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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) |  |                                                                                             
|[X]        |  | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
|           |  | fiscal year ended December 31, 2002                                                         

OR

|      |  |                                                                                             
|----- |  | --------------------------------------------------------------------------------------------
|[   ] |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
|      |  | the transition period from ________________ to ________________                             

Commission File Number 000-14993

CARMIKE CINEMAS, INC.
(Exact Name Of Registrant As Specified in Its Charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 58-1469127                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     
|1301 First Avenue, Columbus, Georgia                           |  | 31901                               
|(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   [X]      No   [   ]

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      [X]

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   [X]      No   [   ]

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

As of March 10, 2003, 8,991,262 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 (based upon the last reported sale price on the
Nasdaq National Market) on June 28, 2002 was approximately $33,330,490.

Documents Incorporated by Reference

Specified portions of Carmike Cinemas, Inc.s Proxy Statement relating to
the 2003 Annual Meeting of Stockholders are incorporated by reference into Part
III.





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TABLE OF CONTENTS



|                                             |                                                                                                         |  |  |  |  |  |  | 
|-------------------------------------------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                      
|                                             | ITEM 1. BUSINESS                                                                                       
|                                             | ITEM 2. PROPERTIES                                                                                     
|                                             | ITEM 3. LEGAL PROCEEDINGS                                                                              
|                                             | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                           
|                                             | EXECUTIVE OFFICERS OF THE REGISTRANT                                                                   
|PART II                                     
|                                             | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.                         
|                                             | ITEM 6. SELECTED FINANCIAL AND OPERATING DATA.                                                         
|                                             | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.         
|                                             | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.                                   
|                                             | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                                                   
|                                             | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.          
|PART III                                    
|                                             | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                                           
|                                             | ITEM 11. EXECUTIVE COMPENSATION.                                                                       
|                                             | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|                                             | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                                               
|                                             | ITEM 14. CONTROLS AND PROCEDURES.                                                                      
|PART IV                                     
|                                             | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.                              
|SIGNATURES                                  
|EX-21 LIST OF SUBSIDIARIES                  
|EX-23 CONSENT OF ERNST & YOUNG LLP          
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO



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Table of Contents

|          |          |                                      |                                                                                       |  |    |    |        |  | 
|--------- | -------- | ------------------------------------ | ------------------------------------------------------------------------------------- |  | -- | -- | ------ |  | 
|          |          |                                      |                                                                                       |  |    |    | Page  
|          |          |                                      |                                                                                       |  |    |    | Number
|          |          |                                      |                                                                                       |  |    |    |       
|PART I    |          |                                      |                                                                                       |  |    |   
|         
|          | ITEM 1.  |                                      | BUSINESS                                                                              |  |    | 3  |       
|         
|          | ITEM 2.  |                                      | PROPERTIES                                                                            |  |    | 23 |       
|         
|          | ITEM 3.  |                                      | LEGAL PROCEEDINGS                                                                     |  |    | 23 |       
|         
|          | ITEM 4.  |                                      | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  |    | 23 |       
|         
|          |          | EXECUTIVE OFFICERS OF THE REGISTRANT |                                                                                       |  | 23 |   
|         
|PART II   |          |                                      |                                                                                       |  |    |   
|         
|          | ITEM 5.  |                                      | MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                 |  |    | 25 |       
|         
|          | ITEM 6.  |                                      | SELECTED FINANCIAL AND OPERATING DATA                                                 |  |    | 27 |       
|         
|          | ITEM 7.  |                                      | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  |    | 29 |       
|         
|          | ITEM 7A. |                                      | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  |    | 45 |       
|         
|          | ITEM 8.  |                                      | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           |  |    | 46 |       
|         
|          | ITEM 9.  |                                      | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  |  |    | 47 |       
|         
|*PART III |          |                                      |                                                                                       |  |    |   
|         
|          | ITEM 10. |                                      | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                    |  |    | 47 |       
|         
|          | ITEM 11. |                                      | EXECUTIVE COMPENSATION                                                                |  |    | 47 |       
|         
|          | ITEM 12. |                                      | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                        |  |    | 47 |       
|         
|          | ITEM 13. |                                      | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                        |  |    | 48 |       
|         
|          | ITEM 14. |                                      | CONTROLS AND PROCEDURES                                                               |  |    | 48 |       
|         
|PART IV   |          |                                      |                                                                                       |  |    |   
|         
|          | ITEM 15. |                                      | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                       |  |    | 49 |       

*Incorporated by reference from Proxy Statement relating to the 2003 Annual Meeting of Shareholders.

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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, 2002, we operated 308 theatres with 2,262 screens located in
35 states, making us the second largest exhibitor in the country by number of
theatres and the fourth largest by number of screens. Of our 308 theatres, 269
theatres are theatres that show films on a first-run basis, and the remaining
39 theatres are discount theatres. We target small- to mid-size non-urban
markets. More than 80% of our theatres are located in communities with
populations of fewer than 100,000.

The smaller size of our markets enables us to service our customers with
fewer screens than would be necessary in larger markets. As a result, our
theatre circuit has an average of 7.3 screens per theatre, lower than some of
the other exhibitors. We believe, however, that our theatres, 65% of which
have six or more screens, are sufficiently modern to provide a high quality
movie going experience. Further, we believe that most of our markets are
already adequately screened and that our smaller markets, in particular, cannot
support significantly more screens.

Additional benefits of operating in small- to mid-size markets include:



| |  |  | Less competition from alternative entertainment opportunities. In
our typical markets, patrons have fewer entertainment alternatives than
in larger markets, where options such as professional sports teams and
cultural events are more likely available.                                                                                                                                                                                                                                                                                                                                        
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Lower likelihood of overbuilding by megaplex theatres. Our markets
generally will not support new megaplex theatres, which we define as
having 12 screens or more. Because most of our principal competitors
are focused on building megaplexes, we believe this provides us with an
additional measure of competitive protection.                                                                                                                                                                                                                                                                 
|
| |  |  | Lower operating costs. We believe that we benefit from lower labor
costs, lower occupancy costs, lower maintenance costs and lower land
and lease costs than many of our competitors. For example, as of
December 31, 2002, approximately 48% of our employees work for the
federal minimum wage. We also believe that our average rent per leased
theatre is among the lowest in the industry. Additionally, as of
December 31, 2002, we owned 76, or approximately 25%, of our theatres,
one of the highest percentages in the industry, which we believe
provides us with further cost benefits.

On January 31, 2002, (the Reorganization Date), we emerged from
bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. When we voluntarily
commenced the bankruptcy proceedings in August 2000, we had not defaulted on
payment of any of our debt obligations.

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All of our creditors have been or are expected to be paid in full, with
interest, for all of their permitted claims.

In the course of our reorganization, we rejected leases on 136
underperforming theatres. We also negotiated modifications to our leases on 35
additional theatres. In connection with the bankruptcy, we converted $45.7
million of debt and $55.0 million of preferred stock into equity. These
actions decreased our ongoing interest obligations. We also agreed to pay,
over a five-year period, the permitted claims of our general unsecured
creditors, plus interest at an annual rate of 9.4%. We estimate that our
aggregate liability at December 31, 2002 for general unsecured creditors is
approximately $46.1 million, which includes our estimated liability for damages
resulting from the rejection of executory contracts and unexpired leases. Of
these claims, $36.1 million (inclusive of accrued interest) are disputed. If
we are unable to resolve these claims with the unsecured creditors, the
bankruptcy court will settle these claims.

The following table sets forth geographic information regarding our
theatre circuit as of December 31, 2002:

|          |  |          |    |         |  |       |     |          |  |                |  |  |     |  |  |  |       |  |  | 
|--------- |  | -------- | -- | ------- |  | ----- | --- | -------- |  | -------------- |  |  | --- |  |  |  | ----- |  |  | 
|State     |  | Theatres |    | Screens |  | State |     | Theatres |  | Screens       
|          |  |          |    |         |  |       |     |          |  |               
|Alabama   |  |          | 17 |         |  |       | 152 |          |  | New Mexico     |  |  | 1   |  |  |  | 2     | 
|Arkansas  |  |          | 10 |         |  |       | 88  |          |  | New York       |  |  | 1   |  |  |  | 8     | 
|Colorado  |  |          | 9  |         |  |       | 57  |          |  | North Carolina |  |  | 40  |  |  |  | 304   | 
|Delaware  |  |          | 1  |         |  |       | 14  |          |  | North Dakota   |  |  | 7   |  |  |  | 40    | 
|Florida   |  |          | 10 |         |  |       | 80  |          |  | Ohio           |  |  | 6   |  |  |  | 39    | 
|Georgia   |  |          | 27 |         |  |       | 218 |          |  | Oklahoma       |  |  | 10  |  |  |  | 52    | 
|Idaho     |  |          | 4  |         |  |       | 17  |          |  | Pennsylvania   |  |  | 25  |  |  |  | 189   | 
|Illinois  |  |          | 2  |         |  |       | 6   |          |  | South Carolina |  |  | 14  |  |  |  | 102   | 
|Iowa      |  |          | 10 |         |  |       | 89  |          |  | South Dakota   |  |  | 5   |  |  |  | 35    | 
|Kansas    |  |          | 1  |         |  |       | 12  |          |  | Tennessee      |  |  | 29  |  |  |  | 226   | 
|Kentucky  |  |          | 10 |         |  |       | 51  |          |  | Texas          |  |  | 12  |  |  |  | 91    | 
|Louisiana |  |          | 3  |         |  |       | 22  |          |  | Utah           |  |  | 4   |  |  |  | 40    | 
|Maryland  |  |          | 1  |         |  |       | 8   |          |  | Virginia       |  |  | 10  |  |  |  | 67    | 
|Michigan  |  |          | 1  |         |  |       | 5   |          |  | Washington     |  |  | 1   |  |  |  | 12    | 
|Minnesota |  |          | 9  |         |  |       | 76  |          |  | West Virginia  |  |  | 4   |  |  |  | 28    | 
|Missouri  |  |          | 1  |         |  |       | 8   |          |  | Wisconsin      |  |  | 2   |  |  |  | 18    | 
|Montana   |  |          | 14 |         |  |       | 78  |          |  | Wyoming        |  |  | 2   |  |  |  | 9     | 
|Nebraska  |  |          | 5  |         |  |       | 19  |          |  |                |  |  |     |  |  |  |       |  |  | 
|          |  |          |    |         |  |       |     |          |  | Totals         |  |  | 308 |  |  |  | 2,262 | 
|          |  |          |    |         |  |       |     |          |  |                |  |  |     |  |  |  |       |  |  | 

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, 2002, we operated 39
theatres with 154 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.

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:

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| |  |  | we believe building a new theatre provides an attractive cash flow
opportunity;               
| | - |  | ----------------------------------------------------------------------------------------------
|
| |  |  | we already operate a theatre and could best protect that theatre by
expanding our presence; or
|
| |  |  | a film licensing zone is currently underserved by an independent
operator.                    

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 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 expect to open two theatres
during 2003. If opportunities exist where new construction will be profitable
to us, we will consider building additional theatres in future periods. From
our bankruptcy through December 31, 2002, we closed approximately 29.4% of our
theatres. We are analyzing the remaining theatres and evaluating approaches to
optimize our portfolio.

The following table shows information about the changes in our theatre
circuit during the past five years:

|                           |                  |  |          |      |         |  |         |      |   |  |          |  | 
|-------------------------- | ---------------- |  | -------- | ---- | ------- |  | ------- | ---- | - |  | -------- |  | 
|                           |                  |  |          |      |         |  |         |      |   |  | Average 
|                           |                  |  |          |      |         |  |         |      |   |  | Screens/
|                           |                  |  | Theatres |      | Screens |  | Theatre
|                           |                  |  |          |      |         |  |        
|Total at December 31, 1998 |                  |  | 468      |      |         |  | 2,658   |      |   |  | 5.7      | 
|                           | New Construction |  |          | 23   |         |  |         | 339  |   |  |          |  | 
|                           | Closures         |  |          | (33  | )       |  |         | (149 | ) |  |          |  | 
|                           |                  |  |          |      |         |  |         |      |   |  |          | 
|Total at December 31, 1999 |                  |  | 458      |      |         |  | 2,848   |      |   |  | 6.2      | 
|                           | New Construction |  |          | 7    |         |  |         | 99   |   |  |          |  | 
|                           | Closures         |  |          | (113 | )       |  |         | (509 | ) |  |          |  | 
|                           |                  |  |          |      |         |  |         |      |   |  |          | 
|Total at December 31, 2000 |                  |  | 352      |      |         |  | 2,438   |      |   |  | 6.9      | 
|                           | New Construction |  |          | 1    |         |  |         | 16   |   |  |          |  | 
|                           | Closures         |  |          | (30  | )       |  |         | (121 | ) |  |          |  | 
|                           |                  |  |          |      |         |  |         |      |   |  |          | 
|Total at December 31, 2001 |                  |  | 323      |      |         |  | 2,333   |      |   |  | 7.2      | 
|                           | New Construction |  |          | 0    |         |  |         | 0    |   |  |          |  | 
|                           | Closures         |  |          | (15  | )       |  |         | (71  | ) |  |          |  | 
|                           |                  |  |          |      |         |  |         |      |   |  |          | 
|Total at December 31, 2002 |                  |  | 308      |      |         |  | 2,262   |      |   |  | 7.3      | 
|                           |                  |  |          |      |         |  |         |      |   |  |          | 

Operations

Our theatre operations are under the supervision of our Chief Operating
Officer 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.

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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 comes from the sale
of movie tickets. For the year ended December 31, 2002, box office admissions
totaled $342.8 million, or 68% of total revenues. At December 31, 2002, of our
308 theatres, 269 showed first-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 pictures at a discount price.

Most of the tickets we sell are sold at our theatre box offices
immediately before the start of a picture. As of December 31, 2002, at 26 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.

Our business is seasonal, as studios tend to release their most successful
pictures during the summer months and the Thanksgiving and Christmas holiday
season.

Concessions. Concession sales are our second largest revenue source after
box office admissions, constituting approximately 30% of total revenues for the
year ended December 31, 2002. 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, we have a limited number
of products, such as bottled water, frozen drinks, coffee, ice cream, pizza,
hot dogs and pretzels, at certain theatre locations where necessary to respond
to competitive conditions in the relevant market. 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.

During 2002, we purchased substantially all of our concession supplies and
janitorial supplies from Showtime Concession Supply, Inc., except for soft
drink syrup, which was supplied by The Coca-Cola Company. We are by far the
largest customer of Showtime Concession Supply. 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.

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 comprise the remaining 2% of our revenue generation.

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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 President,
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 Motion Picture
Association of America, (MPAA), rating. Because we only license a portion of
newly released first-run films (170 of 444 available in 2002), our success in
licensing depends greatly upon the availability of commercially popular motion
pictures, but also upon our knowledge of the tastes of residents in our markets
and insight into trends in those tastes. 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
2002 compared to our top 10 films for 2002:

|    |  |                                         |  |  |     |  |  |                                        
|--- |  | --------------------------------------- |  |  | --- |  |  | ---------------------------------------
|    |  | Industry                                |  |  |     |  |  | Carmike Cinemas                        
|    |  |                                         |  |  |     |  |  |                                        
|1.  |  | Spider-Man                              |  |  | 1.  |  |  | Spider-Man                             
|2.  |  | Star Wars: Attack of the Clones         |  |  | 2.  |  |  | Star Wars: Attack of the Clones        
|3.  |  | Harry Potter and the Chamber of Secrets |  |  | 3.  |  |  | Signs                                  
|4.  |  | Signs                                   |  |  | 4.  |  |  | Lord of the Rings: Two Towers          
|5.  |  | My Big Fat Greek Wedding                |  |  | 5.  |  |  | Harry Potter and the Chamber of Secrets
|6.  |  | Austin Powers in Goldmember             |  |  | 6.  |  |  | Men In Black 2                         
|7.  |  | Lord of the Rings: Two Towers           |  |  | 7.  |  |  | Scooby-Doo                             
|8.  |  | Men In Black 2                          |  |  | 8.  |  |  | Austin Powers in Goldmember            
|9.  |  | Ice Age                                 |  |  | 9.  |  |  | Ice Age                                
|10. |  | Scooby-Doo                              |  |  | 10. |  |  | The Santa Clause 2                     

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 (i) 60 to 70% of gross box office
receipts, gradually declining to as low as 30% over a period of four to seven
weeks and (ii) 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 term 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.

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

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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 either require the
exhibitors in the zone to bid for a film or 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. We currently do not bid for films in any of our film licensing
zones.

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 97.7% of our box office admissions
during the year ended December 31, 2002: Buena Vista, DreamWorks, Fox, MGM/UA,
Miramax, New Line Cinema, Paramount, Sony, Universal and Warner Brothers.

As of the date of our bankruptcy petition, film distributors held claims
against us aggregating approximately $37.2 million. After we commenced our
bankruptcy, several distributors elected to cease supplying us with new film
product until their claims against us for pre-petition film exhibition fees
were paid in full. We negotiated an agreement with each of our principal film
distributors to repay their pre-petition claims for film exhibition fees in
full in 17 weekly installments. Based on those agreements, the film
distributors began to supply us with new film product again. Our payments
under the agreements began on September 18, 2000 and were concluded by December
26, 2000. We believe that we currently have good relationships with all of the
distributors.

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 will allow 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, thereby enabling our theatre manager to focus on the day-to-day
operations of the theatres.

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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.

From the mid- to late-1990s, industry screen count grew faster than
attendance, resulting in declining attendance and profitability per screen. 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, began closing underperforming locations. At December 31, 2002,
according to the MPAA the domestic screen count had declined to 35,280. These
actions have helped to reverse the trend of declining attendance per screen and
increase the profitability of the industry. In the near term, we expect a
further net decline in total industry screen count, with further screen
closures and only modest new builds.

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 the time we re 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

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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 continue to assess the impact of such questionnaires
on our theatres. 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. 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.

Employees

As of December 31, 2002, we had approximately 9,310 employees, of which 43
were covered by collective bargaining agreements and 8,741 were part-time. In
order to combat

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uncertainties that may have stemmed from the Chapter 11 filing, to reward
key employees for shouldering any additional burdens that had been imposed by
the bankruptcy and to maintain employee morale, we implemented, with the
approval of the bankruptcy court, the Carmike Cinemas, Inc. Employee Retention
and Severance Plan, (the Employee Retention and Severance Plan). The
Employee Retention and Severance Plan was one component of our comprehensive
program designed to provide incentives to management and other critical
employees to remain in our employment and to work toward the success of our
business. The other components include the continuance of the Companys annual
bonus plan in the ordinary course of business. The Employee Retention and
Severance Plan terminated on January 31, 2002.

As of December 31, 2002, approximately 48% of our 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 theatre operators. 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
operations to be immediately and adversely affected if the minimum wage is
raised.

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 U.S. 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
(the Plan) 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 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.

Background

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

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notes due 2009, (the Original Senior Subordinated Notes), prohibiting
our payment of the semi-annual interest payment in the amount of $9.4 million
due to 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.

Operations During Reorganization

We could not pay pre-petition debts without prior bankruptcy court
approval during our bankruptcy case. Immediately after the commencement of our
bankruptcy case, we sought and obtained several orders from the bankruptcy
court which were intended to stabilize our business and enable us to continue
operations as debtors-in-possession. The most significant of these orders:



| |  |  | permitted us to operate our consolidated cash management system
during our bankruptcy case in substantially the same manner as it was
operated prior to the commencement of our bankruptcy case;                                                                
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | authorized payment of pre-petition wages, vacation pay and employee
benefits and reimbursement of employee business expenses;                                                                                                                                   
|
| |  |  | authorized payment of pre-petition sales and use taxes we owed;                                                                                                                                                                                                 
|
| |  |  | authorized us to pay up to $2.3 million of pre-petition obligations
to critical vendors, common carriers and workers compensation
insurance, to aid us in maintaining operation of our theatres, and
$37.2 million to film distributors as set forth below; and
|
| |  |  | authorized debt service payments for the loan related to Industrial
Revenue Bonds issued by the Downtown Development Authority of Columbus,
Georgia.                                                                                                            

As debtors-in-possession, we had the right during the reorganization
period, subject to bankruptcy court approval and other limitations, to assume
or reject executory contracts and unexpired leases on our theatres. In this
context, assumption means that we agree to perform our obligations and cure
all existing defaults under the contract or lease, and rejection means that
we are relieved from our obligations to perform further under the contract or
lease but are subject to a claim for damages for breach of the rejected
contract or lease. Any damages resulting from rejection of executory contracts
and unexpired leases were treated as general unsecured claims in our
reorganization. During the reorganization period, we received approval from
the bankruptcy court to reject theatre leases relating to 136 of our theatre
locations.

As of the date of our bankruptcy petition, film distributors held claims
against us aggregating approximately $37.2 million. After we commenced our
bankruptcy, several distributors elected to cease supplying us with new film
product until their claims against us for pre-petition film exhibition fees
were paid in full. We negotiated an agreement with each of our principal film
distributors to repay their pre-petition claims for film exhibition fees in
full in 17 weekly installments. Based on those agreements, the film
distributors began to supply us with new film product again. Our payments under
the agreements began on September 18, 2000 and were concluded by December 26, 2000.

