Directors Incentive Plan), which was approved by
the stockholders on August 14, 2002. The purpose of the Directors Incentive Plan is to provide
incentives that will attract, retain and motivate qualified and experienced persons for service as
non-employee directors of Carmike. There are a total of 75,000 shares reserved under the Directors
Incentive Plan. The Board of Directors approved a grant of 5,000 shares each to two independent
directors on August 14, 2002. Additionally, the Board of Directors approved stock option grants of
5,000 shares in September 2003 and 5,000 shares in April 2004 for new directors. The option grant
price was based on the fair market value of the stock on the date of the grant. These grants of
20,000 shares in the aggregate during 2002, 2003 and 2004 represent the only stock options
outstanding under the Directors Incentive Plan prior the plan being superseded on May 21, 2004, the
effective date of the 2004 Incentive stock Plan. On July 19, 2002, the Board of Directors adopted the Carmike Cinemas, Inc. Employee and
Consultant Long-Term Stock Incentive Plan (the Employee Incentive Plan), which was approved by
the stockholders on August 14, 2002. The purpose of the Employee Incentive Plan is to provide
incentives, competitive with those of similar companies, which will attract, retain and motivate
qualified and experienced persons to serve as employees and consultants of the Company and to
further align such employees and consultants interest with those of the Companys stockholders.
There are a total of 500,000 shares reserved under the Employee Incentive Plan. The Company granted
an aggregate of 150,000 options pursuant to this plan on March 7, 2003 to three members of senior
management. The exercise price for the 150,000 stock options is $21.79 per share, and 75,000
options vest on December 31, 2005 and 75,000 options vest on December 31, 2006. On December 18,
2003, the Company granted an aggregate of 180,000 options to six members of management. The
exercise price for the 180,000 options is $35.63 and they vest ratably over three years beginning
December 31, 2005 through December 31, 2007. These grants of 330,000 shares in the aggregate
during 2003 represent the only stock options outstanding under the Employee Incentive Plan prior
the plan being superseded on May 21, 2004, the effective date of the 2004 Incentive Stock Plan. 55




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##### Table of Contents



On March 31, 2004, the
Board of Directors adopted the Carmike Cinemas, Inc. 2004 Incentive
Stock Plan, which was approved by the stockholders on May 21,
2004. The 2004 Incentive Stock Plan
replaced the Employee Incentive Plan and the Directors Incentive Plan. The 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. There are 1,055,000 shares of common stock reserved for issuance pursuant to
grants made under the 2004 Incentive Stock Plan in addition any shares which may be forfeited under
the Employee Incentive Plan and the Directors Incentive Plan after the effective date of the 2004
Incentive Stock Plan. Changes in outstanding stock options were as follows (in thousands, except for exercise price per
share): Exercise Price per Share$5.44
    
    
    $6.00-$14.00
    
    
    $18.00-$19.95
    
    
    $21.40-$21.79
    
    
    $27.125-$35.63
    
    
    TotalStock options outstanding at January 1, 2002
    
    
    403
    
    
    
    6
    
    
    
    63
    
    
    
    
    
    
    
    275
    
    
    
    747Cancelled (January 31, 2002)
    
    
    (403
    )
    
    
    (6
    )
    
    
    (63
    )
    
    
    
    
    
    
    (275
    )
    
    
    (747
    )Issued
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Stock options outstanding at December 31, 2002
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    180
    
    
    
    335Stock options outstanding at December 31, 2003
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    155
    
    
    
    180
    
    
    
    345Issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options outstanding at December 31, 2004
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    155
    
    
    
    180
    
    
    
    345
 As of December 31, 2004, 20,000 shares are exercisable. NOTE 13 
COMMITMENTS AND CONTINGENCIES Leases The Company received approval from the bankruptcy court to reject leases relating to 136
theatre locations over the course of the proceeding. The Company has recorded a liability in
Liabilities Subject to Compromise based on reasonable estimates of our exposure for these
rejections. Future minimum payments under capital leases and operating leases with terms over one year and
which had not been rejected by the Company in the Chapter 11 Cases as of December 31, 2004, are as
follows (in thousands): Operating
    
    
    Capital
    
    
    FinancingLeases (1)
    
    
    Leases
    
    
    Obligations2005
    
    $
    40,304
    
    
    $
    6,756
    
    
    $
    5,3282006
    
    
    38,295
    
    
    
    6,632
    
    
    
    5,3282007
    
    
    36,620
    
    
    
    6,636
    
    
    
    5,3282008
    
    
    35,072
    
    
    
    6,604
    
    
    
    5,3282009
    
    
    33,899
    
    
    
    6,624
    
    
    
    5,328Thereafter
    
    
    306,352
    
    
    
    64,646
    
    
    
    76,753Total minimum lease payments
    
    $
    490,542
    
    
    
    97,898
    
    
    
    103,393Less amounts representing interest
    
    
    
    
    
    
    (52,736
    )
    
    
    (74,468
    )Present value of future minimum lease payments
    
    
    
    
    
    
    45,162
    
    
    
    28,925Less current maturities
    
    
    
    
    
    
    (1,420
    )
    
    
    (137
    )Long-term obligations
    
    
    
    
    
    $
    43,742
    
    
    $
    28,788
  (1)
    Within the operating leases is a commitment to enter into a transaction that will be
accounted for as a financing obligation in the amount of $6.3 million. The Company is
required to make payments on this lease prior to the closing of the financing. Long-term financing obligations are comprised of various leases with terms ranging between 10-20
years and effective annual percentage rates between 10% -24%. Rent expense was approximately $43.3 million, $42.3 million and $43.1 million for 2004, 2003
and 2002, respectively. In addition, the Company had approximately $3.6 million, $4.0 million and
$6.0 million in contingent rental payments for 2004, 2003 and 2002, respectively. 56




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##### Table of Contents



NOTE 14  CONDENSED FINANCIAL DATA The Company and its wholly owned subsidiaries have fully, unconditionally, and jointly and
severally guaranteed the Companys obligations under the 7.500% senior subordinated notes. The
Company has several unconsolidated affiliates that are not guarantors of the 7.500% senior
subordinated notes. Condensed consolidating financial data for the guarantor subsidiaries is as follows (in thousands): Condensed Consolidating Balance Sheets
As of December 31, 2004 Carmike
    
    
    Guarantor
    
    
    Non-guarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    47,227
    
    
    $
    4,835
    
    
    $
    4,882
    
    
    $
    
    
    