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In connection with our reorganization, we reached an agreement to
restructure our master lease facility (Original MoviePlex Lease) with
MoviePlex Realty Leasing, L.L.C. and entered into the Second Amended and
Restated Master Lease, dated as of September 1, 2001. Under our new MoviePlex
master lease, we leased six MoviePlex properties for 15 years with an option to
extend the term for an additional five years. The Original MoviePlex Lease was
terminated and pre-petition defaults under the Original MoviePlex Lease were
cured up to a maximum amount of $493,680. The initial first twelve months base
rent for the six theatres is an aggregate of $5.4 million per year ($450,000
per month), subject to periodic increases thereafter and certain additional
rent obligations such as percentage rent. Percentage rent is an amount equal
to 12% of all aggregate revenue we earn in the leased theatres in excess of
one-half of ten times our base rent for any lease year.

Our Plan Of Reorganization

The material features of the Plan are described below:



| |  |  | The Plan provided for the issuance or reservation for future
issuance of up to 10,000,000 shares of common stock in the aggregate
(20,000,000 shares of common stock are authorized in our amended and
restated certificate of incorporation), and for the cancellation of all
of our then existing Class A and Class B common stock and preferred
stock. As of December 31, 2002, we had 8,991,262 shares of a single
class of common stock outstanding.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The holders of our cancelled Class A and Class B common stock
received in the aggregate 22.2% of the shares reserved for issuance
under the Plan.                                                                                                                                                                                                                                                                                                        
|
| |  |  | The holders of our cancelled Series A preferred stock received in
the aggregate 41.2% of the shares reserved for issuance under the Plan.
These holders are affiliates of Carmike and have board representation.                                                                                                                                                                                                                                         
|
| |  |  | Certain holders of $45.7 million in aggregate principal amount of
the cancelled 9 3/8% senior subordinated notes we issued prior to our
reorganization received in the aggregate 26.6% of the shares reserved
for issuance under the Plan. These holders are affiliates of Carmike
and have board representation.                                                                                                                                        
|
| |  |  | We reserved 1,000,000 shares of our common stock for issuance under
a new management incentive plan, (the 2002 Stock Plan). Under the
2002 Stock Plan, 780,000 shares were authorized for issuance to Michael
W. Patrick pursuant to his new employment agreement as our Chief
Executive Officer and 220,000 shares have been authorized for issuance
to seven other members of our senior management.                                                 
|
| |  |  | Certain banks holding claims in our reorganization received
replacement debt and cash in the amount of $35.6 million, representing
accrued and unpaid post-petition interest on their prior claims from
August 8, 2000 to January 31, 2002. The prior bank claims arose                                                                                                                                                                                  

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| |   |  | under (i) the Amended and Restated Credit Agreement among the banks party
thereto and Wachovia Bank, N.A., as agent, and us, dated as of January
29, 1999, and amended as of March 31, 2000 and (ii) the term loan credit
agreement among the banks party thereto, Wachovia Bank, N.A., as
administrative agent, Goldman Sachs Credit Partners, L.P., as syndication
agent, and First Union National Bank, as documentation agent, and us,
dated as of February 25, 1999, as amended as of July 13, 1999, and
further amended as of March 31, 2000. The replacement debt was
approximately $254.5 million (the New Bank Debt) and bears interest at
the greater of: (a) at our option, (i) a specified base rate plus 3.5% or
(ii) an adjusted LIBOR plus 4.5%; and (b) 7.75% per annum.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We issued $154.3 million of our new 10 3/8% senior subordinated
notes due 2009 in exchange for $154.3 million aggregate principal
amount of the claims in our reorganization concerning the 9 3/8% senior
subordinated notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | Leases covering 136 of our underperforming theatres were rejected.
Lease terminations and settlement agreements are being negotiated for
the resolution of lease termination claims, and the restructuring or
other disposition of lease obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | General unsecured creditors are receiving or will receive payments
in the aggregate of up to $53.8 million with annual interest of 9.4% in
resolution of their allowed claims in our reorganization, including
claims for damages resulting from the rejection of executory contracts
and unexpired leases. Of these claims, $36.1 million are disputed. As
such, our ultimate liability for these claims is uncertain and is
subject to bankruptcy court resolution.                                                                                                                                                                                                                                                                                                                     

On the Reorganization Date, we entered into a new $254.5 million term loan
credit agreement, which governs the terms of the banks replacement debt. On
the same date we closed on a revolving credit agreement totaling $50.0 million.
The proceeds of advances under the revolving credit agreement will be used to
provide working capital financing to us and our subsidiaries and for funds for
other general corporate purposes. We borrowed $20.0 million of the revolving
credit agreement in partial repayment of our obligations owing to the banks
under the term loan credit agreement, and we have since repaid all outstanding
amounts under our revolving credit agreement.

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 their appeal to our 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 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

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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
$254.5 million, of which $209.7 million was outstanding as of December
31, 2002.                                                                                                   
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Our revolving credit agreement provides for borrowings of up to
$50.0 million. There were no amounts outstanding as of December 31,
2002.                                                                                                          
|
| |  |  | Our new 10 3/8% senior subordinated notes, issued as of January 31,
2002, total $154.3 million.                                                                                                                                                    
|
| |  |  | Amounts owed on our industrial revenue bonds total $1.1 million at
December 31, 2002.                                                                                                                                                              
|
| |  |  | As of December 31, 2002, we estimate that our general unsecured
creditors will receive an aggregate of $46.1 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.

We also have, and will continue to have, significant lease obligations.
As of December 31, 2002, our total capital and operating lease obligations for
leases with terms over one year totaled $534.2 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;
|
| |  |  | 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.                                                                                                            

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.

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We may not generate sufficient cash flow to meet our needs.

Our ability to service our indebtedness or 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.
Further, we have closed certain theatres during the course of our recent
bankruptcy, and our competitors or smaller entrepreneurial developers may
purchase or lease the 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, which may have a
material adverse effect on our theatres. Competitors have built and are
planning to build theatres in certain areas in which we operate. 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 movies), we still may experience competition
for patrons from theatres in neighboring zones. There have also been a number
of consolidations in the movie theatre 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 movie 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.

Movie 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.

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Our revenues vary significantly depending upon the timing of the motion picture
releases by distributors.

Our business is generally 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.

The oversupply of screens in the motion picture exhibition industry and other
factors may affect the performance of some of our theatres.

In the past few years, the motion picture exhibition industry has faced
significant challenges, largely due to the effects of an oversupply of screens
resulting from the industry strategy of aggressively building multiplexes.
Many older multiplex theatres have been rendered obsolete more rapidly than
expected. Many of these theatres are under long-term lease commitments that
make closing them financially burdensome, and some companies have elected to
continue operating them notwithstanding their lack of profitability. In other
instances, because theatres are typically limited-use design facilities, or for
other reasons, landlords have been willing to make rent concessions to keep
them open. As a result, many believe that there continues to be an oversupply
of screens in the North American motion picture exhibition industry. This
oversupply of screens has affected our theatres in the past and may affect the
performance of some of our theatres in the future.

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.

Our term loan credit agreement, our revolving credit agreement, and our
indenture for the 10 3/8% senior subordinated notes require us to comply with
certain covenants that, among other things, limit our ability to make capital
expenditures, restrict our ability to amend our primary supply contracts and
Mr. Patricks employment agreement, and limit our ability to incur additional
debt. Under our term loan credit agreement, our capital expenditures may not
exceed $20.0 million in 2002, $15.0 million in 2003, $10.0 million in 2004 and
$15.0 million in 2005 and 2006. However, beginning in 2003, these limits will
increase each year by the amount of the unused capital expenditure allowance
from the previous year, up to $5.0 million for any given year. Additionally,
our revolving credit agreement limits our capital expenditures to $20.0 million
in 2002 and $15.0 million in each year thereafter until 2006, provided that,
beginning in 2003, such limits may increase up to $5.0 million per year. A
violation of any of these covenants could cause an event of default under those
agreements. If we default under those agreements because of a covenant breach
or otherwise, all outstanding amounts could become immediately due and payable.
We cannot assure you that we would have sufficient funds to repay all the
outstanding amounts, and any acceleration of amounts due under those credit
agreements likely would have a material adverse effect on us.

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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 will 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 to us to enable us to fund our capital
expenditure needs.

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. A 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
a 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 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 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,

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provided that neither we nor Mr. Patrick chooses not to so 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
do not have any employment agreements with our senior officers or managers
other than 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.

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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, 2002, approximately 48% of our
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.

Disruption of our relationship with our primary concession supplier could harm
our margins on concessions.

We purchase substantially all of our concession supplies, except for soft drink
syrup, 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 three-year term agreement with Showtime Concession
expires on May 1, 2003. If Showtime Concession or we commit a material default
under the agreement and fail to cure the default within 30 days after notice of
the default, then the other party may terminate the agreement. 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.

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, although at greatly
reduced rates compared with our past practice. 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-

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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 each of fiscal 1999, 2000 and 2001, totaling
$186.4 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. Through
2002, we believe we have properly tested for impairments to the Company. There
can be no assurance that we will not take additional charges in the future
related to the impairment of our assets.

Our recent bankruptcy reorganization could harm our business, financial
condition and results of operations.

Certain claims from our bankruptcy reorganization remain unsettled and are
subject to ongoing negotiation and possible litigation. We estimate the amount
of these claims at December 31, 2002 to be $46.1 million; however, the final
amounts we pay in satisfaction of the claims depend on the bankruptcy courts
determination. In addition, new claims could be asserted that could exceed our
estimate. The final amounts paid in connection with these claims could
materially exceed our current estimates, which could reduce our profitability
or cause us to incur losses that would affect the trading price of our common
stock.

In addition, our past inability to meet our obligations that resulted in
our filing for bankruptcy protection, or the perception that we may not be able
to meet our obligations in the future, could adversely affect our ability to
obtain adequate financing, to enter into new leases for theatres or to retain
or attract high-quality employees. It could also adversely affect our
relationships with our suppliers.

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 larger stockholders control the composition of the board of directors and
most matters submitted to a vote of our stockholders.

Some of our larger stockholders have agreed until February 29, 2004 to
vote their shares in favor of the election to the board of directors of certain
individuals that have been previously designated by those holders. The
signatory holders own approximately 83% of the shares of our common stock and
are able to determine the composition of the board of directors. In addition,
if the holders that signed the stockholders agreement choose to vote in the
same manner, they will be able to determine the disposition of most matters
submitted to a vote of our stockholders. The interests of our controlling
stockholders may differ from yours. In addition, even after the agreement
expires, the stockholders may choose to extend it or to enter into other formal
or informal arrangements with respect to voting.

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We have significant stockholders with the ability to influence our actions.

Entities affiliated with Goldman, Sachs & Co. beneficially owned
approximately 47% of the shares of our common stock as of December 31, 2002.
This ownership interest and the Goldman entities board representation allows
them to have significant input on major corporate decisions. The Goldman
entities may exert their influence in a manner that is not consistent with the
interests of other stockholders and, in their capacity as stockholders, will be
able to block certain stockholder actions, including stockholder approval of
amendments to our certificate of incorporation or bylaws.

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.

We may be unable to use our net operating loss carry-forwards.

As of December 31, 2002, we had approximately $116.0 million of federal
and state operating loss carryovers with which to offset our future taxable
income. While the issue is complicated and subject to many variables based on
future events and information not currently available to us, the issuance of
shares of common stock under the Plan may have resulted in an ownership
change for purposes of section 382 of the Internal Revenue Code of 1986, as
amended. Furthermore, even if the offering does not result in an ownership
change, future changes in the ownership of our common stock (some of which will
be beyond our control) could result in significant limitations on our ability
to use these net operating losses to offset taxable income in any single year.

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ITEM 2. PROPERTIES

As of December 31, 2002, we owned 76 of our theatres and leased 228 of our
theatres. We operated an additional four 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. Currently, we do not have pending any litigation or proceedings
that we believe will have a material adverse effect, either individually or in
the aggregate, upon our financial position, liquidity or results of operations.




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, 2002.




EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth certain information as of March 10, 2003
regarding the executive officers of Carmike. For purposes of this section,
references to Carmike include Carmikes predecessor, Martin Theatres, Inc.

|                   |  |     |    |       |  |                                                                          
|------------------ |  | --- | -- | ----- |  | -------------------------------------------------------------------------
|Name               |  | Age |    | Title
|                   |  |     |    |      
|Michael W. Patrick |  |     | 52 |       |  | President, Chief Executive Officer and Chairman of the Board of Directors
|                   |  |     |    |       |  |                                                                          
|Fred W. Van Noy    |  |     | 46 |       |  | Senior Vice President, Chief Operating Officer                           
|                   |  |     |    |       |  |                                                                          
|Martin A. Durant   |  |     | 54 |       |  | Senior Vice
President  Finance, Treasurer and Chief
Financial Officer   
|                   |  |     |    |       |  |                                                                          
|Anthony J. Rhead   |  |     | 61 |       |  | Senior Vice
President  Film and Secretary                               

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|                   |  |  |    |  |  |                                                            
|------------------ |  |  | -- |  |  | -----------------------------------------------------------
|P. Lamar Fields    |  |  | 48 |  |  | Senior Vice President  Development                        
|                   |  |  |    |  |  |                                                            
|H. Madison Shirley |  |  | 51 |  |  | Senior Vice President  Concessions and Assistant Secretary
|                   |  |  |    |  |  |                                                            
|Marilyn B. Grant   |  |  | 55 |  |  | Vice President  Advertising                               
|                   |  |  |    |  |  |                                                            
|Philip A. Smitley  |  |  | 44 |  |  | 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. 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. Mr. Patrick also serves as
President of Carmikes subsidiaries Eastwynn Theatres, Inc. and Wooden Nickel
Pub, 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. In December 1997, he was elected to
the position of Senior Vice President  Operations. In November 2000, he
became Senior Vice President  Chief Operating Officer. Mr. Van Noy also
serves as Senior Vice President  Chief Operating Officer of Carmikes
subsidiary Eastwynn Theatres, Inc.

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 licensed Certified Public Accountant. Mr. Durant also serves as
Senior Vice President  Finance, Treasurer and Chief Financial Officer of
Carmikes subsidiaries Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and
Military Services, Inc.

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 and in December 1997 was elected Senior Vice President  Film.
Prior to joining Carmike, he worked as a film booker for Plitt Theatres, Inc.
from 1973 to 1981. Mr. Rhead also serves as Senior Vice President  Film and
Secretary of Carmikes subsidiary Eastwynn Theatres, Inc. and as Senior Vice
President and Secretary of Carmikes subsidiary Wooden Nickel Pub, Inc.

P. Lamar Fieldsjoined Carmike in January 1983 as Director of Real Estate.
He served in this position until 1985 when he became Vice President 
Development. In December 1997 he was elected to the position of Senior Vice
President  Real Estate. In January 2002, he became Senior Vice President 
Development. Mr. Fields also serves as Senior Vice President  Real Estate of
Carmikes subsidiary Eastwynn Theatres, Inc. and as Vice President of Carmikes
subsidiary Military Services, Inc.

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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. Mr.
Shirley also serves as Senior Vice President  Concessions and Assistant
Secretary of Carmikes subsidiary Eastwynn Theatres, Inc.

Marilyn B. Grantjoined Carmike in 1975 as a bookkeeper. She served as
Advertising Coordinator from 1984 to 1985 and became the Director of
Advertising in 1985. In August 1990, she was elected to her present position
as Vice President  Advertising. Ms. Grant also serves as Vice President of
Carmikes subsidiary Eastwynn Theatres, Inc.

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. Mr. Smitley also serves as
Assistant Vice President and Controller of Carmikes subsidiary Eastwynn
Theatres, Inc.




PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common stock is currently traded on the Nasdaq National Market under
the symbol CKEC, but it has traded on the NASDs over-the-counter Bulletin
Board (the OTCBB) and the New York Stock Exchange at different times in the
last three years. From January 31, 2002 until May 22, 2002, our new common
stock was traded on the OTCBB under the symbol CMKC. Prior to that time, our
pre-reorganization Class A common stock traded on the OTCBB under the symbol
CKECQ from January 17, 2001 until January 30, 2002. The Class A common stock
previously traded on the New York Stock Exchange under the symbol CKE until
trading in our stock on the New York Stock Exchange was suspended prior to
trading on January 12, 2001 because we had fallen below certain New York Stock
Exchange criteria for continued listing.

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The following table sets forth the high and low sales prices of our common
stock as reported by Nasdaq for the periods indicated in 2002 (beginning May
23, 2002) and by the OTCBB for the periods indicated in 2002 (beginning January
31, 2002). The table also provides information for our pre-reorganization
Class A Common Stock as reported by the OTCBB for the periods indicated in 2001
(beginning January 17, 2001) and by the New York Stock Exchange for the periods
indicated in 2001.

|               |  |      |       |     |  |   |       | 
|-------------- |  | ---- | ----- | --- |  | - | ----- | 
|2002           |  | High |       | Low
|               |  |      |       |    
|First Quarter  |  | $    | 21.25 |     |  | $ | 3.22  | 
|Second Quarter |  |      | 30.12 |     |  |   | 19.50 | 
|Third Quarter  |  |      | 25.70 |     |  |   | 16.45 | 
|Fourth Quarter |  |      | 21.32 |     |  |   | 16.60 | 

|               |  |      |      |     |  |   |      | 
|-------------- |  | ---- | ---- | --- |  | - | ---- | 
|2001           |  | High |      | Low
|               |  |      |      |    
|First Quarter  |  | $    | 0.75 |     |  | $ | 0.20 | 
|Second Quarter |  |      | 0.67 |     |  |   | 0.33 | 
|Third Quarter  |  |      | 0.57 |     |  |   | 0.34 | 
|Fourth Quarter |  |      | 3.41 |     |  |   | 0.37 | 

As of March 10, 2003, there were approximately 713 record holders of our
common stock and there were no shares of any other class of stock issued and
outstanding.

During fiscal year 2002, we did not make any sales of unregistered equity
securities.

We have never declared or paid a cash dividend on our common stock. It is
the present policy of our board of directors to retain all earnings to support
operations and to finance expansion of the business; therefore, we do not
anticipate declaring or paying cash dividends on the common stock in the
foreseeable future. The declaration and payment of dividends in the future is
within the discretion of the board of directors and is subject to many
considerations, including covenants in debt instruments, operating results,
business and capital requirements and other factors. Pursuant to our credit
agreements, we are subject to certain restrictive provisions which, among other
things, limit the payment of dividends and other defined restricted payments.

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ITEM 6. SELECTED FINANCIAL AND OPERATING DATA.

The selected consolidated Statements of Operations and Balance Sheet data
set forth below were derived from our consolidated financial statements. This
information should be read in conjunction with Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations and
our consolidated financial statements and related notes thereto.

|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |       |       | 
|------------------------------------------------------------- | ----------------------------------- | ------------------------ | ----- | ----------------------------------------------------------- | ----- | ---------- | ----- | ---------- | ----- | ------- | ----- | ------- | ----- | - | ------ | ------ | ----- | - | ----- | ----- | ----- | 
|                                                              |                                     |                          |       | For the Year Ended December 31,                            
|                                                              |                                     |                          |       |                                                            
|                                                              |                                     |                          |       | 1998(1)                                                     |       | 1999(1)(2) |       | 2000(1)(3) |       | 2001(3) |       | 2002(3)
|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |        
|                                                              |                                     |                          |       | (in millions except percentages, ratios and operating data)
|Statement of Operations:                                      |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|Revenues:                                                     |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|                                                              | Admissions                          |                          | $     | 330.5                                                       |       |            | $     | 336.0      |       |         | $     | 315.4   |       |   | $      | 311.8  |       |   | $     | 342.8 |      
|                                                              | Concessions and other               |                          |       | 151.1                                                       |       |            |       | 150.9      |       |         |       | 146.9   |       |   |        | 145.1  |       |   |       | 164.4 |      
|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|                                                              |                                     | Total revenues           |       |                                                             | 481.6 |            |       |            | 486.9 |         |       |         | 462.3 |   |        |        | 456.9 |   |       |       | 507.2 | 
|Costs and expenses:                                           |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|                                                              | Film exhibition costs               |                          |       | 177.8                                                       |       |            |       | 181.5      |       |         |       | 185.2   |       |   |        | 171.2  |       |   |       | 189.3 |      
|                                                              | Concession costs                    |                          |       | 19.9                                                        |       |            |       | 19.0       |       |         |       | 21.0    |       |   |        | 20.2   |       |   |       | 19.2  |      
|                                                              | Other theatre operating costs       |                          |       | 187.9                                                       |       |            |       | 191.1      |       |         |       | 194.8   |       |   |        | 182.0  |       |   |       | 182.8 |      
|                                                              | General and administrative          |                          |       | 7.1                                                         |       |            |       | 7.3        |       |         |       | 6.9     |       |   |        | 8.8    |       |   |       | 15.0  |      
|                                                              | Depreciation and amortization (4)   |                          |       | 37.5                                                        |       |            |       | 41.2       |       |         |       | 43.2    |       |   |        | 42.2   |       |   |       | 32.1  |      
|                                                              | Impairment of long-lived assets (5) |                          |       | 38.3                                                        |       |            |       | 33.0       |       |         |       | 21.2    |       |   |        | 132.2  |       |   |       |      |      
|                                                              | Restructuring charge                |                          |       | 34.7                                                        |       |            |       | (2.7       | )     |         |       |        |       |   |        |       |       |   |       |      |      
|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|                                                              |                                     | Total costs and expenses |       |                                                             | 503.2 |            |       |            | 470.4 |         |       |         | 472.3 |   |        |        | 556.6 |   |       |       | 438.4 | 
|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|Operating income (loss)                                       |                                     |                          | (21.6 | )                                                           |       |            | 16.5  |            |       |         | (10.0 | )       |       |   | (99.7  | )      |       |   | 68.8  |      
|Interest expense                                              |                                     |                          | 27.2  |                                                             |       |            | 36.8  |            |       |         | 31.0  |         |       |   | 6.1    |        |       |   | 102.8 |      
|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|Income (loss) before reorganization costs
and income taxes    |                                     |                          | (48.8 | )                                                           |       |            | (20.3 | )          |       |         | (41.0 | )       |       |   | (105.8 | )      |       |   | (34.0 | )    
|Reorganization costs                                          |                                     |                          |      |                                                             |       |            |      |            |       |         | 7.0   |         |       |   | 19.6   |        |       |   | 20.5  |      
|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|Income (loss) before income taxes                             |                                     |                          | (48.8 | )                                                           |       |            | (20.3 | )          |       |         | (48.0 | )       |       |   | (125.4 | )      |       |   | (54.5 | )    
|Income tax expense (benefit)                                  |                                     |                          | (18.2 | )                                                           |       |            | (7.7  | )          |       |         | 25.6  |         |       |   |       |        |       |   | (14.7 | )    
|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|Net income (loss)                                             |                                     | $                        | (30.6 | )                                                           |       | $          | (12.6 | )          |       | $       | (73.6 | )       |       | $ | (125.4 | )      |       | $ | (39.8 | )    
|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|Weighted average common shares
outstanding:                   |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|                                                              | Basic and diluted                   |                          |       | 11,356                                                      |       |            |       | 11,375     |       |         |       | 11,344  |       |   |        | 11,344 |       |   |       | 9,195 |      
|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|Earnings (loss) per common share before
extraordinary item:   |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|                                                              | Basic and diluted                   |                          | $     | (2.73                                                       | )     |            | $     | (1.37      | )     |         | $     | (6.62   | )     |   | $      | (11.05 | )     |   | $     | (4.33 | )    
|                                                              |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|Balance Sheet Data:                                           |                                     |                          |       |                                                             |       |            |       |            |       |         |       |         |       |   |        |        |       |   |       |      
|Cash and cash equivalents                                     |                                     | $                        | 3.8   |                                                             |       | $          | (4.2  | )          |       | $       | 52.5  |         |       | $ | 94.2   |        |       | $ | 53.5  |      
|Property and equipment, net (5)                               |                                     |                          | 573.6 |                                                             |       |            | 666.2 |            |       |         | 621.2 |         |       |   | 460.1  |        |       |   | 438.3 |      
|Total assets                                                  |                                     |                          | 683.5 |                                                             |       |            | 794.4 |            |       |         | 761.3 |         |       |   | 618.1  |        |       |   | 556.7 |      
|Total long-term obligations, including
current maturities (6) |                                     |                          | 351.8 |                                                             |       |            | 470.3 |            |       |         | 52.0  |         |       |   | 49.7   |        |       |   | 426.5 |      
|Total shareholders equity                                    |                                     |                          | 226.3 |                                                             |       |            | 204.2 |            |       |         | 129.1 |         |       |   | 3.7    |        |       |   | 9.6   |      

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|                                   |  |                                 |        |            |  |            |        |         |  |         |        |  |  |   |        |  |  |   |        | 
|---------------------------------- |  | ------------------------------- | ------ | ---------- |  | ---------- | ------ | ------- |  | ------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                   |  | For the Year Ended December 31,
|                                   |  |                                
|                                   |  | 1998(1)                         |        | 1999(1)(2) |  | 2000(1)(3) |        | 2001(3) |  | 2002(3)
|                                   |  |                                 |        |            |  |            |        |         |  |        
|Operating Data:                    |  |                                 |        |            |  |            |        |         |  |         |        |  |  |   |        |  |  |   |        | 
|Theatre locations(7)               |  |                                 | 468    |            |  |            | 458    |         |  |         | 352    |  |  |   | 323    |  |  |   | 308    | 
|Screens(7)                         |  |                                 | 2,658  |            |  |            | 2,848  |         |  |         | 2,438  |  |  |   | 2,333  |  |  |   | 2,262  | 
|Average screens per location       |  |                                 | 5.7    |            |  |            | 6.2    |         |  |         | 6.9    |  |  |   | 7.2    |  |  |   | 7.3    | 
|Total attendance (in thousands)    |  |                                 | 77,763 |            |  |            | 74,518 |         |  |         | 67,804 |  |  |   | 64,621 |  |  |   | 69,997 | 
|Total average screens in operation |  |                                 | 2,733  |            |  |            | 2,800  |         |  |         | 2,643  |  |  |   | 2,386  |  |  |   | 2,267  | 
|Average ticket price               |  | $                               | 4.25   |            |  | $          | 4.51   |         |  | $       | 4.65   |  |  | $ | 4.83   |  |  | $ | 4.90   | 
|Average concession per patron      |  | $                               | 1.79   |            |  | $          | 1.84   |         |  | $       | 1.98   |  |  | $ | 2.10   |  |  | $ | 2.17   | 



---

|(1) |  | Preferred Stock dividends on the Series A Preferred Stock totaled
$332,000, $3,025,000 and $1,513,000 for the years ended December 31, 1998,
1999 and 2000, respectively. See Notes 2 and 12 of Notes to Consolidated
Financial Statements.                                                                                                                                                                                                                                                         
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Excludes an extraordinary charge of $6,291,000 (net of income taxes) or
$0.56 per diluted share.                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(3) |  | See Notes 1 and 2 of the Notes to Consolidated Financial Statements with
respect to the Companys bankruptcy and financial reporting in accordance
with Statement of Position 90-7 Financial Reporting by Entities in
Reorganization under the Bankruptcy Code. See Note 2 of Notes to
Consolidated Financial Statements with respect to reorganization costs
incurred while in bankruptcy. See Note 11 for income taxes relative to
valuation allowances for deferred income tax debits.         
|   
|(4) |  | Goodwill amortization of
$2.0 million, $1.7 million, $1.5 million and
$1.5 million are included for years 1998, 1999, 2000, and 2001,
respectively.                                                                                                                                                                                                                                                                                                                                                 
|   
|(5) |  | See Note 4 of Notes to Consolidated Financial Statements with respect to
impairment of long-lived assets.                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(6) |  | Excludes deferred compensation
of $3.6 million for the year ended 2002, long-term restructuring reserves of $34.7 million, $27.8
million, $0, $0 and $0 for the years 1998, 1999, 2000, 2001 and 2002,
respectively, and deferred income tax liabilities (assets) of ($14.1
million),
($21.0 million), $1.9 million, $1.9 million and $1.9 million for the years
1998, 1999, 2000, 2001 and 2002, respectively; includes current maturities
of long-term indebtedness and capital lease obligations.
|   
|(7) |  | Excludes 28 theatres with 116 screens at December 31, 1998, which were
closed by Carmike during 1999 in accordance with its restructuring plan.
Excludes 84 theatres and 394 screens at December 31, 2000, which were
closed by Carmike upon approval of the bankruptcy court of the rejection
of certain leases. Excludes 17 theatres and 81 screens at December 31,
2001, which were closed by Carmike upon approval of the bankruptcy court
of the rejection of certain leases.                  

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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 Data and our
consolidated financial statements and accompanying notes.

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, 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. All critical accounting estimates have been
discussed with the Companys 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.

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,
2002 for general unsecured creditors is approximately $46.1 million, which
includes our estimated liability for damages resulting from the rejection of
executory contracts and unexpired leases. Of these claims, $36.1 million 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,
including, the unresolved disputed claims. We have made our best estimate on
such liability given the facts available at this time. If we are unable to
resolve these claims with the unsecured creditors, the bankruptcy court will
settle these claims.

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

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leases is included with depreciation expense in the accompanying
consolidated statements of operations. Although we use accelerated methods of
depreciation for income tax purposes, for financial reporting purposes, we
compute depreciation on a straight-line basis as follows:

|                          |  |            
|------------------------- |  | -----------
|Building and improvements |  | 20-30 years
|Leasehold improvements*   |  | 15-30 years
|Leasehold interests*      |  | 15-30 years
|Equipment                 |  | 5-15 years 
|                          |  |            

*     Number of years is based on the terms of the applicable lease

Impairment of Long Lived Assets, Including Goodwill

Effective January 1, 2002, we adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets(SFAS No. 142). In
general, SFAS No. 142 requires that during 2002 we assess the fair value of the
net assets underlying our acquisition related goodwill on a business by
business basis. Where that fair value is less than the related carrying value,
we will be required to reduce the amount of the goodwill. These reductions
were made retroactive to January 1, 2002. SFAS No. 142 also requires that we
discontinue the amortization of our acquisition related goodwill. As of
December 31, 2002, our financial statements included acquisition related
goodwill of $23.4 million, net of previous amortization. See Impact of
Recently Issued Accounting Standards below for additional information.

We account for our long-lived assets 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 long-lived
assets, including goodwill related to those assets, for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The Company periodically reviews and monitors
its internal management reports and the competition in its markets for
indicators of impairment of individual theatres. 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, which management believes is
the lowest level for which there are identifiable cash flows. We deem a
theatre to be impaired if a forecast of undiscounted future operating cash
flows directly related to the theatre, including estimated disposal value if
any, is less than its carrying amount. If a theatre is determined to be
impaired, the loss is measured as the amount by which the carrying amount of
the theatre 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 and Restructuring Charge  Assets Impairments
following for additional information regarding the effects on the 2001 and 2000
consolidated financial statement. See also Impact of Recently Issued
Accounting Standards below.

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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 fee 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. The Company
accrues for this contingent liability monthly based on the trailing twelve
months activity of the effected theatre. Payment of this liability is defined
within the lease and the accrual is reconciled at the end of the lease year.

Income Taxes

We use the liability method of accounting for income taxes, which requires
recognition of temporary differences between financial statement and income tax
basis of assets and liabilities, measured by enacted tax rates.

In 2000 we established a valuation allowance in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. We continually 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.

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.

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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.

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.

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 concession supplies from a single vendor of which we
are the principal customer.

Other theatre operating costs include labor, utilities and maintenance,
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 facility lease 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, 2002, we had approximately $116.0 million of federal
and state operating loss carryovers with which to offset our future taxable
income. Net operating losses may be carried back and then forward for
specified periods. If they are not used to offset taxable income by the end of
the carryforward period, they expire. Under section 382 of the Internal
Revenue Code of 1986, as amended, a corporation may generally be restricted in
utilizing its net operating losses to offset prospective taxable income if it
experiences an ownership change, as defined in section 382(g). The
determination as to whether a corporation has experienced an

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ownership change on a given date is a complex analysis of the beneficial
stock ownership of the corporation over a time period of not more than three
years. An ownership change under section 382(g) occurs when on a testing date,
the beneficial ownership of the corporation by one or more 5-percent
shareholders has increased, in the aggregate, by more than 50 percentage
points over the respective lowest ownership percentages of such 5-percent
shareholders during the testing period preceding such date. It should be noted
that the rules for determining whether an ownership change under section 382
has occurred are different from those applied to evaluate whether a change in
ownership as defined by Statement of Position 90-7 has occurred.

In the event of an ownership change, certain tax attributes of the
corporation, including net operating losses, that pre-date the ownership change
are generally subject to limitation in offsetting taxable income arising after
the ownership change. The resulting limitation, which indicates how much of
the limited tax attributes may be used in each subsequent tax year, is based on
the stock value of the corporation immediately before the ownership change,
subject to adjustment, and multiplied by a published applicable federal rate.
Because this annual limitation is computed without reference to a corporations
net operating loss carryforward periods, it is possible that losses will expire
unused, regardless of whether the corporation has sufficient taxable income to
absorb such losses. There are certain exceptions to the general rules under
section 382 for corporations that are debtors in a title 11 case and that
experience an ownership change pursuant to a court-approved plan.

While the issue is complicated and subject to many variables based on
future events and possible favorable elections, the issuance of shares of
Common Stock on January 31, 2002 pursuant to the Plan appears to have resulted
in an ownership change under section 382. Furthermore, future activity in the
ownership of our common stock (some of which is beyond our control) could
trigger an ownership change and limit our ability to use these net operating
losses to offset taxable income in a subsequent tax year. However, we believe
that these net operating losses could become available under section 382 before
the end of their respective carryforward lives. Accordingly, we believe that
in the event of an ownership change as a result of past activity in our stock,
as well as future elections and trading activity (some of which is beyond our
control), the availability of our net operating losses would be deferred, but
not lost, specifically as a result of any current or past limitation under
section 382. Such losses could still expire unused if we have insufficient
taxable income to absorb such losses within their carryforward period.

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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 Ended December 31,
|                                                      |                                 |                          |       |                                
|                                                      |                                 |                          |       | 2000                            |       | 2001 |       | 2002
|                                                      |                                 |                          |       |                                 |       |      |       |     
|Revenues:                                             |                                 |                          |       |                                 |       |      |       |      |       |  |       |     
|                                                      | Admissions                      |                          |       | 68.2                            | %     |      |       | 68.2 | %     |  |       | 67.6 | %    
|                                                      | Concessions and other           |                          |       | 31.8                            |       |      |       | 31.8 |       |  |       | 32.4 |      
|                                                      |                                 |                          |       |                                 |       |      |       |      |       |  |       |     
|                                                      |                                 | Total revenues           |       |                                 | 100.0 |      |       |      | 100.0 |  |       |      | 100.0 | 
|Costs and expenses:                                   |                                 |                          |       |                                 |       |      |       |      |       |  |       |     
|                                                      | Film exhibition costs (1)       |                          |       | 40.1                            |       |      |       | 37.5 |       |  |       | 37.3 |      
|                                                      | Concessions costs               |                          |       | 4.5                             |       |      |       | 4.4  |       |  |       | 3.8  |      
|                                                      | Other theatre operating costs   |                          |       | 42.2                            |       |      |       | 39.9 |       |  |       | 36.0 |      
|                                                      | General and administrative      |                          |       | 1.5                             |       |      |       | 1.9  |       |  |       | 3.0  |      
|                                                      | Depreciation and amortization   |                          |       | 9.3                             |       |      |       | 9.2  |       |  |       | 6.3  |      
|                                                      | Impairment of long-lived assets |                          |       | 4.6                             |       |      |       | 28.9 |       |  |       |     |      
|                                                      |                                 |                          |       |                                 |       |      |       |      |       |  |       |     
|                                                      |                                 | Total costs and expenses |       |                                 | 102.2 |      |       |      | 121.8 |  |       |      | 86.4  | 
|                                                      |                                 |                          |       |                                 |       |      |       |      |       |  |       |     
|Operating income (loss)                               |                                 |                          | (2.2  | )                               |       |      | (21.8 | )    |       |  | 13.6  |     
|Interest expense                                      |                                 |                          | 6.7   |                                 |       |      | 1.3   |      |       |  | 20.2  |     
|                                                      |                                 |                          |       |                                 |       |      |       |      |       |  |       |     
|Net
loss before reorganization costs and income taxes |                                 |                          | (8.9  | )                               |       |      | (23.1 | )    |       |  | (6.6  | )   
|Reorganization costs                                  |                                 |                          | 1.5   |                                 |       |      | 4.3   |      |       |  | 4.1   |     
|                                                      |                                 |                          |       |                                 |       |      |       |      |       |  |       |     
|Net
loss before income taxes                          |                                 |                          | (10.4 | )                               |       |      | (27.4 | )    |       |  | (10.7 | )   
|Income tax expense (benefit)                          |                                 |                          | 5.5   |                                 |       |      |      |      |       |  | (2.9  | )   
|Net loss                                              |                                 |                          | (15.9 | )%                              |       |      | (27.4 | )%   |       |  | (7.8  | )%  
|                                                      |                                 |                          |       |                                 |       |      |       |      |       |  |       |     
|Other information:                                    |                                 |                          |       |                                 |       |      |       |      |       |  |       |     
|Film exhibition costs as a % of admissions
revenue(1) |                                 |                          | 58.7  | %                               |       |      | 54.9  | %    |       |  | 55.2  | %   
|Concession costs as a % of concession
revenue(2)      |                                 |                          | 15.6  | %                               |       |      | 14.8  | %    |       |  | 12.7  | %   



---

|(1) |  | Film exhibition costs include advertising expenses net of co-op
reimbursements.                                                                                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Concession costs of
$21.0 million, $20.2 million and $19.2 million for the
years 2000, 2001 and 2002, respectively and concession revenue of $134.5
million, $135.8 million and $151.8 million for the years 2000, 2001 and
2002, respectively.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2002

Revenues. Total revenues increased 11.0% from $456.9 million to $507.2
million for the year ended December 31, 2002 as a result of increased
attendance driving up admissions and concessions revenues, partially offset by
the reduced number of screens. Admissions increased 10% from $311.8 million in
2001 to $342.8 million in 2002 due to an 8.3% increase in overall attendance
and a 1.5% increase in average ticket price. Concessions and other revenue
increased 13.3% from $145.1 million in 2001 to $164.4 million in 2002 due to
(i) the attendance increase, (ii) a 3.2% increase in concession sales per
patron and (iii) a $3.3 million increase in other revenues.

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For the year ended December 31, 2001, our attendance per average screen
was 27,083, our average admission price was $4.83 and our average concession
sale per patron was $2.10. For the year ended December 31, 2002, our
attendance per average screen was 30,876, our average admission price was
$4.90, and our average concession sale per patron was $2.17. As a result of
these increases, our revenues per average screen increased 16.8% from $191,513
to $223,727.

We operated 323 theatres with 2,333 screens at December 31, 2001 and 308
theatres with 2,262 screens at December 31, 2002.

Cost of operations. Total theatre operating costs, including film
exhibition costs, concession costs and other theatre operating costs, increased
4.8% from $373.4 million to $391.3 million. As a percentage of total revenues,
cost of operations decreased from 81.7% to 77.2%. This was the result of
improved cost of sales ratios in conjunction with an increase in other revenues
of approximately $3.3 million over 2001. Film exhibition costs increased 10.6%
from $171.2 to $189.3 due to an increase in admission sales.

General and administrative expenses.General and administrative expenses
increased 70.4% from $8.8 million to $15 million. This increase resulted
primarily from non-cash deferred compensation charges of $3.6 million as
described in Notes 1 and 12 of the Notes to Consolidated Financial Statements
and the write-off of $552 thousand of professional fees relating to our
proposed equity offering that was suspended due to the decline in general
market conditions. As a percentage of total revenues, general and
administrative costs increased from 1.9% to 3%.

Depreciation and amortization expenses. Depreciation and amortization
expenses decreased 23.9% from $42.2 million to $32.1 million as a result of our
having fewer screens in operation. Impairment charges of $21.2 million in 2000
resulted in depreciation and amortization expenses for 2001 being approximately
$9.8 million lower than they otherwise would have been. The impairment charge
of $132.2 million in 2001 resulted in depreciation and amortization expenses
for 2002 being approximately $13.6 million lower than they otherwise would have
been. Additionally, the adoption of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, halted the
amortization of goodwill, which was approximately $1.5 million in 2001.

Interest expense. Total interest for the year 2002 increased to $102.8
million from $6.1 million in 2001. We ceased recording interest expense
relating to substantially all of our debt facilities effective August 8, 2000
in accordance with the requirements of SOP 90-7. At emergence from Chapter 11
on January 31, 2002, all past interest was required to be recorded. Excluding
bankruptcy related items, interest for 2002 would have been approximately $46
million.

Income tax expense. We recognized no income tax expense or benefit in
2001. 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.

Reorganization costs. Reorganization costs of $19.5 million were incurred
during 2001 and include $8.2 million of professional fees and $16.4 million of
asset impairments directly related

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to actions taken under the reorganization including, among other things,
lease rejections. These costs have been offset by $3.0 million of interest
income and gains on asset sales subsequent to the Petition Date.
Reorganization costs of $20.6 million were incurred during 2002, of which, $8.0
million of professional fees and $8.5 million in non-cash transactions related
to the extinguishment of pre-emergence debt, as well as other items totaling
$4.1 million.

Year Ended December 31, 2000 Compared to Year Ended December 31, 2001

Revenues. Total revenues decreased 1.2% from $462.3 million to $456.9
million for the year ended December 31, 2001 as a result of the reduction of
screens in our theatre circuit, partially offset by an increase in average
revenues per patron. The reduction in screen count came as a result of our
rejection and closure of underperforming leased theatres as part of our
reorganization. The result of these reductions forced admissions down 1.1%
from $315.4 million in 2000 to $311.8 million in 2001. The reduction in
screens and continued uncertainty of the industry reduced attendance 4.7%, but
was partially offset by an increase in average ticket price of 3.9%.
Concessions and other revenue was likewise effected by the reduction in
attendance but was offset by an increase in concession sales per patron of
6.1%, thus these revenues only decreased 1.2% from $146.9 million in 2000 to
$145.1 million in 2001.

For the year ended December 31, 2000, our attendance per average screen
was 25,654, our average admission price was $4.65 and our average concession
sale per patron was $1.98. For the year ended December 31, 2001, our
attendance per average screen was 27,083, our average admission price was
$4.83, and our average concession sale per patron was $2.10. As a result of
these increases, our revenues per average screen increased 9.5% from $174,914
to $191,513.

We operated 352 theatres with 2,438 screens at December 31, 2000 and 323
theatres with 2,333 screens at December 31, 2001.

Cost of operations. Total theatre operating costs, including film
exhibition costs, concession costs and other theatre operating costs, decreased
6.9% from $400.9 million to $373.4 million. As a percentage of total revenues,
cost of operations decreased from 86.7% to 81.7%. This was the result of lower
exhibition costs, the elimination of lease and other operating costs at
theatres we closed and a greater number of films that played for extended runs.
Also in 2001, we incurred higher costs as a result of our reorganization as
distributors tightened the terms on their film licensing agreements, newspapers
charged the full contract rates for advertising and we at times purchased
concession supplies in local markets at retail prices.