    $
    56,944Accounts and notes receivable
    
    
    1,322
    
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    1,464Inventories
    
    
    385
    
    
    
    1,062
    
    
    
    12
    
    
    
    
    
    
    
    1,459Prepaid expenses
    
    
    2,329
    
    
    
    3,870
    
    
    
    53
    
    
    
    
    
    
    
    6,252Total current assets
    
    
    51,263
    
    
    
    9,909
    
    
    
    4,947
    
    
    
    
    
    
    
    66,119Other assets:Investment in and advances to partnerships
    
    
    9,331
    
    
    
    2,092
    
    
    
    
    
    
    
    (9,331
    )
    
    
    2,092Investment
in subsidiaries and intercompany receivable
    
    
    335,063
    
    
    
    2,220
    
    
    
    
    
    
    
    (337,283
    )
    
    
    Other
    
    
    45,000
    
    
    
    36,974
    
    
    
    1
    
    
    
    
    
    
    
    81,975Property and equipment, net
    
    
    113,538
    
    
    
    351,748
    
    
    
    4,841
    
    
    
    1
    
    
    
    470,128Goodwill
    
    
    5,914
    
    
    
    17,440
    
    
    
    
    
    
    
    
    
    
    
    23,354Total assets
    
    $
    560,109
    
    
    $
    420,383
    
    
    $
    9,789
    
    
    $
    (346,613
    )
    
    $
    643,668Liabilities and stockholders equityCurrent liabilities:Account payable
    
    $
    17,710
    
    
    $
    4,920
    
    
    $
    80
    
    
    $
    
    
    
    $
    22,710Dividends payable
    
    
    2,128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,128Accrued expenses
    
    
    19,293
    
    
    
    15,910
    
    
    
    379
    
    
    
    
    
    
    
    35,582Current maturities of long-term
indebtedness, capital lease and long-term
financings obligations
    
    
    1,532
    
    
    
    1,340
    
    
    
    
    
    
    
    
    
    
    
    2,872Total current liabilities
    
    
    40,663
    
    
    
    22,170
    
    
    
    459
    
    
    
    
    
    
    
    63,292Long-term debt less current maturities
    
    
    248,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248,000Capital lease and long-term financing
obligations less current maturities
    
    
    11,600
    
    
    
    60,930
    
    
    
    
    
    
    
    
    
    
    
    72,530Intercompany
liabilities
    
    
    
    
    
    
    222,118
    
    
    
    1,134
    
    
    
    (223,252
    )
    
    
    Liabilities subject to compromise
    
    
    1,348
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,348Stockholders equity
    
    
    258,498
    
    
    
    115,165
    
    
    
    8,196
    
    
    
    (123,361
    )
    
    
    258,498Total liabilities and stockholders equity
    
    $
    560,109
    
    
    $
    420,383
    
    
    $
    9,789
    
    
    $
    (346,613
    )
    
    $
    643,668
 57




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##### Table of Contents



Condensed Consolidating Statements of Operations
For Year Ended December 31, 2004 Carmike
    
    
    Guarantor
    
    
    Non-guarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenuesAdmissions
    
    $
    65,560
    
    
    $
    261,197
    
    
    $
    4,722
    
    
    $
    
    
    
    $
    331,479Concessions and other
    
    
    54,451
    
    
    
    129,613
    
    
    
    2,038
    
    
    
    (23,106
    )
    
    
    162,996120,011
    
    
    
    390,810
    
    
    
    6,760
    
    
    
    (23,106
    )
    
    
    494,475Costs and expensesFilm exhibition costs
    
    
    33,095
    
    
    
    138,926
    
    
    
    2,452
    
    
    
    
    
    
    
    174,473Concession costs
    
    
    3,119
    
    
    
    13,571
    
    
    
    191
    
    
    
    
    
    
    
    16,881Other theatre operating costs
    
    
    39,474
    
    
    
    159,935
    
    
    
    2,460
    
    
    
    (22,742
    )
    
    
    179,127General and administrative expenses
    
    
    18,294
    
    
    
    1,006
    
    
    
    366
    
    
    
    (364
    )
    
    
    19,302Depreciation expenses
    
    
    7,155
    
    
    
    26,240
    
    
    
    406
    
    
    
    
    
    
    
    33,801Gain on sales of property and equipment
    
    
    (23
    )
    
    
    (522
    )
    
    
    (506
    )
    
    
    
    
    
    
    (1,051
    )Impairment of long-lived assets
    
    
    362
    
    
    
    530
    
    
    
    
    
    
    
    
    
    
    
    892101,476
    
    
    
    339,686
    
    
    
    5,369
    
    
    
    (23,106
    )
    
    
    423,425Operating income
    
    
    18,535
    
    
    
    51,124
    
    
    
    1,391
    
    
    
    
    
    
    
    71,050Interest expense
    
    
    23
    
    
    
    26,081
    
    
    
    
    
    
    
    
    
    
    
    26,104Loss on extinguishment of debt
    
    
    9,313
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,313Income before reorganization costs and
income taxes
    
    
    9,199
    
    
    
    25,043
    
    
    
    1,391
    
    
    
    
    
    
    
    35,633Reorganization costs
    
    
    (12,397
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,397
    )Net income before income taxes
    
    
    21,596
    
    
    
    25,043
    
    
    
    1,391
    
    
    
    
    
    
    
    48,030Income tax expense
    
    
    5,378
    
    
    
    12,813
    
    
    
    
    
    
    
    
    
    
    
    18,19116,218
    
    
    
    12,230
    
    
    
    1,391
    
    
    
    
    
    
    
    29,839Equity in
earnings of subsidiaries
    
    
    13,621
    
    
    
    
    
    
    
    
    
    
    
    (13,621
    )
    
    
    Net income
available for common stockholders
    
    $
    29,839
    
    
    $
    12,230
    
    
    $
    1,391
    
    
    $
    (13,621
    )
    
    $
    29,839
 58




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##### Table of Contents



Condensed Consolidating Statements of Cash Flow
For Year Ended December 31, 2004 Carmike
    
    
    Guarantor
    
    
    Non-guarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    

    Eliminations


    ConsolidatedOperating activitiesNet income (loss)
    
    $
    29,839
    
    
    $
    12,230
    
    
    $
    1,391
    
    
$
(13,621
)


    $
    29,839Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation
    
    
    7,155
    
    
    
    26,240
    
    
    
    406
    
    




    
    33,801Interest
expense
    
    
    1,693
    
    
    
    
    
    
    
    
    