General and administrative expenses. General and administrative expenses
increased from $6.9 million to $8.8 million. This increase resulted primarily
from the payment of retention bonuses under the Employee Retention and
Severance Plan. As a percentage of total revenues, general and administrative
costs increased from 1.5% to 1.9%.

Depreciation and amortization expenses. Depreciation and amortization
expenses decreased 2.4% from $43.2 million to $42.2 million as a result of our
having fewer screens in operation and an impairment charge taken in
2000. The impairment charge of $21.2 million in
2000 resulted in depreciation and amortization expenses for 2001 being
approximately $1.2 million lower than they otherwise would have been.

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Interest expense. Total interest for the year decreased from $31.0
million to $6.1 million. We ceased recording interest expense relating to
substantially all of our debt facilities effective August 8, 2000 in accordance
with the requirements of SOP 90-7.

Income tax expense. We recognized tax expense of approximately $25.6
million in 2000 as a result of establishing a valuation allowance for deferred
tax assets and no income tax expense or benefit in 2001 as a result of our loss
carryforward position.

Reorganization costs. Reorganization costs increased from $7.0 million in
2000 to $19.6 million in 2001. Professional fees were $3.9 million in 2000 and
$8.2 million in 2001; asset impairments directly related to actions taken in
connection with our reorganization were $4.9 million in 2000 and $16.4 million
in 2001. These costs were offset by interest income and gains on asset sales
of $2.2 million in 2000 and $3.1 million in 2001 and certain other items.

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 $54.7 million as of December 31, 2001, compared to a working capital
deficit of $28.5 million at December 31, 2002. The decreased working capital
recorded as of December 31, 2002 reflects cash settlements required at
emergence from Chapter 11, as well as, mandatory payments defined in the Plan.
The working capital deficit will be funded through anticipated operational
profits as well as the ability to draw from our Revolving Credit Agreement. At
February 28, 2003, we had approximately $49 million in cash and cash
equivalents on hand.

Our capital expenditures arise principally in connection with the
development of new theatres, renovation and expansion of existing theatres and
theatre acquisitions. During 2002, these capital expenditures totaled $18.0
million. Under our credit agreements, we were limited to capital expenditures,
as defined, of $20.0 million in 2002, and will be limited to capital
expenditures, as defined, of: $15.0 million in 2003, $10.0 million in 2004,
$15.0 million in 2005 and $15.0 million in 2006. In addition, in certain
circumstances the limits for 2003 and each later year are increased by an
amount, up to $5.0 million, depending upon our capital expenditures in the
prior year. Our total budgeted capital expenditures for 2003 are $15 million.
We plan to fund the development of new theatres and expansion of existing
theatres by using, subject to any limitations in our debt instruments,
operating cash flow, available cash from our revolving line of credit and
landlord-funded new construction and theatre remodeling, when available.

Cash provided by operating activities was $49.4 million for the twelve
months ended December 31, 2001, compared to cash provided by operating
activities of $15.6 million for the twelve months ended December 31, 2002. The
decrease in cash flow from operating activities was primarily due to cash
requirements, primarily interest, payable at emergence from bankruptcy and
changes in certain operating assets and liabilities. Net cash used in
investing activities was $1.0 million for the year ended December 31, 2001 as
compared to $14.5 million in 2002. This increase in cash used in investing
activities was primarily due to emergence from

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Chapter 11 allowing increased capital spending. For the year ended
December 31, 2001 cash used in financing activities was $6.8 million compared
to $41.7 million in 2002. The increase in cash used in financing activities
was primarily due to scheduled and mandatory payment requirements of our
long-term debt agreements.

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 period to period. Additionally, the ultimate performance of
the film product, any time during the calendar year, will have the most
dramatic impact on our cash needs.

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.
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 2000, as described in Business  Our
Reorganization.

We cannot make assurances that our business will continue to generate
significant cash flow to fund its 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.

Risk Management and Market Sensitive Instruments

We are exposed to various market risks. Prior to August 8, 2000, these
exposures primarily related to changes in interest rates. Substantially all of
our interest was suspended during the bankruptcy. Since we emerged from
bankruptcy, we have begun to pay interest and are again subject to the market
risk related to changes in interest rates. Interest payable under our new
credit agreements is based on a spread over LIBOR or another index. A
substantial number of our theatre leases are off-balance sheet as required by
generally accepted accounting principles for operating leases. The cash
commitments required for these leases have been included in the contractual
obligations schedule included below.

Asset Impairments

In the fourth quarters of 2000 and 2001, we identified impairments of
asset values for certain theatres and a joint venture investment in three movie
theatre-entertainment complexes 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:

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|                                                                |                         |      |       |      |  |   |       |       | 
|--------------------------------------------------------------- | ----------------------- | ---- | ----- | ---- |  | - | ----- | ----- | 
|(in millions except number of theatres and screens)             |                         | 2000 |       | 2001
|                                                                |                         |      |       |     
|Annual impairment charge included in operations                 |                         | $    | 21.2  |      |  | $ | 132.2 |      
|Impairment charge included in reorganization costs              |                         |      | 4.9   |      |  |   | 16.4  |      
|                                                                |                         |      |       |      |  |   |       |      
|                                                                | Total impairment charge |      |       | 26.1 |  |   |       | 148.6 | 
|Reduction in carrying values                                    |                         |      | 36.4  |      |  |   | 235.1 |      
|Reduction in accumulated depreciation and amortization expenses |                         |      | (10.3 | )    |  |   | (86.5 | )    
|Reduction in future depreciation and amortization expenses      |                         | $    | 9.2   |      |  | $ | 9.8   |      
|Number of theatres affected                                     |                         |      | 18    |      |  |   | 287   |      
|Number of screens affected                                      |                         |      | 130   |      |  |   | 2,126 |      

The impairment charge recognized in 2001 was significantly larger than in
prior years due to the write-off of leasehold improvements on theatres for
which we rejected leases, the impact of closing owned theatres, the diminished
value of our entertainment centers and the write-down of surplus equipment
removed from closed or rejected theatres. Additionally, in 2001 we included
impairment charges related to equipment of $34.1 million, based on our reduced
capital building program for the future as well as the excess supply of
equipment in inventory.

The impairment charge in 2000 was 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 or entertainment
centers operating results to a level that would support the carrying value of
the long-lived assets. Some of our theatres that incurred impairment charges
in 1999 incurred additional impairment charges in subsequent years.

We had approximately $23.4 million of goodwill recorded at December 31,
2002. The goodwill values arose from our acquisitions during the period from
1982 through 1997. We evaluate goodwill based on cash flows for theatres with
associated goodwill that operate within a particular market. Where more than
one such theatre operates within a market, we evaluate the cash flows of all
such theatres within that market. See Note 4 of Notes to Consolidated
Financial Statements.

Impact of Recently Issued Accounting Standards

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and
Other Intangible Assets(SFAS No. 142). SFAS No. 142 requires goodwill and
indefinite lived intangible assets to be reviewed periodically for impairment
and no longer amortized. The Company adopted SFAS No. 142 on January 1, 2002.
SFAS No. 142 required companies with goodwill and indefinite lived intangible
assets to complete an initial impairment test by June 30, 2002. The Company
completed the impairment test of its goodwill and did not identify an asset
impairment as a result of the impairment test. Additionally, the Company
completed its periodic review of its goodwill for impairment as of December 31,
2002, and did not identify an asset impairment as a result of the review. The
Company will continue to review its goodwill annually for impairment as of
December 31 of each year.

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In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets(SFAS No. 144). SFAS No. 144
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of (SFAS No. 121). SFAS No. 144
requires that long-lived assets to be disposed of by sale, including those of
discontinued operations, be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. Discontinued operations will no longer be measured at
net realizable value or include amounts for operating losses that have not yet
been incurred. SFAS No. 144 also broadens the reporting of discontinued
operations to include all components of an entity with operations that can be
distinguished from the rest of the entity and that will be eliminated from the
ongoing operations of the entity in a disposal transaction. The Company
adopted the standard on January 1, 2002. There has been no asset impairment in
2002 as a result of adoption.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections(SFAS No. 145). SFAS No. 145 rescinds SFAS No. 4, Reporting
Gains and Losses from Extinguishment of Debt, and an amendment of that
statement, SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. In addition, SFAS No. 145 rescinds SFAS No. 44, Accounting for
Intangible Assets of Motor Carriers. SFAS No. 145 amends SFAS No. 13,
Accounting for Leases, to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects similar to
sale-leaseback transactions. SFAS No. 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. SFAS No.
145 is effective for financial statements issued on or after May 15, 2002. The
Company adopted SFAS No. 145 effective May 15, 2002, however, SFAS No. 145 did
not affect the Companys Consolidated Statements of Operations.

In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities(SFAS No. 146). SFAS No. 146
addresses the financial accounting and reporting for costs associated with exit
or disposal activities and nullifies EITF 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity.
SFAS No. 146 requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. The effective date of SFAS No. 146 is
December 31, 2002. The Company adopted SFAS No. 146 on December 31, 2002,
however, SFAS No. 146 did not have an effect on the Companys Consolidated
Statements of Operations.

In November 2002, the FASB issued FASB Interpretation Number 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others,(FIN 45). FIN 45 requires an
entity to disclose in its interim and annual financial statements information
with respect to its obligations under certain guarantees that it has issued.
It also requires an entity to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of FIN 45 are effective for interim and
annual reports after December 15, 2002. These disclosures are presented in
Note 15 of Notes to Consolidated Financial Statements. The initial recognition
and initial measurement requirements of FIN 45 are effective prospectively for
guarantees issued or modified after December 15, 2002. The Company is
currently assessing the

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initial measurement requirements of FIN 45. However, management does not
believe that the recognition requirements will have a material impact on the
Companys financial position, cash flows or results of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock Based
Compensation-Transition and Disclosure(SFAS No. 148). SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In addition,
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 is effective for financial statements for fiscal years
ending after December 15, 2002 and for interim periods beginning after December
15, 2002. As of December 31, 2002, the Company has three stock-based
compensation plans described more fully in Notes 1 and 12 of Notes to
Consolidated Financial Statements. 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 net income for 2002
is $3.6 million of stock-based employee compensation cost related to stock
grants.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51, (FIN 46).
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The Company is
currently evaluating the effect that the adoption of FIN 46 will have on its
results of operations and financial condition.

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Contractual Obligations

As of December 31, 2002, our long-term debt obligations, obligations to
general unsecured creditors pursuant to the Plan and future minimum payments
under capital leases and operating leases with terms over one year and the
agreement with our CEO (except as indicated) were as follows:

|                                                     |  |                                       |        |           |  |           |         |       |  |       |         |         |  |   |         |  |  |   |         | 
|---------------------------------------------------- |  | ------------------------------------- | ------ | --------- |  | --------- | ------- | ----- |  | ----- | ------- | ------- |  | - | ------- |  |  | - | ------- | 
|                                                     |  | Payments
Due by Period (in thousands)
|                                                     |  |                                      
|                                                     |  | One Year                              |        |           |  |           |         |       |  |       |         | After 5 |  |   |         | 
|                                                     |  | or Less                               |        | 2-3 Years |  | 4-5 Years |         | Years |  | Total
|                                                     |  |                                       |        |           |  |           |         |       |  |      
|Term loan credit agreement(1)                        |  | $                                     | 25,000 |           |  | $         | 70,000  |       |  | $     | 114,729 |         |  | $ |        |  |  | $ | 209,729 | 
|Revolving credit agreement(2)                        |  |                                       |       |           |  |           |        |       |  |       | 50,000  |         |  |   |        |  |  |   | 50,000  | 
|10 3/8% senior subordinated notes(3)                 |  |                                       |       |           |  |           |        |       |  |       |        |         |  |   | 154,315 |  |  |   | 154,315 | 
|General unsecured creditors(4)                       |  |                                       | 5,000  |           |  |           | 10,000  |       |  |       | 31,148  |         |  |   |        |  |  |   | 46,148  | 
|Industrial revenue bond                              |  |                                       | 1,080  |           |  |           |        |       |  |       |        |         |  |   |        |  |  |   | 1,080   | 
|Capital lease obligations(5)                         |  |                                       | 7,764  |           |  |           | 15,752  |       |  |       | 15,582  |         |  |   | 97,804  |  |  |   | 136,902 | 
|Operating leases(5)                                  |  |                                       | 41,059 |           |  |           | 76,091  |       |  |       | 67,575  |         |  |   | 212,600 |  |  |   | 397,325 | 
|Employment agreement with Chief
Executive Officer(6) |  |                                       | 850    |           |  |           | 1,700   |       |  |       | 1,700   |         |  |   |        |  |  |   | 4,250   | 
|                                                     |  |                                       |        |           |  |           |         |       |  |       |         |         |  |   |         |  |  |   |         | 
|Total contractual cash obligations                   |  | $                                     | 80,753 |           |  | $         | 173,543 |       |  | $     | 280,734 |         |  | $ | 464,719 |  |  | $ | 999,749 | 
|                                                     |  |                                       |        |           |  |           |         |       |  |       |         |         |  |   |         |  |  |   |         | 



---

|(1) |  | Term loan has required semi-annual principal payments each June 30 and
December 31 through June 30, 2006. The remaining principal balance outstanding matures on January 31,
2007.                                                                                             
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The revolving credit agreement has a maturity date of October 31, 2006.
This presentation assumes the full $50 million commitment is outstanding
and payable.                                                                                                                  
|   
|(3) |  | The maturity date for the 10 3/8% senior subordinated notes is February 1, 2009.                                                                                                                                                                                               
|   
|(4) |  | Our general unsecured creditors are due semi-annual payments of $2.5
million plus interest with a maturity of January 31, 2007.                                                                                                                                                
|   
|(5) |  | Includes obligations for theatres we had not closed or for which leases
had not been rejected at December 31, 2002. See Note 13 to Notes to
Consolidated Financial Statements.                                                                                                 
|   
|(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.

Financial Covenant Compliance

Both before and after the commencement of our reorganization, we have
taken steps to restructure our operations and to improve profitability. These
steps include but are not limited to reduction of new movie theatre
development, curtailment of renovation and expansion of existing theatres,
increased management control over expenditures, aggressive marketing of surplus
assets and evaluations of capital sources and debt restructurings.

We have been incurring and will continue to incur significant professional
fees and other restructuring costs. We may incur additional impairments of
long-lived assets in connection with the ongoing restructuring of our business
operations during fiscal year 2003 and beyond.

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.

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To secure our new master lease, we granted MoviePlex an express contract
lien, in addition to MoviePlexs statutory lien as landlord, on and a security
interest in all equipment, inventory, fixtures and other personal property
which is located on the leased premises or used in connection therewith and
upon all proceeds thereof.

In the event of our default under the new master lease, MoviePlex has the
immediate option to terminate the new master lease and all of our rights
thereunder and may then recover from us: (a) the worth at the time of award of
any unpaid rent which had been earned at the time of such termination; plus (b)
the worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rent loss which could have been reasonably avoided (as
liquidated damages); plus (c) the worth at the time of award of the amount by
which the unpaid rent for the balance of the new master lease term after the
time of award exceeds the amount of such rent loss which could be reasonably
avoided (as liquidated damages); plus (d) at MoviePlexs election, such other
amounts in addition to or in lieu of the foregoing as may be permitted from
time to time under applicable law. A default under the new master lease
includes our failure to pay rent or perform under certain conditions, our being
adjudged bankrupt or the judicial seizure of our assets, or the occurrence of a
change of control of Carmike. Under the new master lease, a change of control
is any event, transaction or occurrence as a result of which (i) our
stockholders cease to own and control all of the economic and voting rights
associated with ownership of at least 30% of our outstanding capital stock of
all classes on a fully diluted basis, or we cease to own and control all of the
economic and voting rights associated with all of the outstanding capital stock
of any of our debtor subsidiaries (except that a particular qualified buyer
transaction is not a change of control under the new master lease ).

The new master lease has been collaterally assigned, like the original
master lease was, to Wachovia Bank, N.A., in its capacity as agent under the
reimbursement agreement dated as of November 20, 1997, as amended, among
MoviePlex, certain lenders (the MoviePlex Lenders) and Wachovia Bank, as
agent pursuant to a mortgage and an assignment of rents as to each of six
properties, to secure MoviePlexs obligations to such MoviePlex Lenders under
the reimbursement agreement. At the end of the new master lease term, or if
the lease is terminated by reason of our default, the furniture, fixtures and
equipment located in the theatres will become the property of the MoviePlex
Lenders. In addition, the MoviePlex Lenders have released their liens on the
debtors other assets that secured the MoviePlex obligations.

If a default or event of default under the revolving credit agreement
occurs and is continuing, then the agent may (and at the request of the
requisite lenders shall) suspend the revolving credit agreement with respect to
additional advances and/or the incurrence of additional letter of credit
obligations and may increase the interest rate applicable to the loans and the
letter of credit fees to the default rate (i.e., two percentage points above
the otherwise applicable rate). If an event of default under the revolving
credit agreement occurs and is continuing, the agent may (and at the request of
the requisite lenders shall) terminate the revolving loan facility with respect
to further advances or the incurrence of further letter of credit obligations
and may declare all or any portion of the obligations due and payable and
require that the letter of credit obligations be cash collateralized (except
that no declaration of such is required if any borrower or debtor subsidiary

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becomes subject to a bankruptcy proceeding). Events of default under the
revolving credit agreement include, among other events and subject to any
conditions set forth in the revolving credit agreement: (a) a borrowers
failure to pay principal or interest on the loans or other obligations when due
and payable or failure to reimburse agents expenses; (b) any credit partys or
borrowers failure to perform or observe certain covenants, such as the
borrowers using the proceeds of the revolving loan and swing line advances
solely for refinancing the bank debt under the post-confirmation credit
agreement; (c) a credit partys breach or default with respect to the indenture
or the post-confirmation credit agreement; or (d) the occurrence of a change
of control. A change of control under the revolving credit agreement is
similar to such an event under the new master lease.

If an event of default under the post-confirmation credit agreement occurs
and is continuing, then, if requested by the required lenders, the
administrative agent shall terminate the commitments and declare the notes and
all amounts payable under the post-confirmation credit agreement due (except
that no declaration of such is required if we or any of our subsidiaries
becomes subject to a bankruptcy proceeding). Events of default under the
post-confirmation credit agreement include, among other events and subject to
any conditions in the post-confirmation credit agreement: (a) our failure to
pay principal or interest on the loans or when due and payable or failure to
pay certain expenses; (b) our failure to perform or observe certain covenants,
such as compliance with certain funded debt to EBITDA and interest coverage
ratios; or (c) the occurrence of a change of control. A change of control
under the post-confirmation credit agreement is similar to such an event under
the new master lease.

If an 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 new senior subordinated notes may declare all the new senior
subordinated notes to be due and payable immediately. Events of default under
the indenture include, among other events and subject to any conditions in the
indenture: (a) our failure to pay principal, interest or premium when due on
the new senior subordinated notes, (b) our or certain of our subsidiaries
failure to comply with the restrictions concerning certain payments, incurrence
of certain indebtedness and issuance of preferred stock, offer to repurchase
the new senior subordinated notes upon a change of control, assets sales,
limitations on dividend and other payment restrictions affecting subsidiaries,
and merger, consolidation, sale of assets contained in the indenture, or (c)
our default under the plan trade payables (as defined by the indenture) or any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced certain indebtedness for money borrowed by us
or certain of our subsidiaries, which default (A) is caused by a failure to pay
principal of, or interest or premium, if any, on such plan trade payables or
indebtedness prior to the expiration of the grace period, if any on the date of
such default (a Payment Default) or (B) results in the acceleration of such
Indebtedness prior to the express maturity thereof and, in each case, the
principal amount of such plan trade payables or indebtedness, together with the
principal amount of any other plan trade payables or such indebtedness which
has so had a Payment Default or the maturity of which has been so accelerated,
aggregates $20.0 million or more.

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

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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 2003.

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. Prior to August 8, 2000, these
exposures primarily related to changes in interest rates. Substantially all of
our interest was suspended during the bankruptcy. Since we emerged from
bankruptcy, we have begun to pay interest and are again subject to the market
risk related to changes in interest rates. Interest payable under our new
credit agreements is based on a spread over LIBOR or another index. A
substantial number of our theatre leases are off-balance sheet as required by
generally accepted accounting principles for operating leases. The cash
commitments required for these leases have been included in the contractual
obligations schedule included below.

Interest paid on our debt is largely subject to changes in interest rates
in the market. The revolving credit agreement and the new bank debt are based
on a structure that is priced over an

45



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index or LIBOR rate option with a minimum floor of 7.75%. A change of
1.0% in interest rates would not raise the effective rate above the 7.75%
floor, therefore, there is no measurable risk due to interest rate changes.

A substantial number of our theatre leases are off-balance sheet as
required by Accounting Principles Generally Accepted in the U.S. for operating
leases. The cash commitments required for these leases have been included in
the contractual obligations schedule included in Part II, Item 7 of this
Report.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Consolidated Financial Statements for the years ended December 31, 2002 and 2001

|                                                  |  |  |     | 
|------------------------------------------------- |  |  | --- | 
|Report of Ernst & Young LLP, Independent Auditors |  |  | F-1 | 
|Consolidated Balance Sheets                       |  |  | F-2 | 
|Consolidated Statements of Operations             |  |  | F-4 | 
|Consolidated Statements of Cash Flows             |  |  | F-5 | 
|Consolidated Statements of Shareholders Equity   |  |  | F-6 | 
|Notes to Consolidated Financial Statements        |  |  | F-8 | 

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Report Of Independent Auditors

Board of Directors and Shareholders
Carmike Cinemas, Inc.