    

    


    
    1,693Impairment charge
    
    
    362
    
    
    
    530
    
    
    
    
    
    




    
    892Deferred income taxes
    
    
    5,271
    
    
    
    12,321
    
    
    
    
    
    




    
    17,592Non-cash deferred compensation
    
    
    5,757
    
    
    
    
    
    
    
    
    
    




    
    5,757Non-cash reorganization items
    
    
    (12,552
    )
    
    
    
    
    
    
    
    
    




    
    (12,552
    )Gain on sales of property and equipment
    
    
    (23
    )
    
    
    (522
    )
    
    
    (506
    )
    




    
    (1,051
    )Changes in operating assets and liabilities
    
    
    15,837
    
    
    
    (44,675
    )
    
    
    (1,357
    )
    

13,621


    
    (16,574
    )Net cash
provided by (used in) operating activities
    
    
    53,339
    
    
    
    6,124
    
    
    
    (66
    )
    






    
    59,397Investing activitiesPurchases of property and equipment
    
    
    (20,544
    )
    
    
    (18,047
    )
    
    
    (53
    )
    




    
    (38,644
    )Proceeds from sale of property and equipment
    
    
    213
    
    
    
    1,774
    
    
    
    2,590
    
    




    
    4,577Net change
in consolidation of partnerships
    
    
    (1,333
    )
    
    
    
    
    
    
    
    
    




    
    (1,333
    )Net cash
provided by (used in) investing activities
    
    
    (21,664
    )
    
    
    (16,273
    )
    
    
    2,537
    
    




    
    (35,400
    )Financing activitiesAdditional borrowing, net of debt issuance costs
    
    
    250,263
    
    
    
    
    
    
    
    
    
    




    
    250,263Repayments of debt
    
    
    (342,079
    )
    
    
    (1,270
    )
    
    
    
    
    




    
    (343,349
    )Issuance of common stock
    
    
    89,052
    
    
    
    
    
    
    
    
    
    




    
    89,052Dividends paid
    
    
    (4,255
    )
    
    
    
    
    
    
    
    
    




    
    (4,255
    )Net cash used in financing activities
    
    
    (7,019
    )
    
    
    (1,270
    )
    
    
    
    
    




    
    (8,289
    )Increase (decrease) in cash and cash equivalents
    
    
    24,656
    
    
    
    (11,419
    )
    
    
    2,471
    
    




    
    15,708Cash and cash equivalents at beginning of year
    
    
    22,571
    
    
    
    16,254
    
    
    
    2,411
    
    




    
    41,236Cash and cash equivalents at end of year
    
    $
    47,227
    
    
    $
    4,835
    
    
    $
    4,882
    
    
 $



    $
    56,944
 59




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##### Table of Contents



Condensed Consolidating Balance Sheets
As of December 31, 2003 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    24,982
    
    
    $
    16,254
    
    
    $
    
    
    
    $
    41,236Accounts and notes receivable
    
    
    1,938
    
    
    
    123
    
    
    
    
    
    
    
    2,061Inventories
    
    
    407
    
    
    
    1,170
    
    
    
    
    
    
    
    1,577Prepaid expenses
    
    
    7,189
    
    
    
    (233
    )
    
    
    
    
    
    
    6,956Total current assets
    
    
    34,516
    
    
    
    17,314
    
    
    
    
    
    
    
    51,830Other assets:Investment in and advances to partnerships
    
    
    4,955
    
    
    
    1,997
    
    
    
    
    
    
    
    6,952Investment
in subsidiaries and intercompany receivable
    
    
    102,932
    
    
    
    
    
    
    
    (102,932
    )
    
    
    Other
    
    
    297,627
    
    
    
    53,363
    
    
    
    (258,833
    )
    
    
    92,157Property and equipment, net
    
    
    102,974
    
    
    
    357,349
    
    
    
    
    
    
    
    460,323Goodwill, net
    
    
    5,914
    
    
    
    17,440
    
    
    
    
    
    
    
    23,354Total assets
    
    $
    548,918
    
    
    $
    447,463
    
    
    $
    (361,765
    )
    
    $
    634,616Liabilities and stockholders equityCurrent liabilities:Account payable
    
    $
    15,400
    
    
    $
    11,962
    
    
    $
    
    
    
    $
    27,362Accrued expenses
    
    
    28,021
    
    
    
    16,392
    
    
    
    
    
    
    
    44,413Current maturities of long-term indebtedness and capital lease
and financing obligations
    
    
    887
    
    
    
    1,275
    
    
    
    
    
    
    
    2,162Total current liabilities
    
    
    44,308
    
    
    
    29,629
    
    
    
    
    
    
    
    73,937Long-term debt less current maturities
    
    
    323,050
    
    
    
    
    
    
    
    
    
    
    
    323,050Capital lease and long-term financing obligations less current maturities
    
    
    11,820
    
    
    
    56,069
    
    
    
    
    
    
    
    67,889Long-term trade payables less current maturities
    
    
    7,988
    
    
    
    
    
    
    
    
    
    
    
    7,988Intercompany
liabilities
    
    
    
    
    
    
    258,833
    
    
    
    (258,833
    )
    
    
    Liabilities subject to compromise
    
    
    21,521
    
    
    
    
    
    
    
    
    
    
    
    21,521Satockholders equity
    
    
    140,231
    
    
    
    102,932
    
    
    
    (102,932
    )
    
    
    140,231Total liabilities and stockholders equity
    
    $
    548,918
    
    
    $
    447,463
    
    
    $
    (361,765
    )
    
    $
    634,616
 60




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##### Table of Contents



Condensed Consolidating Statements of Operations
For Year Ended December 31, 2003 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenuesAdmissions
    
    $
    66,057
    
    
    $
    266,013
    
    
    $
    
    
    
    $
    332,070Concessions and other
    
    
    56,130
    
    
    
    128,957
    
    
    
    (24,072
    )
    
    
    161,015122,187
    
    
    
    394,970
    
    
    
    (24,072
    )
    
    
    493,085Costs and expensesFilm exhibition costs
    
    
    33,665
    
    
    
    146,738
    
    
    
    
    
    
    
    180,403Concession costs
    
    
    3,155
    
    
    
    14,830
    
    
    
    
    
    
    
    17,985Other theatre operating costs
    
    
    39,710
    
    
    
    161,143
    
    
    
    (24,072
    )
    
    
    176,781General and administrative expenses
    
    
    15,344
    
    
    
    (9
    )
    
    
    
    
    
    
    15,335Depreciation expenses
    
    
    6,897
    
    
    
    25,867
    
    
    
    
    
    
    
    32,764Gain on sales of property and equipment
    
    
    (671
    )
    
    
    (2,352
    )
    
    
    
    
    
    
    (3,023
    )Impairment of long-lived assets
    
    
    
    
    
    
    1,148
    
    
    
    
    
    
    
    1,14898,100
    
    
    
    347,365
    
    
    
    (24,072
    )
    
    
    421,393Operating income
    
    
    24,087
    
    
    
    47,605
    
    
    
    
    
    
    
    71,692Interest expense
    
    
    12,394
    
    
    
    30,480
    
    
    
    
    
    
    
    42,874Income before reorganization costs and income taxes
    
    
    11,693
    
    
    
    17,125
    
    
    
    
    
    
    
    28,818Reorganization benefits
    
    
    (4,109
    )
    
    
    
    
    
    
    
    
    
    
    (4,109
    )Net income before income taxes
    
    
    15,802
    
    
    
    17,125
    
    
    
    
    
    
    
    32,927Income tax (benefit)
    
    
    (35,111
    )
    
    
    (38,352
    )
    
    
    
    
    
    
    (73,463
    )50,913
    
    
    
    55,477
    
    
    
    
    
    
    
    106,390Equity in earnings of subsidiaries
    
    
    55,477
    
    
    
    
    
    
    
    (55,477
    )
    
    
    Net income (loss)
available for common stockholders
    
    
    106,390
    
    
    
    55,477
    
    
    
    (55,477
    )
    
    
    106,390
 61




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##### Table of Contents



Condensed Consolidating Statements of Cash Flow
For Year Ended December 31, 2003 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    

Eliminations


    ConsolidatedOperating activitiesNet income (loss)
    
    $
    106,390
    
    
    $
    55,477
    
    
$
(55,477
)

    $
    106,390Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation
    
    
    6,897
    
    
    
    25,867
    
    




    
    32,764Interest
Expense
    
    
    668
    
    
    
    
    
    

    


    
    668Impairment charge
    
    
    
    
    
    
    1,148
    
    




    
    1,148Deferred income taxes
    
    
    (37,538
    )
    
    
    (36,425
    )
    




    
    (73,963
    )Non-cash deferred compensation
    
    
    6,023
    
    
    
    
    
    




    
    6,023Non-cash reorganization items
    
    
    (5,940
    )
    
    
    
    
    




    
    (5,940
    )Gain on sales of property and equipment
    
    
    (671
    )
    
    
    (2,352
    )
    




    
    (3,023
    )Changes in operating assets and liabilities
    
    
    (39,589
)
    
    
    (26,692
    )
    

    55,477


    
    (10,804
    )Net cash provided by operating activities
    
    
    36,240
    
    
    
    17,023
    
    

    


    
    53,263Investing activitiesPurchases of property and equipment
    
    
    (1,683
    )
    
    
    (17,245
    )
    




    
    (18,928
    )Proceeds from sale of property and equipment
    
    
    1,967
    
    
    
    4,755
    
    




    
    6,722Net cash provided by (used) in investing activities
    
    
    284
    
    
    
    (12,490
    )
    

    


    
    (12,206
    )Financing activitiesAdditional borrowing, net of debt issuance costs
    
    
    
    
    
    
    
    
    




    
    Repayments of debt
    
    
    (51,331
    )
    
    
    (818
    )
    




    
    (52,149
    )Prepaid financing costs
    
    
    
    
    
    
    (1,163
)

    




    
    (1,163
)Proceeds from long-term financing obligations
    
    
    
    
    
    
    
    
    





    
    Net cash used in financing activities
    
    
    (51,331
    )
    
    
    (1,981
    )
    

    



    
    (53,312
    )Increase (decrease) in cash and cash equivalents
    
    
    (14,807
    )
    
    
    2,552
    
    

    


    
    (12,255
    )Cash and cash equivalents at beginning of year
    
    
    39,789
    
    
    
    13,702
    
    

    


    
    53,491Cash and cash equivalents at end of year
    
    $
    24,982
    
    
    $
    16,254
    
    


    



    $
    41,236
 62




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##### Table of Contents



Condensed Consolidating Statements of Operations
For Year Ended December 31, 2002 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenuesAdmissions
    
    $
    67,621
    
    
    $
    275,218
    
    
    $
    
    
    
    $
    342,839Concessions and other
    
    
    56,333
    
    
    
    131,124
    
    
    
    (23,789
    )
    
    
    163,668123,954
    
    
    
    406,342
    
    
    
    (23,789
    )
    
    
    506,507Costs and expensesFilm exhibition costs
    
    
    36,263
    
    
    
    153,002
    
    
    
    
    
    
    
    189,265Concession costs
    
    
    3,551
    
    
    
    15,682
    
    
    
    
    
    
    
    19,233Other theatre operating costs
    
    
    40,289
    
    
    
    161,876
    
    
    
    (23,789
    )
    
    
    178,376General and administrative expenses
    
    
    14,902
    
    
    
    81
    
    
    
    
    
    
    
    14,983Depreciation and amortization expenses
    
    
    7,248
    
    
    
    26,490
    
    
    
    
    
    
    
    33,738Gain on sales of property and equipment
    
    
    (330
    )
    
    
    (351
    )
    
    
    
    
    
    
    (681
    )101,923
    
    
    
    356,780
    
    
    
    (23,789
    )
    
    
    434,914Operating income
    
    
    22,031
    
    
    
    49,562
    
    
    
    
    
    
    
    71,593Interest expense
    
    
    52,832
    
    
    
    52,688
    
    
    
    
    
    
    
    105,520Income before reorganization costs and income taxes
    
    
    (30,801
    )
    
    
    (3,126
    )
    
    
    
    
    
    
    (33,927
    )Reorganization costs
    
    
    20,030
    
    
    
    517
    
    
    
    
    
    
    
    20,547Net income before income taxes
    
    
    (50,831
    )
    
    
    (3,643
    )
    
    
    
    
    
    
    (54,474
    )Income tax (benefit)
    
    
    (14,706
    )
    
    
    
    
    
    
    
    
    
    
    (14,706
    )(36,125
    )
    
    
    (3,643
    )
    
    
    
    
    
    
    (39,768
    )Equity in
earnings of subsidiaries
    
    
    (3,643
    )
    
    
    
    
    
    
    3,643
    
    
    