We have audited the accompanying consolidated balance sheets of Carmike
Cinemas, Inc. and subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of operations, shareholders equity and cash
flows for each of the three years in the period ended December 31, 2002. Our
audits 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 audits.

We conducted our audits in accordance with auditing standards generally
accepted in the 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
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Carmike Cinemas, Inc. and subsidiaries at December 31, 2002 and
2001 and the consolidated results of its operations and cash flows for each
of the three years in the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States. 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 4 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.

|                               |                       | 
|------------------------------ | --------------------- | 
|                               | -s- Ernst & Young LLP | 
|                               |                       | 
|Atlanta, Georgia
March 3, 2003 |                       | 

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

|                                          |                                                                                                  |                      |          |              |        |      |          |         |         | 
|----------------------------------------- | ------------------------------------------------------------------------------------------------ | -------------------- | -------- | ------------ | ------ | ---- | -------- | ------- | ------- | 
|                                          |                                                                                                  |                      |          | December 31,
|                                          |                                                                                                  |                      |          |             
|                                          |                                                                                                  |                      |          | 2002         |        | 2001
|                                          |                                                                                                  |                      |          |              |        |     
|Assets                                    |                                                                                                  |                      |          |              |        |      |          |        
|Current assets:                           |                                                                                                  |                      |          |              |        |      |          |        
|                                          | Cash and cash equivalents                                                                        |                      | $        | 53,491       |        |      | $        | 94,187  |        
|                                          | Accounts receivable                                                                              |                      |          | 1,206        |        |      |          | 624     |        
|                                          | Notes receivable (net of reserves of $327 and $0 as
of December 31, 2002 and 2001, respectively) |                      |          | 368          |        |      |          | 68      |        
|                                          | Inventories                                                                                      |                      |          | 3,171        |        |      |          | 3,072   |        
|                                          | Recoverable construction allowances                                                              |                      |          | 8,742        |        |      |          | 8,175   |        
|                                          | Prepaid expenses                                                                                 |                      |          | 9,367        |        |      |          | 5,447   |        
|                                          |                                                                                                  |                      |          |              |        |      |          |        
|                                          |                                                                                                  | Total current assets |          |              | 76,345 |      |          |         | 111,573 | 
|Other assets:                             |                                                                                                  |                      |          |              |        |      |          |        
|                                          | Investment in and advances to partnerships                                                       |                      |          | 6,542        |        |      |          | 7,095   |        
|                                          | Other (including restricted cash of $13,185 in 2001)                                             |                      |          | 12,181       |        |      |          | 15,984  |        
|                                          |                                                                                                  |                      |          |              |        |      |          |        
|                                          |                                                                                                  |                      | 18,723   |              |        |      | 23,079   |        
|Property and equipment:                   |                                                                                                  |                      |          |              |        |      |          |        
|                                          | Land                                                                                             |                      |          | 48,213       |        |      |          | 58,707  |        
|                                          | Buildings and improvements                                                                       |                      |          | 158,352      |        |      |          | 146,728 |        
|                                          | Leasehold improvements                                                                           |                      |          | 222,827      |        |      |          | 218,352 |        
|                                          | Leasehold interest                                                                               |                      |          | 5,841        |        |      |          | 5,841   |        
|                                          | Equipment                                                                                        |                      |          | 182,308      |        |      |          | 179,619 |        
|                                          |                                                                                                  |                      |          |              |        |      |          |        
|                                          |                                                                                                  |                      | 617,541  |              |        |      | 609,247  |        
|Accumulated depreciation and amortization |                                                                                                  |                      | (179,236 | )            |        |      | (149,154 | )      
|                                          |                                                                                                  |                      |          |              |        |      |          |        
|                                          |                                                                                                  |                      | 438,305  |              |        |      | 460,093  |        
|Goodwill, net of accumulated amortization |                                                                                                  |                      | 23,354   |              |        |      | 23,354   |        
|                                          |                                                                                                  |                      |          |              |        |      |          |        
|Total assets                              |                                                                                                  | $                    | 556,727  |              |        | $    | 618,099  |        
|                                          |                                                                                                  |                      |          |              |        |      |          |        

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|                                           |                                                                                                                                                                                                                  |                           |          |              |         |      |          |        |        | 
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | -------- | ------------ | ------- | ---- | -------- | ------ | ------ | 
|                                           |                                                                                                                                                                                                                  |                           |          | December 31,
|                                           |                                                                                                                                                                                                                  |                           |          |             
|                                           |                                                                                                                                                                                                                  |                           |          | 2002         |         | 2001
|                                           |                                                                                                                                                                                                                  |                           |          |              |         |     
|Liabilities and shareholders equity:      |                                                                                                                                                                                                                  |                           |          |              |         |      |          |       
|Current liabilities:                       |                                                                                                                                                                                                                  |                           |          |              |         |      |          |       
|                                           | Accounts payable                                                                                                                                                                                                 |                           | $        | 31,946       |         |      | $        | 22,291 |       
|                                           | Accrued expenses                                                                                                                                                                                                 |                           |          | 45,820       |         |      |          | 32,335 |       
|                                           | Current maturities of long-term indebtedness and capital
lease obligations                                                                                                                                       |                           |          | 27,051       |         |      |          | 2,289  |       
|                                           |                                                                                                                                                                                                                  |                           |          |              |         |      |          |       
|                                           |                                                                                                                                                                                                                  | Total current liabilities |          |              | 104,817 |      |          |        | 56,915 | 
|Long-term liabilities:                     |                                                                                                                                                                                                                  |                           |          |              |         |      |          |       
|                                           | Long-term debt, less
$26,080 and $1,417 in current maturities
at December 31, 2002 and 2001, respectively, and $444,806
classified as Liabilities Subject to Compromise at December
31, 2001                     |                           |          | 339,044      |         |      |          |       |       
|                                           | Capital lease obligations,
less current maturities of $972, and $872 at
December 31, 2002 and 2001, respectively, and $3,120
classified as
Liabilities Subject to Compromise at December 31, 2001                |                           |          | 52,673       |         |      |          | 47,423 |       
|                                           | Long-term trade payables, less current maturities                                                                                                                                                                |                           |          | 7,693        |         |      |          |       |       
|                                           | Deferred compensation                                                                                                                                                                                            |                           |          | 3,614        |         |      |          |       |       
|                                           | Deferred income taxes                                                                                                                                                                                            |                           |          | 1,927        |         |      |          | 1,927  |       
|                                           |                                                                                                                                                                                                                  |                           |          |              |         |      |          |       
|                                           |                                                                                                                                                                                                                  |                           | 404,951  |              |         |      | 49,350   |       
|Liabilities Subject to Compromise          |                                                                                                                                                                                                                  |                           | 37,367   |              |         |      | 508,100  |       
|Shareholders equity:                      |                                                                                                                                                                                                                  |                           |          |              |         |      |          |       
|                                           | 5.5% Series A Senior Cumulative Exchangeable Preferred
Stock, $1.00 par value, authorized 1,000,000 shares, issued
and outstanding 550,000 shares at December 31, 2001;
involuntary liquidation value of $55,000 |                           |          |             |         |      |          | 550    |       
|                                           | Preferred Stock, $1.00 par value, authorized 1,000,000
shares,
none outstanding at December 31, 2002                                                                                                             |                           |          |             |         |      |          |       |       
|                                           | Common Stock, $0.03 par value, authorized 20,000,000
shares, issued and outstanding 8,991,262 shares at
December 31, 2002                                                                                        |                           |          | 270          |         |      |          |       |       
|                                           | Class A Common Stock, $0.03 par value, one vote per share,
authorized 22,500,000 shares, issued and outstanding
10,018,287 shares at December 31, 2001                                                           |                           |          |             |         |      |          | 301    |       
|                                           | Class B Common Stock, $0.03 par value, ten votes per
shares, authorized 5,000,000 shares, issued and outstanding
1,370,000 shares at December 31, 2001                                                           |                           |          |             |         |      |          | 41     |       
|                                           | Treasury Stock, at cost, 44,800 shares at December 31, 2001                                                                                                                                                      |                           |          |             |         |      |          | (441   | )     
|Paid-in capital                            |                                                                                                                                                                                                                  |                           | 204,638  |              |         |      | 158,772  |       
|Retained deficit                           |                                                                                                                                                                                                                  |                           | (195,316 | )            |         |      | (155,489 | )     
|                                           |                                                                                                                                                                                                                  |                           |          |              |         |      |          |       
|                                           |                                                                                                                                                                                                                  |                           | 9,592    |              |         |      | 3,734    |       
|                                           |                                                                                                                                                                                                                  |                           |          |              |         |      |          |       
|Total liabilities and shareholders equity |                                                                                                                                                                                                                  | $                         | 556,727  |              |         | $    | 618,099  |       
|                                           |                                                                                                                                                                                                                  |                           |          |              |         |      |          |       

See accompanying notes.

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

|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |         |  
|---------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | - | ------------------------ | ------- | ---- | - | -------- | ------- | - | - | ------- | ------- | -
|                                                                                                                             |                                        |   | Years Ended December 31,
|                                                                                                                             |                                        |   |                         
|                                                                                                                             |                                        |   | 2002                     |         | 2001 |   | 2000    
|                                                                                                                             |                                        |   |                          |         |      |   |         
|Revenues:                                                                                                                    |                                        |   |                          |         |      |   |          |         |   |   |         |        
|                                                                                                                             | Admissions                             |   | $                        | 342,839 |      |   | $        | 311,818 |   |   | $       | 315,395 |  
|                                                                                                                             | Concessions and other                  |   |                          | 164,349 |      |   |          | 145,132 |   |   |         | 146,902 |  
|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |        
|                                                                                                                             |                                        |   | 507,188                  |         |      |   | 456,950  |         |   |   | 462,297 |        
|Costs and expenses:                                                                                                          |                                        |   |                          |         |      |   |          |         |   |   |         |        
|                                                                                                                             | Film exhibition costs                  |   |                          | 189,265 |      |   |          | 171,207 |   |   |         | 185,195 |  
|                                                                                                                             | Concession costs                       |   |                          | 19,233  |      |   |          | 20,184  |   |   |         | 20,964  |  
|                                                                                                                             | Other theatre operating costs          |   |                          | 182,841 |      |   |          | 182,054 |   |   |         | 194,789 |  
|                                                                                                                             | General and administrative expenses    |   |                          | 14,983  |      |   |          | 8,846   |   |   |         | 6,889   |  
|                                                                                                                             | Depreciation and amortization expenses |   |                          | 32,079  |      |   |          | 42,153  |   |   |         | 43,174  |  
|                                                                                                                             | Impairment charge                      |   |                          |        |      |   |          | 132,207 |   |   |         | 21,250  |  
|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |        
|                                                                                                                             |                                        |   | 438,401                  |         |      |   | 556,651  |         |   |   | 472,261 |        
|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |        
|Operating income (loss)                                                                                                      |                                        |   | 68,787                   |         |      |   | (99,701  | )       |   |   | (9,964  | )      
|Interest expense (Contractual interest was $47,468
and $44,651 for the years ended December 31,
2002 and 2001, respectively) |                                        |   | 102,773                  |         |      |   | 6,138    |         |   |   | 31,009  |        
|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |        
|Net loss before reorganization costs and income
taxes                                                                        |                                        |   | (33,986                  | )       |      |   | (105,839 | )       |   |   | (40,973 | )      
|Reorganization costs                                                                                                         |                                        |   | 20,547                   |         |      |   | 19,548   |         |   |   | 7,042   |        
|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |        
|Net loss before income taxes                                                                                                 |                                        |   | (54,533                  | )       |      |   | (125,387 | )       |   |   | (48,015 | )      
|Income tax expense (benefit)                                                                                                 |                                        |   | (14,706                  | )       |      |   |         |         |   |   | 25,548  |        
|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |        
|Net loss                                                                                                                     |                                        |   | (39,827                  | )       |      |   | (125,387 | )       |   |   | (73,563 | )      
|Preferred stock dividends                                                                                                    |                                        |   |                         |         |      |   |         |         |   |   | (1,513  | )      
|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |        
|Net loss available for common shareholders                                                                                   |                                        | $ | (39,827                  | )       |      | $ | (125,387 | )       |   | $ | (75,076 | )      
|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |        
|Weighted average shares outstanding:                                                                                         |                                        |   |                          |         |      |   |          |         |   |   |         |        
|                                                                                                                             | Basic and diluted                      |   |                          | 9,195   |      |   |          | 11,344  |   |   |         | 11,344  |  
|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |        
|Loss per common share:                                                                                                       |                                        |   |                          |         |      |   |          |         |   |   |         |        
|                                                                                                                             | Basic and diluted                      |   | $                        | (4.33   | )    |   | $        | (11.05  | ) |   | $       | (6.62   | )
|                                                                                                                             |                                        |   |                          |         |      |   |          |         |   |   |         |        

See accompanying notes.

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

|                                                                                |                                                  |                                               |         |                          |        |      |          |         |        |   |         |          |        |  
|------------------------------------------------------------------------------- | ------------------------------------------------ | --------------------------------------------- | ------- | ------------------------ | ------ | ---- | -------- | ------- | ------ | - | ------- | -------- | ------ | -
|                                                                                |                                                  |                                               |         | Years Ended December 31,
|                                                                                |                                                  |                                               |         |                         
|                                                                                |                                                  |                                               |         | 2002                     |        | 2001 |          | 2000   
|                                                                                |                                                  |                                               |         |                          |        |      |          |        
|Operating activities                                                            |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         
|Net loss                                                                        |                                                  | $                                             | (39,827 | )                        |        | $    | (125,387 | )       |        | $ | (73,563 | )       
|Adjustments to reconcile net loss to net cash provided
by operating activities: |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         
|                                                                                | Depreciation and amortization                    |                                               |         | 32,079                   |        |      |          | 42,153  |        |   |         | 43,174   |       
|                                                                                | Impairment charge                                |                                               |         |                         |        |      |          | 132,207 |        |   |         | 26,134   |       
|                                                                                | Restructuring charge                             |                                               |         |                         |        |      |          |        |        |   |         | (755     | )     
|                                                                                | Deferred income taxes                            |                                               |         |                         |        |      |          |        |        |   |         | 22,965   |       
|                                                                                | Non-cash deferred compensation                   |                                               |         | 3,614                    |        |      |          |        |        |   |         |         |       
|                                                                                | Non-cash reorganization items                    |                                               |         | 13,528                   |        |      |          | 9,064   |        |   |         | 3,021    |       
|                                                                                | Recoverable income taxes                         |                                               |         |                         |        |      |          |        |        |   |         | 5,775    |       
|                                                                                | Gain on sales of property and equipment          |                                               |         | (681                     | )      |      |          |        |        |   |         | (3,018   | )     
|                                                                                | Changes in operating assets and liabilities:     |                                               |         |                          |        |      |          |         |        |   |         |          |       
|                                                                                |                                                  | Accounts and notes receivable and inventories |         |                          | (427   | )    |          |         | 3,544  |   |         |          | 43     |  
|                                                                                |                                                  | Prepaid expenses and other assets             |         |                          | 10,702 |      |          |         | (7,313 | ) |         |          | 3,148  |  
|                                                                                |                                                  | Accounts payable                              |         |                          | 5,420  |      |          |         | 3,193  |   |         |          | (6,642 | )
|                                                                                |                                                  | Accrued expenses and other liabilities        |         |                          | (8,849 | )    |          |         | (8,040 | ) |         |          | 5,150  |  
|                                                                                |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         
|Net cash provided by operating activities                                       |                                                  |                                               | 15,559  |                          |        |      | 49,421   |         |        |   | 25,432  |         
|Investing activities                                                            |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         
|Purchases of property and equipment                                             |                                                  |                                               | (18,023 | )                        |        |      | (9,191   | )       |        |   | (44,948 | )       
|Proceeds from sale of property and equipment                                    |                                                  |                                               | 3,475   |                          |        |      | 8,197    |         |        |   | 4,473   |         
|Proceeds from sale/leaseback transaction                                        |                                                  |                                               |        |                          |        |      |         |         |        |   | 23,589  |         
|Other                                                                           |                                                  |                                               |        |                          |        |      |         |         |        |   | 1,249   |         
|                                                                                |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         
|Net cash used in investing activities                                           |                                                  |                                               | (14,548 | )                        |        |      | (994     | )       |        |   | (15,637 | )       
|Financing activities                                                            |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         
|Debt:                                                                           |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         
|                                                                                | Additional borrowing, net of debt issuance costs |                                               |         | 21,705                   |        |      |          |        |        |   |         | 341,211  |       
|                                                                                | Repayments (including prepayment penalties)      |                                               |         | (66,026                  | )      |      |          | (11,979 | )      |   |         | (294,599 | )     
|Preferred Stock dividends                                                       |                                                  |                                               |        |                          |        |      |         |         |        |   | (1,513  | )       
|Recoverable construction allowances under capital
leases                        |                                                  |                                               | 2,614   |                          |        |      | 5,217    |         |        |   | 1,867   |         
|                                                                                |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         
|Net cash provided by (used in) financing activities                             |                                                  |                                               | (41,707 | )                        |        |      | (6,762   | )       |        |   | 46,966  |         
|                                                                                |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         
|Increase (decrease) in cash and cash equivalents                                |                                                  |                                               | (40,696 | )                        |        |      | 41,665   |         |        |   | 56,761  |         
|Cash and cash equivalents at beginning of year                                  |                                                  |                                               | 94,187  |                          |        |      | 52,522   |         |        |   | (4,239  | )       
|                                                                                |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         
|Cash and cash equivalents at end of year                                        |                                                  | $                                             | 53,491  |                          |        | $    | 94,187   |         |        | $ | 52,522  |         
|                                                                                |                                                  |                                               |         |                          |        |      |          |         |        |   |         |         

See accompanying notes.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands)

|                             |                                                                        |  |                          |      |                |   |        |      |        |  |        |         |   |   |     |      |  
|---------------------------- | ---------------------------------------------------------------------- |  | ------------------------ | ---- | -------------- | - | ------ | ---- | ------ |  | ------ | ------- | - | - | --- | ---- | -
|                             |                                                                        |  | Series A Cumulative      |      |                |   |        |      |        |  |       
|                             |                                                                        |  | Convertible Exchangeable |      | Class A Common
|                             |                                                                        |  | Preferred Stock          |      | Stock         
|                             |                                                                        |  |                          |      |               
|                             |                                                                        |  | Shares                   |      | Amount         |   | Shares |      | Amount
|                             |                                                                        |  |                          |      |                |   |        |      |       
|Balance at January 1, 2000   |                                                                        |  | 550                      |      |                | $ | 550    |      |        |  | 9,968  |         |   | $ | 299 |     
|                             | Issuance of Class A Common Stock by
conversion of Class B Common
Stock |  |                          |     |                |   |        |     |        |  |        | 50      |   |   |     | 2    |  
|                             | Dividends on Preferred Stock                                           |  |                          |     |                |   |        |     |        |  |        |        |   |   |     |     |  
|                             | Net loss                                                               |  |                          |     |                |   |        |     |        |  |        |        |   |   |     |     |  
|                             |                                                                        |  |                          |      |                |   |        |      |        |  |        |         |   |   |     |     
|Balance at December 31, 2000 |                                                                        |  | 550                      |      |                |   | 550    |      |        |  | 10,018 |         |   |   | 301 |     
|                             | Net
loss                                                               |  |                          |     |                |   |        |     |        |  |        |        |   |   |     |     |  
|                             |                                                                        |  |                          |      |                |   |        |      |        |  |        |         |   |   |     |     
|Balance at December 31, 2001 |                                                                        |  | 550                      |      |                |   | 550    |      |        |  | 10,018 |         |   |   | 301 |     
|                             | Emergence from bankruptcy                                              |  |                          | (550 | )              |   |        | (550 | )      |  |        | (10,018 | ) |   |     | (301 | )
|                             | Net loss                                                               |  |                          |     |                |   |        |     |        |  |        |        |   |   |     | -    |  
|                             |                                                                        |  |                          |      |                |   |        |      |        |  |        |         |   |   |     |     
|Balance at December 31, 2002 |                                                                        |  |                         |      |                | $ |       |      |        |  |       |         |   | $ | -   |     
|                             |                                                                        |  |                          |      |                |   |        |      |        |  |        |         |   |   |     |     

See accompanying notes.