    Net income
(loss) available for common stockholders
    
    $
    (39,768
    )
    
    $
    (3,643
    )
    
    $
    3,643
    
    
    $
    (39,768
    )
 63




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##### Table of Contents



Condensed Consolidating Statements of Cash Flow
For Year Ended December 31, 2002 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    

Eliminations
    
    
    ConsolidatedOperating activitiesNet income (loss)
    
    $
    (39,768)
    
    
    $
    (3,643
    )

    

    $
    3,643
    

    

    $
    (39,768
    )Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation
and amortization
    
    
    7,248
    
    
    
    26,490
    
    
    
    
    
    
    
    33,738Non-cash deferred compensation
    
    
    3,614
    
    
    
    
    
    
    
    
    
    
    
    3,614Non-cash reorganization items
    
    
    13,528
    
    
    
    
    
    
    
    
    
    
    
    13,528Gain on sales of property and equipment
    
    
    (330
    )
    
    
    (351
    )
    
    
    
    
    
    
    (681
    )Changes in operating assets and liabilities
    
    
    22,902
    
    
    
    (13,418
    )
    

    

    (3,643
    )
    

    
    5,841Net cash provided by operating activities
    
    
    7,194
    
    
    
    9,078
    

    

    
    
    

    

    
    16,272Investing activitiesPurchases of property and equipment
    
    
    (2,636
    )
    
    
    (15,432
    )
    
    
    
    
    
    
    (18,068
    )Proceeds from sale of property and equipment
    
    
    813
    
    
    
    2,662
    
    
    
    
    
    
    
    3,475Net cash used in investing activities
    
    
    (1,823
    )
    
    
    (12,770
    )

    

    
    
    

    

    
    (14,593
    )Financing activitiesAdditional borrowing, net of debt issuance costs
    
    
    15,405
    
    
    
    6,300
    
    
    
    
    
    
    
    21,705Repayments of debt
    
    
    (64,723
    )
    
    
    (808
    )
    
    
    
    
    
    
    (65,531
    )Prepaid financing costs
    
    
    
    
    
    
    (1,163
    )
    
    
    
    
    
    
    (1,163
    )Proceeds from long-term financing obligations
    
    
    2,768
    
    
    
    (154
    )
    
    
    
    
    
    
    2,614Net cash used in financing activities
    
    
    (46,550
    )
    
    
    4,175
    

    

    
    
    

    

    
    (42,375
    )Increase (decrease) in cash and cash equivalents
    
    
    (41,179
    )
    
    
    483
    

    

    
    
    

    

    
    (40,696
    )Cash and cash equivalents at beginning of year
    
    
    80,968
    
    
    
    13,219
    
    

    
    
    

    

    
    94,187Cash and cash equivalents at end of year
    
    $
    39,789
    
    
    $
    13,702
    

    

    $
    
    

    

    $
    53,491
 NOTE 15 LITIGATION The Company is subject to various claims and lawsuits arising in the ordinary course of business.
In the opinion of management, the ultimate resolution of these matters will not have a material
effect on the consolidated financial statements of the Company. NOTE 16  FINANCIAL INSTRUMENTS Concentrations of credit risk Financial instruments that potentially subject the Company to significant concentrations of credit
risk consist principally of cash and cash equivalents. The Company maintains cash and cash equivalents with various financial institutions. These
financial institutions are located in the southeastern United States and Company policy is designed
to limit exposure to any one institution. The Company performs periodic evaluations of the relative
credit standings of those financial institutions that are considered in the Companys investment
strategy. The following methods and assumptions were used by the Company in estimating its fair value
disclosures for financial instruments: Cash and cash equivalents:The carrying amount reported in the balance sheets for cash and cash
equivalents approximates their fair value. Accounts receivable and accounts payable:The carrying amounts reported in the balance sheets for
accounts receivable and accounts payable approximated their fair value. Accounts receivable are
determined based on specified percentages within film distribution agreements for advertising.
Accounts payable are based on costs incurred not paid in the current period. Long-term debt:The carrying amount of the Companys long-term debt borrowings are reported at the
lower of cost or fair value. Our former 10 3/8% senior subordinated notes had a fair value of
$161.5 million ($154.3 million x 1.04688) based on the tender price. The carrying amount is
determined by the contractual agreement. 64




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##### Table of Contents



NOTE 17  QUARTERLY RESULTS (Unaudited) In thousands, except for per share data 1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    4th Quarter
    
    
    TotalYear ended December 31, 2004Total revenues
    
    $
    116,928
    
    
    $
    133,096
    
    
    $
    116,928
    
    
    $
    127,523
    
    
    $
    494,475Operating income
    
    
    19,832
    
    
    
    19,594
    
    
    
    11,324
    
    
    
    18,607
    
    
    
    69,357Net income
    
    
    1,772
    
    
    
    10,541
    
    
    
    7,626
    
    
    
    9,900
    
    
    
    29,839Income per common share:Basic
    
    $
    0.16
    
    
    $
    0.88
    
    
    $
    0.64
    
    
    $
    0.83
    
    
    $
    2.55Diluted
    
    $
    0.15
    
    
    $
    0.82
    
    
    $
    0.60
    
    
    $
    0.78
    
    
    $
    2.39Year ended December 31, 2003Total revenues
    
    $
    103,214
    
    
    $
    130,440
    
    
    $
    128,227
    
    
    $
    131,204
    
    
    $
    493,085Operating income
    
    
    15,714
    
    
    
    19,412
    
    
    
    19,459
    
    
    
    16,439
    
    
    
    71,024Net income
    
    
    4,762
    
    
    
    13,686
    
    
    
    9,251
    
    
    
    78,691
    
    
    
    106,390Income per common share:Basic
    
    $
    0.52
    
    
    $
    1.52
    
    
    $
    1.03
    
    
    $
    8.75
    
    
    $
    11.83Diluted
    
    $
    0.51
    
    
    $
    1.48
    
    
    $
    0.98
    
    
    $
    8.20
    
    
    $
    11.26
 Net income per common share calculations for each of the above quarters is based on the
weighted average number of shares outstanding for each period and the sum of the quarters may not
necessarily equal the net income per common share amount for the year. The Company reversed
its income tax valuation allowance in the fourth quarter of 2003. See
Note 11 for additional information. 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Ernst & Young LLP (Ernst & Young) audited Carmikes consolidated financial statements for
the year ended December 31, 2002. On April 7, 2003 Carmike determined not to renew the engagement
of Ernst & Young, and appointed PricewaterhouseCoopers LLP (PricewaterhouseCoopers) as its new
independent accountants, effective immediately. This determination followed Carmikes decision to
seek proposals from independent accountants to audit Carmikes financial statements for the fiscal
year ended December 31, 2003. The decision not to renew the engagement of Ernst & Young and to
retain PricewaterhouseCoopers was approved by Carmikes Audit Committee. Ernst & Young was
dismissed effective as of April 7, 2003. During Carmikes fiscal year ended December 31, 2002 and the subsequent interim period through
April 7, 2003, there were no disagreements between Carmike and Ernst & Young on any matter of
accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements if not resolved to Ernst & Youngs satisfaction would have caused them to make
reference to the subject matter of the disagreement in connection with their reports. None of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred
within Carmikes most recent fiscal year and the subsequent interim period through April 7, 2003. The audit reports of Ernst & Young on the consolidated financial statements of Carmike and its
subsidiaries for the fiscal year ended December 31, 2002 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit
scope, or accounting principles. During Carmikes fiscal year ended December 31, 2002, and the subsequent interim period
through April 7, 2003, Carmike did not consult with PricewaterhouseCoopers regarding any of the
matters or events set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K. 
 ITEM 9A. CONTROLS AND PROCEDURES. As
required by Securities and Exchange Commission 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 annual report. This evaluation was carried out under
the supervision and with the participation of our management,
including our principal executive officer and principal financial
officer. Based on this evaluation, these officers have concluded that
the design and operation of our disclosure controls and procedures
are effective. There were no changes to our internal control over
financial reporting during the fourth quarter ended December 31,
2004 that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting. The Company maintains disclosure controls and procedures designed to provide reasonable
assurance of achieving the objective that information in its Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified and pursuant to the
regulations of the Securities and Exchange Commission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 by the company in the
reports we file or submit under the Exchange Act is accumulated and communicated to our Companys
management, including our Chief Executive Officer and 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. 65




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##### Table of Contents



As of the date of the filing of this Form 10-K we are in the process of testing our internal
control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of
2002, which requires an annual management report of the effectiveness of our internal controls over
financial reporting and for our Independent Registered Public Accounting Firm to attest to this
report. The SEC has granted certain accelerated filers, including Carmike, an option to extend the
compliance deadline for Section 404 for an additional 45 days. We have opted to utilize this 45
day extension, and therefore, this Form 10-K does not include our managements report regarding our
internal controls nor the related attestation report from our Independent Registered Public
Accounting Firm. We anticipate completing this process and filing these reports in an amended Form
10-K, which we intend to file in April of 2005. Currently, we are not aware of any material
weaknesses in our internal controls over financial reporting. 
 ITEM 9B. OTHER INFORMATION. None. 
 PART III 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding the Board of Directors, its committees and the selection of director
nominees is incorporated by reference from the section entitled Corporate Governance contained in
the Proxy Statement relating to the 2005 Annual Meeting of Stockholders of Carmike (hereinafter,
the 2005 Proxy Statement). Other information regarding the directors of Carmike is incorporated by reference from the
section entitled Election of Directors contained in the 2005 Proxy Statement. Information regarding the executive officers of Carmike is set forth in Part I of this Report
on Form 10-K pursuant to General Instruction G(3) of Form 10-K. Information regarding compliance with Section 16(a) of the Exchange Act is incorporated by
reference from the section entitled Section 16(a) Beneficial Ownership Reporting Compliance
contained in the 2005 Proxy Statement. Carmike adopted the Carmike Cinemas, Inc. Code of Ethics for Senior Executive and Financial
Officers that applies to Carmikes principal executive officer and senior financial officers, among
others, in accordance with Section 406 of the Sarbanes-Oxley Act of 2002 and the rules of the
Securities and Exchange Commission (SEC) promulgated thereunder. The Code of Ethics, is available
on our website, www.carmike.com. In the event that we make changes in, or provide waivers from, the
provisions of the Code of Ethics that the SEC requires us to disclose, we intend to disclose these
events on our website. 
 ITEM 11. EXECUTIVE COMPENSATION. Information regarding executive compensation is incorporated by reference from the sections
entitled Executive Compensation and Other Information and Compensation and Nominating Committee
Interlocks and Insider Participation contained in the 2005 Proxy Statement. 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS. Certain information required by this item is incorporated by reference from the sections
entitled Security Ownership of Certain Beneficial Holders, Security Ownership of Management and
Compensation Plans contained in the 2005 Proxy Statement. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS. Information regarding certain relationships and related party transactions is incorporated by
reference from the section entitled Certain Relationships and Related Party Transactions
contained in the 2005 Proxy Statement. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Information regarding principal accountant fees and services is incorporated by reference from
the section entitled Fees Paid to Independent Auditors contained in the 2005 Proxy Statement. 66




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##### Table of Contents



PART IV 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)(1)
The following consolidated financial statements of Carmike Cinemas, Inc. are included in Item
8. Financial Statements And Supplementary Data. Financial Statements: Report of Independent Registered Public Accounting Firm
Consolidated balance sheets  December 31, 2004 and 2003
Consolidated statements of operations  Years ended December 31, 2004, 2003 and 2002
Consolidated statements of cash flows  Years ended December 31, 2004, 2003 and 2002
Consolidated statements of stockholders equity  Years ended December 31, 2004, 2003 and 2002
Notes to Consolidated Financial Statements  December 31, 2004 (a)(2)
This report also includes the following Financial Statement Schedule: Schedule II  Valuation and Qualifying Accounts All other financial statement schedules are omitted because they are not applicable or not
required under the related instructions, or because the required information is shown either in the
consolidated financial statements or in the notes thereto. (a)(3) Listing of Exhibits Periodic reports, proxy statements and other information filed by Carmike with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. Information on the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330. The Commission also maintains a web site
(http://www.sec.gov) that makes available reports, proxy statements and other information regarding
Carmike. Carmikes SEC file number reference is Commission File No. 000-14993. 67




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##### Table of Contents



ExhibitNumber
    
    Description2.1
    
    Debtors Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code,
dated November 14, 2001 (filed as Exhibit 99 to Carmikes Current Report on Form 8-K
filed November 19, 2001 and incorporated herein by reference).2.2
    
    Debtors Amended Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code,
dated November 14, 2001 (filed as Exhibit T-3E1 to Carmikes Form T-3 filed December
11, 2001 and incorporated herein by reference).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
    