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##### Table of Contents



|       |  |                |   |                |  |                  |     |        |  |        |     |         |  |          |      |       |  |  |       |  |  |   |     |  |  |         |         |          |  |   |          |   |  |   |          |  
|------ |  | -------------- | - | -------------- |  | ---------------- | --- | ------ |  | ------ | --- | ------- |  | -------- | ---- | ----- |  |  | ----- |  |  | - | --- |  |  | ------- | ------- | -------- |  | - | -------- | - |  | - | -------- | -
|       |  | Class B Common |   |                |  |                  |     |        |  |        |     |         |  |          |      |       |  |  |       |  |  |   |     |  |  |        
|       |  | Stock          |   | Treasury Stock |  | New Common Stock |     |        |  |        |     |        
|      
|       |  |                |   |                |  |                  |     |        |  |        |     |         |  |          |      |       |  |  |       |  |  |   |     |  |  | Paid-in |         | Retained |  |   |          |  
|Shares |  | Amount         |   | Shares         |  | Amount           |     | Shares |  | Amount |     | Capital |  | Earnings |      | Total
|       |  |                |   |                |  |                  |     |        |  |        |     |         |  |          |      |       |  | 
|       |  | 1,421          |   |                |  | $                | 43  |        |  |        | (45 | )       |  | $        | (441 | )     |  |  |      |  |  | $ |    |  |  | $       | 158,772 |          |  | $ | 44,974   |   |  | $ | 204,197  |  
|       |  | (50            | ) |                |  |                  | (2  | )      |  |        |    |         |  |          |     |       |  |  |      |  |  |   |    |  |  |         |        |          |  |   |         |   |  |   |         |  
|       |  |               |   |                |  |                  |    |        |  |        |    |         |  |          |     |       |  |  |      |  |  |   |    |  |  |         |        |          |  |   | (1,513   | ) |  |   | (1,513   | )
|       |  |               |   |                |  |                  |    |        |  |        |    |         |  |          |     |       |  |  |      |  |  |   |    |  |  |         |        |          |  |   | (73,563  | ) |  |   | (73,563  | )
|       |  |                |   |                |  |                  |     |        |  |        |     |         |  |          |      |       |  |  |       |  |  |   |     |  |  |         |         |          |  |   |          |   |  |   |          |  
|       |  | 1,371          |   |                |  |                  | 41  |        |  |        | (45 | )       |  |          | (441 | )     |  |  |      |  |  |   |    |  |  |         | 158,772 |          |  |   | (30,102  | ) |  |   | 129,121  |  
|       |  |               |   |                |  |                  |    |        |  |        |    |         |  |          |     |       |  |  |      |  |  |   |    |  |  |         |        |          |  |   | (125,387 | ) |  |   | (125,387 | )
|       |  |                |   |                |  |                  |     |        |  |        |     |         |  |          |      |       |  |  |       |  |  |   |     |  |  |         |         |          |  |   |          |   |  |   |          |  
|       |  | 1,371          |   |                |  |                  | 41  |        |  |        | (45 | )       |  |          | (441 | )     |  |  |      |  |  |   |    |  |  |         | 158,772 |          |  |   | (155,489 | ) |  |   | 3,734    |  
|       |  | (1,371         | ) |                |  |                  | (41 | )      |  |        | 45  |         |  |          | 441  |       |  |  | 8,991 |  |  |   | 270 |  |  |         | 45,866  |          |  |   |         |   |  |   | 45,685   |  
|       |  |               |   |                |  |                  |    |        |  |        |    |         |  |          |     |       |  |  |      |  |  |   |    |  |  |         |        |          |  |   | (39,827  | ) |  |   | (39,827  | )
|       |  |                |   |                |  |                  |     |        |  |        |     |         |  |          |      |       |  |  |       |  |  |   |     |  |  |         |         |          |  |   |          |   |  |   |          |  
|       |  |               |   |                |  | $                |    |        |  |        |    |         |  | $        |     |       |  |  | 8,991 |  |  | $ | 270 |  |  | $       | 204,638 |          |  | $ | (195,316 | ) |  | $ | 9,592    |  
|       |  |                |   |                |  |                  |     |        |  |        |     |         |  |          |      |       |  |  |       |  |  |   |     |  |  |         |         |          |  |   |          |   |  |   |          |  

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CARMIKE CINEMAS, INC. and SUBSIDIARIES
December 31, 2002

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.

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 97.7%, 97.3% and 98.8% of the Companys
admission revenues in 2002, 2001 and 2000, respectively.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its majority 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.

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.

Notes Receivable

The Company holds notes in conjunction with sales of assets in prior years. These notes carry varying maturity
dates.

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 was capitalized and are being amortized to
interest expense over the term of the related debt.

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 1SIGNIFICANT ACCOUNTING POLICIES (continued)

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
cost, 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 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. The Company uses
accelerated methods of depreciation for income tax purposes. For financial
reporting purposes, depreciation is computed on a straight-line basis as
follows:

|                          |  |             |  | 
|------------------------- |  | ----------- |  | 
|Building and improvements |  | 20-30 years
|Leasehold improvements*   |  | 15-30 years
|Leasehold interests*      |  | 15-30 years
|Equipment                 |  | 5-15 years 
|                          |  |             |  | 



---

|* |  | Number of years is based on the term of the applicable lease
|- |  | ------------------------------------------------------------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 1SIGNIFICANT ACCOUNTING POLICIES (continued)

Goodwill

The Company adopted Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets(SFAS No. 142), effective January 1,
2002. Accordingly, the amortization of goodwill ceased as of January 1, 2002.
Goodwill represents the excess of purchase price over the fair value of net
intangible assets acquired. SFAS No. 142 required companies with goodwill to
complete an initial impairment test by June 30, 2002. The Company completed
the impairment test of its goodwill and did not identify an asset impairment as
a result of the impairment test. Additionally, the Company completed its
periodic review of its goodwill for impairment as of December 31, 2002, and did
not identify an asset impairment as a result of the review. The Company will
continue to review its goodwill annually for impairment.

Adoption of the non-amortization provisions of SFAS No. 142 as of January 1,
2000 would have reduced net loss for the years ended December 31, 2001 and 2000
by $ 1.5 million, or $0.13 per diluted share per period.

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 as other assets
pending the completion of their sale and are held at the lower of their
carrying amount or fair value less costs to sell.

Recoverable Construction Allowances

Under certain circumstances with our landlords, theatres being developed have
defined reimbursements due the Company from the landlord. These reimbursements
relate to an estimated value of the building to the landlord, after completion
of the property. The recoverable allowances are recorded as a receivable in
accordance with the lease agreement.

Impairment of Long Lived Assets

The Company accounts for its long-lived assets 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
long-lived assets and goodwill related to those assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The Company periodically reviews and monitors
its internal management reports and the competition in its markets for
indicators of impairment of individual theatres.

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 market, either from third parties or from the
Companys own expansion. For purposes of SFAS No. 144, assets are evaluated
for impairment at the theatre level. The Company deems a theatre to be
impaired if a forecast of undiscounted future operating cash flows directly
related to the theatre, including

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 1SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of Long Lived Assets (continued)

estimated disposal value if any, is less than its carrying amount. If a
theatre is determined to be impaired, the loss is measured as the amount by
which the carrying amount of the theatre 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. We have
established a full valuation allowance related to our deferred tax assets.

Advertising

The company expenses advertising costs when incurred.

Stock Based Compensation

Stock-based Compensation Plans.In December 2002, the FASB issued SFAS No.
148, Accounting for Stock Based Compensation-Transition and Disclosure(SFAS
No. 148). SFAS
No. 148 provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation. In addition, 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 is effective for
financial statements for fiscal years ending after December 15, 2002 and for
interim periods beginning after December 15, 2002.

At December 31, 2002, the Company had three stock based compensation plans. The
plans are as follows: (i) the Carmike Cinemas, Inc. 2002 Stock Plan (the 2002
Stock Plan) reserved 1,000,000 shares of Common Stock for issuance. The 2002
Stock Plan has eight grants to senior management under the terms of the plan.
Seven of the grants are performance based with various earning goals and
criteria, as well as specific vesting periods from January 31, 2005 through
2007. The total potential shares to be issued under these seven grants is
220,000. The eighth grant is to the Companys Chief Executive Officer under
the terms of his employment

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 1SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock Based Compensation (continued)

agreement. These shares will be delivered ratably over a three year period
beginning January 31, 2005. All such shares under the 2002 Stock Plan have a
zero cost to the grantee. The seven grants are expensed using variable
accounting and the eighth grant is expensed using fixed accounting. (ii) The
Carmike Cinemas, Inc. Non-Employee Directors Long-Term Stock Incentive Plan
(the Directors Incentive Plan) reserved 75,000 shares of Common Stock for
issuance. The Directors Incentive Plan has two grants of 5,000 options each to
two independent Directors. The exercise price of the options were set at the market price on
August 14, 2002. (iii) The Carmike Cinemas, Inc. Employee and Consultants
Long-Term Stock Incentive Plan (the Employee Plan) reserved 500,000 shares of
Common Stock for issuance. As of December 31, 2002 there were no
options granted under this plan.

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 2002 Statement of Operations is $3.6 million of
stock-based employee compensation cost related to the stock grants ($2.9
million from fixed accounting and $0.7 million from variable accounting.)

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. Options to purchase
shares of common stock were not included in the computed diluted earnings per
share for all periods presented because the effect would be antidilutive.
Shares potentially issuable in connection with the 5.5% Series A Senior
Cumulative Convertible Exchangeable Preferred Stock (the Preferred Stock)
were not included in the diluted earnings per share calculation in 2001 and
2000 as their effect would be antidilutive. Stock grants to acquire shares of
Common Stock under the 2002 Stock Plan were not included in 2002 as their
effect would be antidilutive.

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

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 1SIGNIFICANT ACCOUNTING POLICIES (continued)

Leases (continued)

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.

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 shareholders 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. See Note 3  Liabilities Subject to Compromise, for a
discussion of the interest rate swaps terminated at the Petition Date. As of
December 31, 2002 the Company has 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 operations.

Reclassifications

Certain amounts in the accompanying consolidated financial statements have been
reclassified to conform to the current years presentation.

Recent Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections(SFAS No. 145). SFAS No. 145 rescinds SFAS No. 4, Reporting
Gains and Losses from Extinguishment of Debt, and an amendment of that
statement, SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. In addition, SFAS No. 145 rescinds SFAS No. 44, Accounting for
Intangible Assets of Motor Carriers. SFAS No. 145 amends SFAS No. 13,
Accounting for Leases, to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic
effects similar to sale-leaseback transactions. SFAS No. 145 also amends
other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 1SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements (continued)

describe their applicability under changed conditions. SFAS No. 145 is
effective for financial statements issued on or after May 15, 2002. The
Company adopted SFAS No. 145 effective May 15, 2002, however, SFAS No. 145 did
not affect the Companys Consolidated Statements of Operations.

In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities(SFAS No. 146). SFAS No. 146
addresses the financial accounting and reporting for costs associated with exit
or disposal activities and nullifies EITF 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity.
SFAS No. 146 requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. The effective date of SFAS No. 146 is
December 31, 2002. The Company adopted SFAS No. 146 on December 31, 2002,
however, SFAS No. 146 did not have an effect on the Companys Consolidated
Statements of Operations.

In November 2002, the FASB issued FASB Interpretation Number 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others,(FIN 45). FIN 45 requires an entity to
disclose in its interim and annual financial statements information with
respect to its obligations under certain guarantees that it has issued. It
also requires an entity to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of FIN 45 are effective for interim and
annual reports after December 15, 2002. The initial recognition and initial
measurement requirements of FIN 45 are effective prospectively for guarantees
issued or modified after December 15, 2002. The Company is currently assessing
the initial measurement requirements of FIN 45. However, management does not
believe that the recognition requirements will have a material impact on the
Companys financial position, cash flows or results of operations.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51, (FIN 46). FIN
46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The Company is
currently evaluating the effect that the adoption of FIN 46 will have on its
results of operations and financial condition.

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

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 their business and enable the
Company to continue operations as debtors-in-possession. The most significant
of these orders: (i) permitted the Company to operate their 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 their 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.

As debtors-in-possession, the Company had the right, subject to bankruptcy
court approval and certain other limitations, to assume or reject executory
contracts and unexpired leases during the Chapter 11 Cases. In this context,
assumption means that the Company agrees to perform their 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

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 2PROCEEDINGS UNDER CHAPTER 11 (continued)

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
provide, 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 New Master Lease). Under the
New Master Lease, Carmike has entered into a new 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 New 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 New Master
Lease, Carmike pays all real estate taxes with respect to the leased premises.

When the Plan 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 has only 8,991,262 shares of reorganized Carmike Common Stock
outstanding.

Material features of the Plan are:



| |  |  | The Plan 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.

F-16



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 2PROCEEDINGS UNDER CHAPTER 11 (continued)



| |  |  | 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 new employment agreement as Chief Executive
Officer of the Company, and 220,000 shares have been authorized for
issuance to seven other members of senior management.                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | The holders of Bank Claims in the Chapter 11 Cases received New
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. New Bank Debt consists
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 new 10 3/8% Senior Subordinated
Notes due 2009 (the New Senior Subordinated Notes) 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, $36.1 million
are disputed as of December 31, 2002. As such, the Companys ultimate
liability for these claims is uncertain and is subject to bankruptcy
court resolution. The Company has paid,                                                                                                                                                                                                                                                                                                            

F-17



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 2PROCEEDINGS UNDER CHAPTER 11 (continued)



| |  |  | adjusted by stipulation or
changed estimates, as of December 31, 2002, approximately $17.7
million of these claims.
| |  |  | -------------------------------------------------------------------------------------------------------------------

On the Reorganization Date, the Company entered into a new term loan credit
agreement (the Post-Confirmation Credit Agreement), which governs the terms
of the New Bank Debt. The Companys subsidiaries have guaranteed the Companys
obligations under the Post-Confirmation Credit Agreement. The lenders under
the Post-Confirmation Credit Agreement have (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 secure the New Bank Debt under the Post-Confirmation
Credit Agreement are junior and subordinate to the liens and security interests
of the collateral agent under the Revolving Credit Agreement described below.

The final maturity date of the New Bank Debt under the Post-Confirmation Credit
Agreement is January 31, 2007. The principal payments for the
Post-Confirmation Credit Agreement are as follows (in thousands):

|                  |  |   |         | 
|----------------- |  | - | ------- | 
|June 30, 2003     |  | $ | 12,500  | 
|December 31, 2003 |  |   | 12,500  | 
|June 30, 2004     |  |   | 15,000  | 
|December 31, 2004 |  |   | 15,000  | 
|June 30, 2005     |  |   | 20,000  | 
|December 31, 2005 |  |   | 20,000  | 
|June 30, 2006     |  |   | 20,000  | 
|January 31, 2007  |  |   | 94,729  | 
|                  |  |   |         | 
|                  |  | $ | 209,729 | 
|                  |  |   |         | 

In addition, the Post-Confirmation Credit Agreement contains covenants that
require the Company, among other things, to meet certain financial ratios and
that prohibit the Company from taking certain actions and entering into certain
transactions. There are also provisions in the Post-Confirmation Credit
Agreement as to when the Company must prepay portions of the loans.

Also on the Reorganization Date, the Company closed on a revolving credit
agreement (the Revolving Credit Agreement) totaling $50 million. The
proceeds of advances under the
Revolving Credit Agreement will be used to provide working capital financing to
the Company and its subsidiaries and for funds for other general corporate
purposes of the Company. The Company, on the Reorganization Date, borrowed $20
million of the Revolving Credit Agreement

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 2PROCEEDINGS UNDER CHAPTER 11 (continued)

in partial repayment of its obligations owing to the banks under the
Post-Confirmation Credit Agreement. As of December 31, 2002, the Company has
repaid the borrowed $20 million and has no outstanding balance under the
Revolving Credit Agreement.

The interest rate for borrowings under the Revolving Credit Agreement is set
from time to time at the Companys option (subject to certain conditions set
forth in the Revolving Credit Agreement) at either: (i) a specified base rate
plus 1.75% per annum or (ii) an adjusted LIBOR Rate plus 3.25% per annum, based
on the aggregate Revolving Credit Advances (as defined in the Revolving Credit
Agreement) outstanding from time to time. Borrowings under the Revolving
Credit Agreement are secured by first priority security interests in
substantially all tangible or intangible property of the Company (but does not
include certain equipment or real estate constituting premises subject to the
master leasing agreement with MoviePlex Realty Leasing, L.L.C.). The Revolving
Credit Agreement contains covenants that, among other things, prohibit the
Company from taking certain actions and entering into certain transactions.
There are also provisions in the Revolving Credit Agreement as to when the
Company must prepay portions of the loans.

In addition, on the Reorganization Date and pursuant to the Plan, the Company
issued $154,315,000 of New Senior Subordinated Notes due 2009, in exchange for
$154,315,000 aggregate principal amount of the Original Senior Subordinated
Note Claims in the Companys Chapter 11 Cases relating to the Companys
Original Senior Subordinated Notes due 2009. The remaining $45,685,000 in
aggregate principal amount of the Original Senior Subordinated Notes were
exchanged under the Plan for shares of reorganized Carmike Common Stock, as
previously described. The New Senior Subordinated Notes were issued pursuant
to an Indenture, dated as of January 31, 2002, among the Company, the
subsidiary guarantors named therein and Wilmington Trust Company, as Trustee
(the Indenture). The Companys subsidiary guarantees the New Senior
Subordinated Notes are junior and subordinated on the same basis as the New
Senior Subordinated Notes are junior and subordinated to the Companys Senior
Debt (as defined in the Indenture and includes the debt described above under
the Post-Confirmation and Revolving Credit Agreements). Interest at 10 3/8%
per annum from the issue date to maturity is payable on the New Senior
Subordinated Notes each February 1 and August 1, beginning February 1, 2002.
The New Senior Subordinated Notes are redeemable at the Companys option under
certain conditions after February 1, 2004. Further, the Indenture contains
covenants that, among other things, restricts the Company in connection with
the incurrence of additional indebtedness not including the debt incurred under
the Post-Confirmation and Revolving Credit Agreements as described above, asset
sales, changes of control and transactions with affiliates.
The reorganization value of the assets of the Company immediately before the
Reorganization Date was greater than the total of all post-petition liabilities
and allowed claims and the Plan

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 2PROCEEDINGS UNDER CHAPTER 11 (continued)

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, 2002, 2001 and 2000,
respectively, are as follows (in thousands):

|                              |  |              |        |      |  |      |        |   |  |   |        |  
|----------------------------- |  | ------------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                              |  | December 31,
|                              |  |             
|                              |  | 2002         |        | 2001 |  | 2000
|                              |  |              |        |      |  |     
|Write-off of origination fees |  | $            | 8,994  |      |  | $    |       |   |  | $ |       |  
|Professional fees             |  |              | 8,049  |      |  |      | 8,210  |   |  |   | 3,936  |  
|Asset impairments             |  |              |       |      |  |      | 16,419 |   |  |   | 4,884  |  
|Gains on sale of assets       |  |              | (15    | )    |  |      | (871   | ) |  |   | (1,108 | )
|Retention payments            |  |              |       |      |  |      | 902    |   |  |   |       |  
|Interest income               |  |              | (92    | )    |  |      | (2,240 | ) |  |   | (1,138 | )
|Theatre disposition expenses  |  |              | 592    |      |  |      |       |   |  |   |       |  
|Other                         |  |              | 3,019  |      |  |      | (2,872 | ) |  |   | 468    |  
|                              |  |              |        |      |  |      |        |   |  |   |        |  
|Total reorganization costs    |  | $            | 20,547 |      |  | $    | 19,548 |   |  | $ | 7,042  |  
|                              |  |              |        |      |  |      |        |   |  |   |        |  

Cash used in reorganization activities for 2002 and 2001 are as follows (in
thousands):

|                                    |  |              |         |      |  |      |         |   |  |   |        | 
|----------------------------------- |  | ------------ | ------- | ---- |  | ---- | ------- | - |  | - | ------ | 
|                                    |  | December 31,
|                                    |  |             
|                                    |  | 2002         |         | 2001 |  | 2000
|                                    |  |              |         |      |  |     
|Professional fees                   |  | $            | (8,773  | )    |  | $    | (7,927  | ) |  | $ |       | 
|Retention payments                  |  |              | (283    | )    |  |      | (619    | ) |  |   |       | 
|Proceeds from sale of assets        |  |              | 15      |      |  |      | 8,197   |   |  |   |       | 
|Payment of pre-petition liabilities |  |              | (8,528  | )    |  |      | (15,534 | ) |  |   | 39,497 | 
|Interest income                     |  |              | 107     |      |  |      | 2,240   |   |  |   |       | 
|Other                               |  |              | (1,486  | )    |  |      | (886    | ) |  |   |       | 
|                                    |  |              |         |      |  |      |         |   |  |   |       
|                                    |  | $            | (18,948 | )    |  | $    | (14,529 | ) |  | $ | 39,497 | 
|                                    |  |              |         |      |  |      |         |   |  |   |       

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.