    Amended and Restated By-Laws of Carmike Cinemas, Inc. (filed as Exhibit 3.2 to
Carmikes Amendment to Form 8-A filed January 31, 2002 and incorporated herein by
reference).3.3
    
    Amendment No. 1 to the Amended and Restated By-Laws of Carmike Cinemas, Inc. (filed as
Exhibit 3.2 to Carmikes Form 10-Q for the quarter ended June 30, 2003 and incorporated
herein by reference).4.1
    
    Indenture, dated as of February 4, 2004, among Carmike Cinemas, Inc., each of the
Guarantors named therein and Wells Fargo Bank Minnesota, National Association, as
Trustee (filed as Exhibit 4.2 to Carmikes Current Report on Form 8-K filed February
20, 2004 and incorporated herein by reference).4.2
    
    Registration Rights Agreement, dated as of February 4, 2004, among Carmike Cinemas,
Inc., each of the Guarantors named therein and Goldman, Sachs & Co. (filed as Exhibit
4.3 to Carmikes Current Report on Form 8-K filed February 20, 2004 and incorporated
herein by reference).4.3
    
    Registration Rights Agreement, dated as of January 31, 2002, by and among Carmike
Cinemas, Inc. and certain stockholders (filed as Exhibit 99.3 to Amendment No. 1 to
Schedule 13D of Goldman, Sachs & Co., et. al., filed February 8, 2002 and incorporated
herein by reference).4.4
    
    First Amendment to Stockholders
Agreement, dated as of May 9, 2003, by
and among Carmike Cinemas, Inc. and
certain stockholders (filed as Exhibit
4.4 to Carmikes Form S-1/A
(Registration No. 333-90028) filed
November 18, 2003 and incorporated
herein by reference).4.5
    
    Letter Agreement, dated as of November
17, 2003, by and among Carmike Cinemas,
Inc. and certain Stockholders regarding
the Stockholders Agreement dated
January 31, 2002, as amended, and the
Registration Rights Agreement dated
January 31, 2002 (filed as Exhibit 4.5
to Carmikes Form S-1/A (Registration
No. 333-90028) filed November 18, 2003
and incorporated herein by reference).10.1
    
    $50,000,000 Senior Secured First
Priority Revolving Credit Facility,
dated as of February 4, 2004, among
Carmike Cinemas, Inc., each of the
Guarantors named therein, the Lenders
party to the agreement from time to
time, Goldman Sachs Credit Partners
L.P., as Syndication Agent, Wells Fargo
Foothill, Inc., as Administrative Agent
and Collateral Agent, and CIT Lending
Services Corporation and General
Electric Capital Corporation, as
Co-Documentation Agents (filed as
Exhibit 10.1 to Carmikes Current Report
on Form 8-K filed February 20, 2004 and
incorporated herein by reference).10.2
    
    $100,000,000 Senior Secured Second
Priority Credit Facility, dated as of
February 4, 2004, among Carmike Cinemas,
Inc., each of the Guarantors named
therein, the Lenders party to the
agreement from time to time, Goldman
Sachs Credit Partners L.P., as
Syndication Agent, and National City
Bank, as Administrative Agent and
Collateral Agent (filed as Exhibit 10.2
to Carmikes Current Report on Form 8-K
filed February 20, 2004 and incorporated
herein by reference).10.3
    
    Stock Purchase Agreement, dated as of
June 27, 1997, by and between the
Stockholders of Morgan Creek Theatres,
Inc.; Stockholders of SB Holdings, Inc.;
members of RDL Consulting Limited
Liability Company; Morgan Creek
Theatres, Inc.; SB Holdings, Inc.; RDL
Consulting Limited Liability Company;
First International Theatres; Carmike
Cinemas, Inc. and Eastwynn Theatres,
Inc. (filed as Exhibit 10.2 to Carmikes
Form 10-Q (Registration No. 001-11604)
for the quarter ended June 30, 1997 and
incorporated herein by reference).10.4*
    
    Carmike Cinemas, Inc. Deferred
Compensation Agreement and Trust
Agreement, dated as of January 1, 1990
(filed as Exhibit 10(u) to Carmikes
Form 10-K (Registration No. 000-14993)
for the year ended December 31, 1990 and
incorporated herein by reference).
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10.5
    
    Aircraft Lease, dated July 1, 1983, as
amended June 30, 1986, by and between
C.L.P. Equipment and Carmike Cinemas,
Inc. (filed as Exhibit 10(h) to
Carmikes Registration Statement on Form
S-1 (Registration No. 33-8007) and
incorporated herein by reference).10.6
    
    Summary of Extensions of Aircraft Lease
Agreement and Equipment Lease Agreement
which are Exhibits 10(e) and 10(k)
(filed as Exhibit 10(o) to Carmikes
Form 10-K (Registration No. 000-14993)
for the year ended December 31, 1991 and
incorporated herein by reference).10.7
    
    Second Amended and Restated Master
Lease, dated September 1, 2001, between
MoviePlex Realty Leasing, L.L.C. and
Carmike Cinemas, Inc. (filed as Exhibit
10.17 to Carmikes Form 10-K for the
year ended December 31, 2001 and
incorporated herein by reference).10.8*
    
    Trust Agreement, dated as of July 16,
1999, between Carmike Cinemas, Inc.,
Michael W. Patrick, F. Lee Champion, III
and Larry M. Adams (filed as Exhibit
10.23 to Carmikes Form 10-K for the
year ended December 31, 1999 and
incorporated herein by reference).10.9*
    
    Carmike Cinemas, Inc. Employee Retention
and Severance Plan (filed as Exhibit
10.22 to Carmikes Form 10-K for the
year ended December 31, 2000 and
incorporated herein by reference).10.10*
    
    Carmike Cinemas, Inc. 2002 Stock Plan
(filed as Exhibit 4.2 to Carmikes Form
S-8 (Registration No. 333-85194) filed
March 29, 2002 and incorporated herein
by reference).10.11*
    
    Employment Agreement, dated as of
January 31, 2002, between Carmike
Cinemas, Inc. and Michael W. Patrick
(filed as Exhibit 10 to Carmikes Form
10-Q for the quarter ended March 31,
2002 and incorporated herein by
reference).10.12*
    
    Carmike Cinemas, Inc. Non-Employee
Directors Long-Term stock Incentive Plan
(filed as Appendix C to Carmikes 2002
Definitive Proxy Statement filed July
24, 2002 and incorporated herein by
reference).10.13*
    