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 3  LIABILITIES SUBJECT TO COMPROMISE (continued)

A summary of the principal categories of claims classified as Liabilities
Subject to Compromise at December 31, 2002 and 2001 are as follows (in
thousands):

|                          |  |              |        |      |  |   |         | 
|------------------------- |  | ------------ | ------ | ---- |  | - | ------- | 
|                          |  | December 31,
|                          |  |             
|                          |  | 2002         |        | 2001
|                          |  |              |        |     
|Long-term debt            |  | $            |       |      |  | $ | 444,806 | 
|Restructuring reserves    |  |              |       |      |  |   | 24,668  | 
|Disputed unsecured claims |  |              | 36,075 |      |  |   | 35,783  | 
|Disputed priority claims  |  |              | 1,292  |      |  |   | 2,843   | 
|                          |  |              |        |      |  |   |         | 
|                          |  | $            | 37,367 |      |  | $ | 508,100 | 
|                          |  |              |        |      |  |   |         | 

NOTE 4IMPAIRMENT OF LONG-LIVED ASSETS

Impairment charges for the years ended December 31, 2001 and 2000 are as
follows (in thousands):

|                                     |  |              |         |      |  |   |        |  
|------------------------------------ |  | ------------ | ------- | ---- |  | - | ------ | -
|                                     |  | December 31,
|                                     |  |             
|                                     |  | 2001         |         | 2000
|                                     |  |              |         |     
|Impairment of fixed assets           |  | $            | 93,615  |      |  | $ | 22,806 |  
|Impairment of equipment              |  |              | 34,103  |      |  |   | 1,347  |  
|Impairment of goodwill               |  |              | 20,908  |      |  |   | 1,981  |  
|                                     |  |              |         |      |  |   |        |  
|Total impairments                    |  |              | 148,626 |      |  |   | 26,134 |  
|Amounts classified as reorganization |  |              | (16,419 | )    |  |   | (4,884 | )
|                                     |  |              |         |      |  |   |        |  
|Impairment charge                    |  | $            | 132,207 |      |  | $ | 21,250 |  
|                                     |  |              |         |      |  |   |        |  

During the course of the Chapter 11 proceedings, the Company had the
opportunity to reject leases on unprofitable leased theatres, to reassess the
longer term value in keeping some of its owned theatres operating and to remove
equipment taken from leased and owned theatres. During the fourth quarter of
2001 the Company had sufficient information to assess the impact of lease
rejections, the closure of owned theatres, the future viability of our
entertainment centers and the effect of surplus equipment. As a result of
these reviews, in the fourth quarter of 2001, Carmike identified impairment of
asset values for 287 theatres and 2,126 screens (the 2001 Impairment Charge).
The 2001 Impairment Charge was significant and included a provision for the
total impairment of carrying value on 136 leased theatres that were rejected
during the Chapter 11 Cases, the impairment of our two entertainment centers,
the impairment of equipment removed from leased and owned theatres and the
inclusion of equipment in the valuation analysis for the theatres remaining in
the Companys portfolio. This inclusion of equipment resulted in a change in
estimate, which accounted for approximately $34.1 million of the 2001
Impairment
Charge. The Company recognized an impairment charge of $132.2 million
(approximately $11.65 per diluted share) plus $16.4 million charged to
reorganization. These impairment charges reduced the carrying value of
property and equipment by $127.7 million

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 4IMPAIRMENT OF LONG-LIVED ASSETS (continued)

(cost of $214.2 million less accumulated depreciation and amortization of $86.5
million) and goodwill by approximately $20.9 million.

Subsequent to the Petition Date in 2000, the Company identified certain owned
theatres and other leased theatres which had not yet been rejected but had
indicators of impairments. These theatres were identified as impaired as a
result of decreased cash flows due to new competition in their markets or
managements plans relative to future operations. The Company has recognized
impairment charges of approximately $21.2 million (approximately $1.87 per
diluted share) for 18 theatres with 130 screens (the 2000 Impairment Charge).
The 2000 Impairment Charge reduced the carrying value of property and
equipment by $24.2 million (costs of $34.4 million less accumulated
depreciation and amortization of $10.2 million) and goodwill by approximately
$2.0 million.

The 2001 Impairment Charge was primarily attributed to the rejection of leases
during the reorganization process, the decrease in value in our entertainment
centers, surplus equipment and the decrease in the fair market values of owned
property. The 2000 Impairment Charge was primarily caused by reductions in
estimated theatre cash flow due to (i) the impact of new or increased
competition on certain older, auditorium-style theatres, (ii) negative
evaluation of the operating results produced from theatres previously converted
to Discount Theatres or (iii) inability to improve a marginal
theatre/entertainment centers operating results to a level that would support
the carrying value of the long-lived assets. There can be no assurance that
Carmike will not take additional charges in the future related to the
impairment of assets.

There was no impairment of long-lived assets during
the year ended December 31, 2002

NOTE 5INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company is a partner in joint ventures that operate motion picture
theatres. The Companys equity in the income or (loss) of these ventures, prior
to impairment charges, was approximately $950,000, $(699,000) and $(980,000) in
2002, 2001 and 2000, respectively. These amounts are included as Concessions
and other in the accompanying consolidated statements of operations.

The Company was a partner in another joint venture that operated three
entertainment center/movie theatre complexes, which closed by December 31,
2000. The Company reflected on the 2001 Statement of Operations a
loss of $1.2 million from joint venture operations.

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 6OTHER ASSETS

The Company has approximately $7.9 million in surplus long-term real estate
assets held for sale as of December 31, 2002. The carrying values of these
assets are reviewed annually as to relative market conditions and are adjusted
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. Upon emergence from
the Chapter 11 Cases, there was no continuing obligation for restricted cash.

NOTE 7PROPERTY AND EQUIPMENT

The Company did not obtain any property or equipment under capital leases
during 2002 or 2001. The following amounts related to capital lease assets are
included in property and equipment (in thousands):

|                              |  |              |         |      |  |   |        |  
|----------------------------- |  | ------------ | ------- | ---- |  | - | ------ | -
|                              |  | December 31,
|                              |  |             
|                              |  | 2002         |         | 2001
|                              |  |              |         |     
|Buildings and improvements    |  | $            | 43,147  |      |  | $ | 43,147 |  
|Less accumulated amortization |  |              | (10,242 | )    |  |   | (8,685 | )
|                              |  |              |         |      |  |   |        |  
|                              |  | $            | 32,905  |      |  | $ | 34,462 |  
|                              |  |              |         |      |  |   |        |  

NOTE 8CAPITALIZED INTEREST

The Company capitalized interest in connection with its construction on
long-lived assets. Interest incurred and interest capitalized are as follows
(in thousands):

|                         |  |          |         |          |  |             |         |  |  |   |       | 
|------------------------ |  | -------- | ------- | -------- |  | ----------- | ------- |  |  | - | ----- | 
|                         |  | Interest |         | Interest |  | Interest   
|Years ended December 31, |  | Incurred |         | Paid     |  | Capitalized
|                         |  |          |         |          |  |            
|2002                     |  | $        | 102,773 |          |  | $           | 104,411 |  |  | $ | 292   | 
|2001                     |  |          | 6,138   |          |  |             | 6,138   |  |  |   |      | 
|2000                     |  |          | 29,254  |          |  |             | 26,112  |  |  |   | 1,500 | 

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 9ACCRUED EXPENSES

Accrued expenses include the following (in thousands):

|                                 |  |              |        |      |  |   |        | 
|-------------------------------- |  | ------------ | ------ | ---- |  | - | ------ | 
|                                 |  | December 31,
|                                 |  |             
|                                 |  | 2002         |        | 2001
|                                 |  |              |        |     
|Deferred revenues                |  | $            | 12,007 |      |  | $ | 12,062 | 
|Deferred and other accrued rents |  |              | 7,889  |      |  |   | 5,852  | 
|Property taxes                   |  |              | 4,968  |      |  |   | 6,847  | 
|Accrued interest                 |  |              | 9,969  |      |  |   |       | 
|Other accruals                   |  |              | 10,987 |      |  |   | 7,574  | 
|                                 |  |              |        |      |  |   |        | 
|                                 |  | $            | 45,820 |      |  | $ | 32,335 | 
|                                 |  |              |        |      |  |   |        | 

NOTE 10DEBT

Debt consists of the following (in thousands):

|                                                                                                                        |                                                         |   |              |         |      |   |         |          |  
|----------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | - | ------------ | ------- | ---- | - | ------- | -------- | -
|                                                                                                                        |                                                         |   | December 31,
|                                                                                                                        |                                                         |   |             
|                                                                                                                        |                                                         |   | 2002         |         | 2001
|                                                                                                                        |                                                         |   |              |         |     
|Revolving credit facility                                                                                               |                                                         | $ |             |         |      | $ | 184,392 |         
|Term Loan                                                                                                               |                                                         |   | 209,729      |         |      |   | 68,448  |         
|Subordinated Notes                                                                                                      |                                                         |   | 154,315      |         |      |   | 191,966 |         
|Industrial Revenue Bonds; payable in equal installments
through May 2006, with interest rates ranging from 5 3/4%
to 7% |                                                         |   | 1,080        |         |      |   | 1,417   |         
|                                                                                                                        |                                                         |   |              |         |      |   |         |         
|                                                                                                                        |                                                         |   | 365,124      |         |      |   | 446,223 |         
|Less:                                                                                                                   |                                                         |   |              |         |      |   |         |         
|                                                                                                                        | Amounts classified as liabilities subject to compromise |   |              |        |      |   |         | (444,806 | )
|                                                                                                                        | Current maturities                                      |   |              | (26,080 | )    |   |         | (1,417   | )
|                                                                                                                        |                                                         |   |              |         |      |   |         |         
|                                                                                                                        |                                                         | $ | 339,044      |         |      | $ | -0-     |         
|                                                                                                                        |                                                         |   |              |         |      |   |         |         

See Note 2  Proceedings Under Chapter 11 for further discussion of debt.

NOTE 11INCOME TAXES

For the fiscal year ending December 31, 2002 and 2001, the Company had net
deferred tax assets of approximately $79.9 million and $83.0 million,
respectively, that were fully offset by a valuation allowance. Further, as a
result of its Chapter 11 filing, default on Bank Facilities, and changes in
future projections of operating results, the Company believes that doubt
remains as to
the ability to recognize future tax benefits related to its deferred tax
assets. Thus, the Company continues to offset existing deferred tax assets
with a valuation allowance.

F-24



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 11  INCOME TAXES (continued)

In connection with the reorganization and Chapter 11 filing, the Company is
currently evaluating whether it underwent an ownership change or changes within
the meaning of Section 382 of the Internal Revenue Code. If so, the ability of
the Company to use its net operating losses may be severely limited and subject
to an annual limitation based on the product of the fair value of the Company
immediately before the reorganization multiplied by the federal long-term tax
exempt bond rate. Furthermore, the Company is currently evaluating available
elections based on existing tax law that may impact the usability of future
losses and possibly mitigate the consequences of the Section 382 limitation.

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

Also, in the first quarter of 2002, the Company recorded a benefit for taxes
refundable under the Job Creation and Worker Assistance Act of 2002 (the Act)
of $14.7 million. The Act became effective on March 9, 2002 and among other
things, extends the carryback period for net operating losses from two to five
years for taxpayers with net operating losses for any tax year ending during
2001 or 2002. 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. Accordingly, the Company (which paid alternative minimum
tax in 1997 and 1998) utilized this provision to obtain the refund.

The provision for income tax expense (benefit) is summarized as follows (in
thousands):

|         |         |              |         |         |   |      |   |   |  |   |        |       | 
|-------- | ------- | ------------ | ------- | ------- | - | ---- | - | - |  | - | ------ | ----- | 
|         |         | December 31,
|         |         |             
|         |         | 2002         |         | 2001    |   | 2000
|         |         |              |         |         |   |     
|Current: |         |              |         |         |   |      |   |   |  |   |        |      
|         | Federal |              | $       | (14,706 | ) |      | $ |  |  |   | $      |      | 
|         | State   |              |         |        |   |      |   |  |  |   |        | 1,150 | 
|Deferred |         |              |        |         |   |      |  |   |  |   | 24,398 |      
|         |         |              |         |         |   |      |   |   |  |   |        |      
|         |         | $            | (14,706 | )       |   | $    |  |   |  | $ | 25,548 |      
|         |         |              |         |         |   |      |   |   |  |   |        |      

F-25



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 11INCOME TAXES (continued)

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,
|                                           |  |             
|                                           |  | 2002         |         | 2001 |  | 2000
|                                           |  |              |         |      |  |     
|Pre-tax
book (loss)                        |  | $            | (39,827 | )    |  | $    | (125,387 | ) |  | $ | (73,563 | )
|Federal
tax expense (benefit)              |  |              | (13,541 | )    |  |      | (42,631  | ) |  |   | (16,325 | )
|State tax expense (benefit)                |  |              | (876    | )    |  |      | (2,758   | ) |  |   | 759     |  
|Permanent items                            |  |              | 2,972   |      |  |      | 3,666    |   |  |   |        |  
|Other                                      |  |              | (9      | )    |  |      | (469     | ) |  |   | 163     |  
|Increase/(decrease)
in valuation allowance |  |              | (3,252  | )    |  |      | 42,192   |   |  |   | 40,951  |  
|Total
tax expense (benefit)                |  | $            | (14,706 | )    |  | $    |         |   |  | $ | 25,548  |  

Significant components of the Companys
deferred tax (assets) liabilities and
valuation reserves are as follows (in thousands):

|                                                                       |  |              |         |      |  |   |         |  
|---------------------------------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                                                                       |  | December 31,
|                                                                       |  |             
|                                                                       |  | 2002         |         | 2001
|                                                                       |  |              |         |     
|Alternative minimum tax credit carryforwards                           |  | $            |        |      |  | $ | (6,041  | )
|Net operating loss carryforwards                                       |  |              | (41,991 | )    |  |   | (54,633 | )
|Book basis of property, equipment and
intangible assets over tax basis |  |              | (29,376 | )    |  |   | (36,396 | )
|Restructuring reserve                                                  |  |              |        |      |  |   | (8,606  | )
|Deferred rent                                                          |  |              | (1,265  | )    |  |   | (1,152  | )
|Post-petition interest                                                 |  |              |        |      |  |   | 23,877  |  
|Disputed claims                                                        |  |              | (3,616  | )    |  |   |        |  
|Other                                                                  |  |              | (3,642  | )    |  |   |        |  
|                                                                       |  |              |         |      |  |   |         |  
|                                                                       |  |              | (79,890 | )    |  |   | (82,951 | )
|Valuation reserves                                                     |  |              | 79,890  |      |  |   | 83,143  |  
|Other deferred tax credits                                             |  |              | 1,927   |      |  |   | 1,735   |  
|                                                                       |  |              |         |      |  |   |         |  
|                                                                       |  | $            | 1,927   |      |  | $ | 1,927   |  
|                                                                       |  |              |         |      |  |   |         |  

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

NOTE 12SHAREHOLDERS 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

F-26



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 12SHAREHOLDERS EQUITY (continued)

value, and one million shares of the 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 $7.0
million and $2.3 million on Preferred Stock were in arrears at December 31,
2001 and 2000. 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 New Common Stock were issued. The New Common Stock, $0.03 par value,
consists of 20 million authorized shares, of which approximately 9 million are
outstanding as of December 31, 2002. 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, 2002.

The Company had shares of Class A Common Stock
in 2001 and 2000 and has shares of New
Common Stock in 2002 reserved for future issuance as follows (in thousands):

|                                              |  |              |       |      |  |      |       |  |  |  |       | 
|--------------------------------------------- |  | ------------ | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                              |  | December 31,
|                                              |  |             
|                                              |  | 2002         |       | 2001 |  | 2000
|                                              |  |              |       |      |  |     
|2002 Stock Plan                               |  |              | 1,000 |      |  |      |      |  |  |  |      | 
|Directors Incentive Plan                      |  |              | 75    |      |  |      | 813   |  |  |  | 813   | 
|Employee Plan                                 |  |              | 500   |      |  |      |       |  |  |  |      | 
|Conversion rights of Series A Preferred Stock |  |              |      |      |  |      | 2,200 |  |  |  | 2,200 | 
|Conversion rights of Class B Common Stock     |  |              |      |      |  |      | 1,371 |  |  |  | 1,371 | 
|                                              |  |              |       |      |  |      |       |  |  |  |       | 
|                                              |  |              | 1,575 |      |  |      | 4,384 |  |  |  | 4,384 | 
|                                              |  |              |       |      |  |      |       |  |  |  |       | 

See Note 2  Proceedings Under Chapter 11

F-27



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 12SHAREHOLDERS EQUITY (continued)

Stock Option Plans

Upon emergence from Chapter 11, the Board of Directors and Shareholders
approved the 2002 Stock Plan for members of management. All previous stock
plans were cancelled as part of the Plan. Under the 2002 Stock Plan one
million shares were reserved for members of management. Of the one million
reserved shares, 780,000 have been authorized for issuance to the CEO upon
completion of the required vesting period. The remaining 220,000 have been
authorized for issuance to members of senior management upon reaching certain
performance criteria during 2002, 2003 and 2004, as well as meeting required
vesting restrictions. All of the shares relating to the 2002 Stock Plan will
be granted with no purchase price to the grantee. Reflected in net income for
2002, is $3.6 million of stock-based employee compensation cost.

On May 31, 2002, the Board of Directors adopted the Directors Incentive Plan,
which was approved by the Shareholders 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 is a total of 75,000 shares reserved under the
Directors Incentive Plan. The Board of Directors approved a grant of 5,000
options each to two independent Directors on August 14, 2002. The option grant
price was based on the fair market value of the stock on the date of the grant.
These grants of 10,000 shares in the aggregate, represent the only stock
options outstanding under the Directors Incentive Plan.

On July 19, 2002, the Board of Directors adopted the Employee Plan, which was
approved by the Shareholders on August 14, 2002. The purpose of the Employee
Plan is to provide incentives that will attract, retain and motivate qualified
and experienced persons to serve as employees and consultants of Carmike.
There is a total of 500,000 shares reserved under the Employee Plan. There
were no stock options outstanding under the Employee Plan at December 31, 2002.

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:

F-28



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 12SHAREHOLDERS EQUITY (continued)

|                        |  |      |      |       |  |      |     |  |  |  |       |  
|----------------------- |  | ---- | ---- | ----- |  | ---- | --- |  |  |  | ----- | -
|                        |  | 2002 |      | 2001* |  | 2000
|                        |  |      |      |       |  |     
|Expected life (years)   |  |      | 9.0  |       |  |      | N/A |  |  |  | 5.0   |  
|Risk-free interest rate |  |      | 4.19 | %     |  |      | N/A |  |  |  | 6.65  | %
|Dividend yield          |  |      | 0.0  | %     |  |      | N/A |  |  |  | 0.0   | %
|Expected volatility     |  |      | 0.40 |       |  |      | N/A |  |  |  | 1.302 |  
|                        |  |      |      |       |  |      |     |  |  |  |       |  



---

|* |  | No options were granted in 2001
|- |  | -------------------------------

The estimated fair value of the options granted during 2000 were $4.77 per
share, and were amortized to expense over the options vesting period. Had
compensation cost been determined consistent with SFAS No. 123, utilizing the
assumptions detailed above, the Companys pro forma net loss and pro forma
basic loss per share would have increased to the following amounts (in
thousands, except share data):

|                         |                              |  |      |         |      |  |      |          |   |  |   |         |  
|------------------------ | ---------------------------- |  | ---- | ------- | ---- |  | ---- | -------- | - |  | - | ------- | -
|                         |                              |  | 2002 |         | 2001 |  | 2000
|                         |                              |  |      |         |      |  |     
|Net loss:                |                              |  |      |         |      |  |      |          |   |  |   |        
|                         | As reported                  |  | $    | (39,827 | )    |  | $    | (125,387 | ) |  | $ | (75,076 | )
|                         | Pro forma  for
SFAS No. 123 |  |      | (39,827 | )    |  |      | (125,803 | ) |  |   | (75,931 | )
|Basic net loss per share |                              |  |      |         |      |  |      |          |   |  |   |        
|                         | As reported                  |  | $    | (4.33   | )    |  | $    | (11.05   | ) |  | $ | (6.62   | )
|                         | Pro forma  for
SFAS No. 123 |  |      | (4.33   | )    |  |      | (11.09   | ) |  |   | (6.70   | )
|                         |                              |  |      |         |      |  |      |          |   |  |   |        

Changes in outstanding stock options were as follows (in thousands, except for
exercise price per share):

|                                               |                              |  |                          |      |        |  |        |     |        |  |         |     |       |  |    |    |  |  |     |      |   |  |     |      |  
|---------------------------------------------- | ---------------------------- |  | ------------------------ | ---- | ------ |  | ------ | --- | ------ |  | ------- | --- | ----- |  | -- | -- |  |  | --- | ---- | - |  | --- | ---- | -
|                                               |                              |  | Exercise Price per Share
|                                               |                              |  |                         
|                                               |                              |  |                          |      |        |  | $6.00- |     |        |  |         |     |       |  |    |    |  |  |     |      |   |  |    
|                                               |                              |  | $5.44                    |      | $14.00 |  | $18.00 |     | $19.95 |  | $27.125 |     | Total
|                                               |                              |  |                          |      |        |  |        |     |        |  |         |     |      
|Stock options outstanding at January 1, 2000   |                              |  |                         |      |        |  | 72     |     |        |  | 73      |     |       |  |   |    |  |  | 335 |      |   |  | 480 |     
|                                               | Issued                       |  |                          | 403  |        |  |        |    |        |  |         |    |       |  |    |   |  |  |     |     |   |  |     | 403  |  
|                                               | Forfeitures                  |  |                          |     |        |  |        | (66 | )      |  |         |    |       |  |    |   |  |  |     |     |   |  |     | (66  | )
|                                               | Exercised                    |  |                          |     |        |  |        |    |        |  |         |    |       |  |    |   |  |  |     |     |   |  |     |     |  
|                                               |                              |  |                          |      |        |  |        |     |        |  |         |     |       |  |    |    |  |  |     |      |   |  |     |     
|Stock options outstanding at December 31, 2000 |                              |  | 403                      |      |        |  | 6      |     |        |  | 73      |     |       |  |   |    |  |  | 335 |      |   |  | 817 |     
|                                               | Issued                       |  |                          |     |        |  |        |    |        |  |         |    |       |  |    |   |  |  |     |     |   |  |     |     |  
|                                               | Forfeitures                  |  |                          |     |        |  |        |    |        |  |         | (10 | )     |  |    |   |  |  |     | (60  | ) |  |     | (70  | )
|                                               | Exercised                    |  |                          |     |        |  |        |    |        |  |         |    |       |  |    |   |  |  |     |     |   |  |     |     |  
|                                               |                              |  |                          |      |        |  |        |     |        |  |         |     |       |  |    |    |  |  |     |      |   |  |     |     
|Stock options outstanding at December 31, 2001 |                              |  | 403                      |      |        |  | 6      |     |        |  | 63      |     |       |  |   |    |  |  | 275 |      |   |  | 747 |     
|                                               | Cancelled (January 31, 2002) |  |                          | (403 | )      |  |        | (6  | )      |  |         | (63 | )     |  |    |   |  |  |     | (275 | ) |  |     | (747 | )
|                                               | Issued                       |  |                          |     |        |  |        |    |        |  |         |    |       |  |    | 10 |  |  |     |     |   |  |     | 10   |  
|                                               |                              |  |                          |      |        |  |        |     |        |  |         |     |       |  |    |    |  |  |     |      |   |  |     |     
|Stock options outstanding at December 31, 2002 |                              |  |                         |      |        |  |       |     |        |  |        |     |       |  | 10 |    |  |  |    |      |   |  | 10  |     
|                                               |                              |  |                          |      |        |  |        |     |        |  |         |     |       |  |    |    |  |  |     |      |   |  |     |     

F-29



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

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, 2002, are as follows (in thousands):

|                                               |  |                  |         |                |  |   |         |  
|---------------------------------------------- |  | ---------------- | ------- | -------------- |  | - | ------- | -
|                                               |  | Operating Leases |         | Capital Leases
|                                               |  |                  |         |               
|2003                                           |  | $                | 41,059  |                |  | $ | 7,764   |  
|2004                                           |  |                  | 38,977  |                |  |   | 7,867   |  
|2005                                           |  |                  | 37,114  |                |  |   | 7,885   |  
|2006                                           |  |                  | 34,627  |                |  |   | 7,761   |  
|2007                                           |  |                  | 32,948  |                |  |   | 7,821   |  
|Thereafter                                     |  |                  | 212,600 |                |  |   | 97,804  |  
|                                               |  |                  |         |                |  |   |         |  
|Total minimum lease payments                   |  | $                | 397,325 |                |  | $ | 136,902 |  
|                                               |  |                  |         |                |  |   |         |  
|Less amounts representing interest             |  |                  |         |                |  |   | (83,257 | )
|                                               |  |                  |         |                |  |   |         |  
|Present value of future minimum lease payments |  |                  |         |                |  |   | 53,645  |  
|Less current maturities                        |  |                  |         |                |  |   | (972    | )
|                                               |  |                  |         |                |  |   |         |  
|Long-term obligations                          |  |                  |         |                |  | $ | 52,673  |  
|                                               |  |                  |         |                |  |   |         |  

Rent expense was approximately $ 47.6 million, $51.7 million and $67.4 million
for 2002, 2001 and 2000, respectively. In addition, the Company had
approximately $6.0 million, $3.5 million and $3.1 million in contingent rental
payments for 2002, 2001 and 2000, respectively.