    Carmike Cinemas, Inc. Employee and
Consultant Long-Term stock Incentive
Plan (filed as Appendix D to Carmikes
2002 Definitive Proxy Statement filed
July 24, 2002 and incorporated herein by
reference).10.14*
    
    Form of Separation Agreement and
schedule of officers who have entered
into such agreement (filed as Exhibit
10.1 to Carmikes Form 10-Q for the
quarter ended June 30, 2003 and
incorporated herein by reference).10.15*
    
    Michael W. Patrick Dividend-Related
Bonus Agreement, effective as of January
29, 2004, between Carmike Cinemas, Inc.
and Michael W. Patrick (filed as Exhibit
10.3 to Carmikes Form 10-Q for the
quarter ended March 31, 2004 and
incorporated herein by reference).10.16
    
    Form of Indemnification Agreement and
Schedule of Directors who have entered
into such agreement (filed as Exhibit
10.1 to Carmikes Form S-3 (Registration
No. 333-117403) filed July 16, 2004 and
incorporated herein by reference).10.17
    
    Indemnification Agreement, effective as
of December 10, 2004, by and between
Carmike Cinemas, Inc. and Fred W. Van
Noy (filed as Exhibit 10.1 to Carmikes
Current Report on Form 8-K filed on
January 24, 2005 and incorporated herein
by reference).10.18
    
    First Amendment to Second Amended and
Restated Master Lease, dated as of July
12, 2004, between MoviePlex Realty
Leasing L.L.C. and Carmike Cinemas, Inc.
(filed an Exhibit 10.2 to Carmikes Form
S-3 (Registration No. 333-117403) filed
July 16, 2004 and incorporated herein by
reference).10.19
    
    Letter Agreement, dated as of June 23,
2004, by and among Carmike Cinemas, Inc.
and Goldman, Sachs & Co. regarding the
Exchange and Registration Rights
Agreement dated January 29, 2004 (filed
as Exhibit 10.1 to Carmikes S-4/A
(Registration No. 333-115134) filed July
22, 2004 and incorporated herein by
reference).10.20*
    
    Carmike Cinemas, Inc. 2004 Incentive
Stock Plan (filed as Appendix A to
Carmikes Definitive Proxy Statement for
the 2004 Annual Meeting of Stockholders,
filed on April 16, 2004 and incorporated
herein by reference).11
    
    Computation of per share earnings
(provided in Note 1 to the Notes to
Audited Consolidated Financial
Statements included in this report under
the caption Earnings Per Share).21
    
    List of Subsidiaries.23.1
    
    Consent of PricewaterhouseCoopers LLP.
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23.2
    
    Consent of Ernst & Young LLP.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.
    *
    Management contract or compensatory plan or arrangement required to be filed as an exhibit
pursuant to Item 15(c) of Form 10-K. (b) Exhibits The response to this portion of Item 15 is submitted as a separate section of this report. (c) Financial Statement Schedules See Item 15(a) (1) and (2). 70




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. CARMIKE CINEMAS, INC.Date: March 16, 2005
    By:
    /s/ Michael W. PatrickMichael W. PatrickPresident and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant in the capacities indicated and
as of the date indicated above. Signature
    
    Title/s/ Michael W. Patrick
    
    President, Chief Executive Officer andMichael W. Patrick
    
    Chairman of the Board of Directors(Principal Executive Officer)/s/ Martin A. Durant
    
    Senior Vice President andMartin A. Durant
    
    Chief Financial Officer(Principal Financial Officer)/s/ Philip A. Smitley
    
    Assistant Vice President  Controller(Principal Accounting Officer)Philip A. Smitley/s/ Alan J. Hirschfield
    
    DirectorAlan J. Hirschfield
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##### Table of Contents



/s/ S. David Passman III
    
    DirectorS. David Passman III/s/ Carl L. Patrick, Jr.
    
    DirectorCarl L. Patrick, Jr./s/ Kenneth A. Pontarelli
    
    DirectorKenneth A. Pontarelli/s/ Roland C. Smith
    
    DirectorRoland C. Smith/s/ Fred W. Van Noy
    
    Senior Vice President, Chief Operating Officer andDirectorFred W. Van Noy/s/ Patricia A. Wilson
    
    DirectorPatricia A. Wilson
 72




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Schedule II  Valuation and Qualifying Accounts
Carmike Cinemas, Inc. and Subsidiaries
December 31, 2004 (in thousands of dollars) Col. A
    
    Col. B
    
    
    Col. C
    
    
    Col. D
    
    
    Col. EAdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    Balance atBeginning of
    
    
    Costs and
    
    
    Other Accounts
    
    
    Deductions -
    
    
    EndDescription
    
    Period
    
    
    Expenses
    
    
    - Describe
    
    
    Describe
    
    
    of PeriodYear Ended December 31, 2001:Valuation reserve for deferred income tax assets
    
    $
    40,951
    
    
    $
    36,735
    (1)
    
    $
    
    
    
    $
    
    
    
    $
    77,686Year Ended December 31, 2002:Valuation reserve for deferred income tax assets
    
    $
    77,686
    
    
    $
    700
    (2)
    
    $
    
    
    
    $
    
    
    
    $
    78,386Year Ended December 31, 2003:Valuation reserve for deferred income tax assets
    
    $
    78,386
    
    
    $
    (4,923
    )(3)
    
    $
    (73,463
    ) (4)
    
    $
    
    
    
    $
    Year Ended December 31, 2004:Valuation reserve for deferred income tax assets
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  (1)
    Valuation reserve recorded in the year ended December 31, 2001. See Note 11 of notes to
audited annual consolidated financial statements.(2)
    Valuation reserve recorded in the year ended December 31, 2002. See Note 11 of notes to
audited annual consolidated financial statements.(3)
    Valuation reserve recorded in the year ended December 31, 2003. See Note 11 of notes to
audited annual consolidated financial statements.(4)
    Full release of valuation reserve as of December 31, 2003. See Note 11 of notes to
audited annual consolidated financial statements. 73




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Report of Independent Registered Public Accounting Firm on
Financial Statement Schedule To the Board of Directors
of Carmike Cinemas, Inc.: Our audits of the
consolidated financial statements referred to in our report dated
March 15, 2005 appearing in this Annual Report on Form 10-K
of Carmike Cinemas, Inc. also included an audit of the financial
statement schedule listed in Item 15(a)(2) of this
Form 10-K for the years ended December 31, 2004 and 2003. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated
financial statements. PricewaterhouseCoopers LLP
Atlanta, Georgia
March 15, 2005 74