The Company is committed to an operating lease for a corporate aircraft with
the former Chairman of the Board of Directors and Founder, C.L. Patrick. The
Company pays rent of approximately $191 thousand per year to Mr. Patrick until
the leases expiration in June 2004.

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.

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 14CONDENSED FINANCIAL DATA

The Company and its majority owned subsidiaries have fully, unconditionally,
and jointly and severally guaranteed the Companys obligations under the
Subordinated Notes. The Company has one subsidiary and several unconsolidated
affiliates that are not guarantors of the Subordinated Notes. Separate
financial statements and other disclosures of each of the guarantors are not
presented because management has determined that they would not be material to
investors.

Combined separate financial data for the guarantor subsidiaries is as follows
(in thousands):

|                        |                                   |   |                         |         |      |   |         |          |   |   |         |         |  
|----------------------- | --------------------------------- | - | ----------------------- | ------- | ---- | - | ------- | -------- | - | - | ------- | ------- | -
|                        |                                   |   | Year Ended December 31,
|                        |                                   |   |                        
|                        |                                   |   | 2002                    |         | 2001 |   | 2000   
|                        |                                   |   |                         |         |      |   |        
|                        | Revenues                          |   | $                       | 406,693 |      |   | $       | 364,973  |   |   | $       | 371,826 |  
|                        | Operating income (loss)(1)        |   |                         | 47,699  |      |   |         | (67,832  | ) |   |         | (3,080  | )
|                        | Net loss                          |   |                         | (3,361  | )    |   |         | (108,328 | ) |   |         | (48,044 | )
|Assets:                 |                                   |   |                         |         |      |   |         |          |   |   |         |        
|                        | Current assets                    |   |                         | 25,373  |      |   |         | 26,342   |   |   |         | 36,069  |  
|                        | Other assets                      |   |                         | 9,397   |      |   |         | 3,709    |   |   |         | 3,642   |  
|                        | Property and equipment            |   |                         | 337,581 |      |   |         | 355,238  |   |   |         | 480,786 |  
|                        | Goodwill                          |   |                         | 17,440  |      |   |         | 12,001   |   |   |         | 30,903  |  
|                        |                                   |   |                         |         |      |   |         |          |   |   |         |         |  
|                        |                                   | $ | 389,791                 |         |      | $ | 397,290 |          |   | $ | 551,400 |        
|                        |                                   |   |                         |         |      |   |         |          |   |   |         |         |  
|Liabilities and equity: |                                   |   |                         |         |      |   |         |          |   |   |         |        
|                        | Current liabilities               |   | $                       | 30,374  |      |   | $       | 21,590   |   |   | $       | 21,758  |  
|                        | Intercompany notes and advances   |   |                         | 280,017 |      |   |         | 278,516  |   |   |         | 320,073 |  
|                        | Long-term liabilities             |   |                         | 46,544  |      |   |         | 41,149   |   |   |         | 42,799  |  
|                        | Liabilities Subject to Compromise |   |                         |        |      |   |         | 21,549   |   |   |         | 23,968  |  
|                        | Equity                            |   |                         | 32,856  |      |   |         | 34,486   |   |   |         | 142,802 |  
|                        |                                   |   |                         |         |      |   |         |          |   |   |         |         |  
|                        |                                   | $ | 389,791                 |         |      | $ | 397,290 |          |   | $ | 551,400 |        
|                        |                                   |   |                         |         |      |   |         |          |   |   |         |         |  



---

| |  | (1) Net of parent company management and license fees of approximately $23.8
million, $21.4 million and $21.8 million for the years ended December 31,
2002, 2001 and 2000, respectively.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-31



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 14CONDENSED FINANCIAL DATA (continued)

Cash flow financial data for the guarantor subsidiaries is as follows (in
thousands):

|                                                |  |      |         |      |  |              |        |   |  |   |        |  
|----------------------------------------------- |  | ---- | ------- | ---- |  | ------------ | ------ | - |  | - | ------ | -
|                                                |  |      |         |      |  | December 31, |        |   |  |  
|                                                |  | 2002 |         | 2001 |  | 2000        
|                                                |  |      |         |      |  |             
|Cash provided by operating activities           |  | $    | 7,858   |      |  | $            | 10,030 |   |  | $ | 10,692 |  
|Cash used in investing activities               |  |      | (12,770 | )    |  |              | (8,032 | ) |  |   | (9,760 | )
|Cash
provided by (used in) financing
activities |  |      | 5,395   |      |  |              | (4,069 | ) |  |   | 11,258 |  
|                                                |  |      |         |      |  |              |        |   |  |   |        |  
|Change in cash                                  |  |      | 483     |      |  |              | (2,071 | ) |  |   | 12,190 |  
|Beginning cash balance                          |  |      | 13,219  |      |  |              | 15,290 |   |  |   | 3,100  |  
|                                                |  |      |         |      |  |              |        |   |  |   |        |  
|Ending cash balance                             |  | $    | 13,702  |      |  | $            | 13,219 |   |  | $ | 15,290 |  
|                                                |  |      |         |      |  |              |        |   |  |   |        |  

NOTE 15FINANCIAL INSTRUMENTS

Concentrations of credit risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, investments and
recoverable construction allowances.

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.

Recoverable construction allowances:The carrying amount reported in the
balance sheets for recoverable construction allowances approximates their fair
value. The potentially recoverable amounts are specified in the executed lease
agreements with landlords.

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
approximates fair value. The carrying amount is determined by the contractual
agreement.

F-32



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTE 16QUARTERLY RESULTS (Unaudited)

(In thousands, except for per share data)

|                                |  |             |         |             |  |             |         |             |  |        |         |  |  |   |          |   |  |   |          |  
|------------------------------- |  | ----------- | ------- | ----------- |  | ----------- | ------- | ----------- |  | ------ | ------- |  |  | - | -------- | - |  | - | -------- | -
|                                |  | 1st Quarter |         | 2nd Quarter |  | 3rd Quarter |         | 4th Quarter |  | Totals
|                                |  |             |         |             |  |             |         |             |  |       
|Year ended December 31, 2002    |  |             |         |             |  |             |         |             |  |        |         |  |  |   |          |   |  |   |          |  
|Total revenues                  |  | $           | 116,453 |             |  | $           | 137,478 |             |  | $      | 123,473 |  |  | $ | 129,784  |   |  | $ | 507,188  |  
|Operating income                |  |             | 15,682  |             |  |             | 20,989  |             |  |        | 19,191  |  |  |   | 12,925   |   |  |   | 68,787   |  
|Net income (loss)               |  |             | (55,950 | )           |  |             | 9,514   |             |  |        | 8,072   |  |  |   | (1,463   | ) |  |   | (39,827  | )
|Income (loss) per common share: |  |             |         |             |  |             |         |             |  |        |         |  |  |   |          |   |  |   |          |  
|Basic                           |  | $           | (5.70   | )           |  | $           | 1.06    |             |  | $      | 0.90    |  |  | $ | (0.16    | ) |  | $ | (4.33    | )
|Diluted                         |  | $           | (5.70   | )           |  | $           | 1.04    |             |  | $      | 0.89    |  |  | $ | (0.16    | ) |  | $ | (4.33    | )
|                                |  |             |         |             |  |             |         |             |  |        |         |  |  |   |          |   |  |   |          |  
|Year ended December 31, 2001    |  |             |         |             |  |             |         |             |  |        |         |  |  |   |          |   |  |   |          |  
|Total revenues                  |  | $           | 99,704  |             |  | $           | 108,877 |             |  | $      | 130,439 |  |  | $ | 117,930  |   |  | $ | 456,950  |  
|Operating income (loss)         |  |             | 1,931   |             |  |             | 5,980   |             |  |        | 15,130  |  |  |   | (122,742 | ) |  |   | (99,701  | )
|Net income (loss)               |  |             | (1,246  | )           |  |             | 2,275   |             |  |        | 11,096  |  |  |   | (137,512 | ) |  |   | (125,387 | )
|Income (loss) per common share: |  |             |         |             |  |             |         |             |  |        |         |  |  |   |          |   |  |   |          |  
|Basic and diluted               |  | $           | (0.11   | )           |  | $           | 0.20    |             |  | $      | 0.97    |  |  | $ | (12.12   | ) |  | $ | (11.05   | )
|                                |  |             |         |             |  |             |         |             |  |        |         |  |  |   |          |   |  |   |          |  

Net income (loss) 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 (loss) per
common share amount for the year.

The fourth quarter of 2001 includes a charge for the impairment of long-lived
assets as discussed in Note 4. The fourth quarter of 2001 includes a decrease
in the estimated property taxes payable of $2.0 million.

F-33



---



##### Table of Contents








|ITEM 9. |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|------- |  | -------------------------------------------------------------------------------------

Not applicable.




PART III






|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
|-------- |  | ---------------------------------------------------

Information regarding the directors of Carmike is incorporated by
reference from the section entitled Election of Directors in the Proxy
Statement relating to the 2003 Annual Meeting of Stockholders of Carmike
(hereinafter, the 2003 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.






|ITEM 11. |  | EXECUTIVE COMPENSATION.
|-------- |  | -----------------------

Information regarding executive compensation is incorporated by reference
from the section entitled Executive Compensation and Other Information
contained in the 2003 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
and Security Ownership of Management contained in the 2003 Proxy Statement.

The following table presents information as of December 31, 2002 about
Carmikes Common Stock that may be issued upon the exercise of outstanding
options, warrants and rights under Carmikes 2002 Stock Plan, Employee Plan and
Directors Incentive Plan.

47



---



##### Table of Contents



|                                                        |                          |                     |           |                         |           |                      |       |                         |       |  |         |                         |         | 
|------------------------------------------------------- | ------------------------ | ------------------- | --------- | ----------------------- | --------- | -------------------- | ----- | ----------------------- | ----- |  | ------- | ----------------------- | ------- | 
|                                                        |                          |                     |           |                         |           |                      |       |                         |       |  |         | (c)                    
|                                                        |                          |                     |           |                         |           |                      |       |                         |       |  |         | Number of securities   
|                                                        |                          |                     |           |                         |           |                      |       |                         |       |  |         | remaining available for
|                                                        |                          |                     |           | (a)                     |           | (b)                  |       | future issuance under  
|                                                        |                          |                     |           | Number of securities to |           | Weighted average     |       | equity compensation    
|                                                        |                          |                     |           | be issued upon exercise |           | exercise price of    |       | plans (excluding       
|                                                        |                          |                     |           | of outstanding options, |           | outstanding options, |       | Securities reflected in
|Plan Category                                           |                          | warrants and rights |           | warrants and rights     |           | Columbus (a))       
|                                                        |                          |                     |           |                         |           |                     
|Equity compensation plans
approved by shareholders:     |                          |                     |           |                         |           |                      |       |                         |       |  |         |                        
|                                                        | 2002 Stock Plan          |                     |           | 1,000,000               |           |                      |       | N/A                     | (1)   |  |         |                        |        
|                                                        | Employee Plan            |                     |           |                        |           |                      |       | N/A                     |       |  |         | 500,000                 |        
|                                                        |                          |                     |           |                         |           |                      |       |                         |       |  |         |                         |        
|                                                        | Directors Incentive Plan |                     |           | 10,000                  |           |                      | $     | 19.95                   |       |  |         | 65,000                  |        
|                                                        |                          | Total               |           |                         | 1,010,000 |                      |       | $                       | 19.95 |  |         |                         | 565,000 | 
|Equity compensation plans
not
approved by shareholders: |                          |                     |           |                         |           |                      |       |                         |       |  |         |                        
|                                                        |                          | Total               |           | None                    |           | None                 |       | None                   
|                                                        |                          |                     |           |                         |           |                      |       |                         |       |  |         |                         |        
|Grand Total                                             |                          |                     | 1,010,000 |                         |           | $                    | 19.95 |                         |       |  | 565,000 |                        
|                                                        |                          |                     |           |                         |           |                      |       |                         |       |  |         |                         |        



---

| |  | (1) Under the 2002 Stock Plan, 780,000 shares are available to Michael W.
Patrick, our President, Chief Executive Officer and Chairman. Mr.
Patricks employment agreement with us provides that we will issue and/or
deliver to him 260,000 shares of Common Stock on each of the third,
fourth, and fifth anniversary dates of January 31, 2002. In addition, we
have approved restricted stock grants of 220,000 shares to our other
executive officers.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------






|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
|-------- |  | -----------------------------------------------

Information regarding certain relationships and related transactions is
incorporated by reference from the section entitled Certain Relationships and
Related Transactions contained in the 2003 Proxy Statement.






|ITEM 14. |  | CONTROLS AND PROCEDURES
|-------- |  | -----------------------

During the 90-day period prior to the filing date of this report,
management, including Carmikes Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of Carmikes
disclosure controls and procedures. Based upon, and as of the date of, that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures were effective, in all material
respects, to ensure that information required to be disclosed in the reports
Carmike files and submits under the Exchange Act is recorded, processed,
summarized and reported as and when required.

There have been no significant changes in the Carmikes internal controls
or in other factors
that could significantly affect internal controls subsequent to the date
Carmike carried out its evaluation. There were no significant deficiencies or
material weaknesses identified in the evaluation and therefore, no corrective
actions were taken.

48



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##### Table of Contents






PART IV






|ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
|-------- |  | ----------------------------------------------------------------

(a)(1) and (2)   Financial Statements and Financial Statement Schedules

The following consolidated financial statements of Carmike Cinemas, Inc.
are included in Item 8. Financial Statements And Supplementary Data.

Financial Statements:



| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Report of Independent Auditors                                                                
|
| | Consolidated balance sheets  December 31, 2002 and 2001                                      
|
| | Consolidated statements of operations  Years ended December 31, 2002,
2001 and 2000          
|
| | Consolidated statements of cash flows  Years ended December 31, 2002,
2001 and 2000          
|
| | Consolidated statements of shareholders equity  Years ended December
31, 2002, 2001 and 2000
|
| | Notes to Consolidated Financial Statements  December 31, 2002                                

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.

49



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2.1     |  | Debtors Joint 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 on December 11, 2001 and incorporated herein by
reference).                                                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.1     |  | Amended and Restated Certificate of Incorporation of Carmike (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 (filed as Exhibit 3.2 to
Carmikes Amendment to Form 8-A filed January 31, 2002 and incorporated
herein by reference).                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.1     |  | Indenture dated January 31, 2002 between Carmike, the subsidiary
guarantors named therein and Wilmington Trust Company, as Trustee (filed
as Exhibit 4.1 to Carmikes Form 10-K for the year ended December 31, 2001
and incorporated herein by reference).                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.2     |  | Stockholders Agreement, dated as of January 31, 2002 by and among
Carmike Cinemas, Inc. and certain stockholders (filed as Exhibit 99.2 to
Amendment No. 1 to Schedule 13D of Goldman Sachs & Co., et. al., dated
February 8, 2002 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., dated
February 8, 2002 and incorporated herein by reference).                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.1    |  | Term Loan Credit Agreement dated January 31, 2002 among Carmike
Cinemas,
Inc., BNY Asset Solutions LLC as Administrative Agent, and the various
banks or other financial institutions from time to time parties to the
agreement as Lenders. (filed as Exhibit 10.1 to Carmike's Form 10-K for
the year ended December 31, 2001 and incorporated herein by reference).                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.2    |  | $50,000,000 Credit Agreement dated as of January 31, 2002 among Carmike
Cinemas, Inc., Eastwynn Theatres, Inc., General Electric Corporation as
Agent and Lender, GECC Capital Markets Group, Inc. as Lead Arranger, the
various subsidiaries from time to time parties to the agreement as credit
parties, and the various banks or other financial institutions from time
to time parties to the agreement as Lenders (filed as Exhibit 10.2 to
Carmikes Form 10-K for the year ended December 31, 2001 and incorporated
herein by reference).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.3    |  | First Amendment to Credit Agreement, dated as of June 21, 2002, among
Carmike Cinemas, Inc., Eastwynn Theatres, Inc., General Electric Capital
Corporation as Agent and Lender, the various subsidiaries from time to
time parties to the agreement as credit parties and the various banks and
other financial institutions from time to                                                                                                                                                                                                        

50



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |  | time parties to the agreement as Lenders (filed as Exhibit 10 to
Carmikes Form 10-Q for the quarter ended June 30, 2002 and
incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.4    |  | Stock Purchase Agreement dated as of June 27, 1997 by and between the
shareholders of Morgan Creek Theatres, Inc.; shareholders 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 and Eastwynn Theatres, Inc.
(filed as Exhibit 10.2 to Carmikes Form 10-Q for the fiscal quarter ended
June 30, 1997 (Commission File No. 1-11604), and incorporated herein by
reference).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.5*   |  | Carmike Deferred Compensation Agreement and Trust Agreement dated as of
January 1, 1990 (filed as Exhibit 10(u) to Carmikes Form 10-K for the
year ended December 31, 1990, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.6*   |  | Employment Agreement dated December 30, 1999 between C. L. Patrick and
Carmike. (filed as Exhibit 10.8 to Carmikes Form 10-K for the year ended
December 31, 1999 (Commission File No. 1-11604 (the 1999 Form 10-K) and
incorporated herein by reference).                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.7    |  | Aircraft Lease dated July 1, 1983, as amended June 30, 1986, by and
between C.L.P. Equipment and Carmike (filed as Exhibit 10(h) to Carmikes
Registration Statement on Form S-1 (Registration No. 33-8007), and
incorporated herein by reference).                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.8    |  | Equipment Lease Agreement dated December 17, 1982 by and between Michael
W. Patrick and Carmike (Kingsport, Tennessee) (filed as Exhibit 10(i) to
Carmikes Registration Statement on Form S-1 (Registration No. 33-8007),
and incorporated herein by reference).                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.9    |  | 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 for the year ended December 31, 1991 (Commission File
No. 1-11604), and incorporated herein by reference).                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.10   |  | Second Amended and Restated Master Lease dated September 1, 2001 between
MoviePlex Realty Leasing, L.L.C. and Carmike (filed as Exhibit 10.17 to
Carmikes Form 10-K for the year ended December 31, 2001 and incorporated
herein by reference).                                                                                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.11*  |  | Letter of employment dated July 6, 1999, between Carmike and
Martin A. Durant
(filed as Exhibit 10.21 to Carmikes Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.12*  |  | Trust Agreement dated as of July 16, 1999, between Carmike,
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).                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.13*  |  | 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).                                                                                                                                                                                                                                                                                                                                               

51



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##### Table of Contents



|        |  |                                                                                                                                                                                                                        
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                        
|Number  |  | Description                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                        
|10.14*  |  | 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).                                             
|        |  |                                                                                                                                                                                                                        
|10.15*  |  | Employment Agreement, dated as of January 31, 2002, between Carmike 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).     
|        |  |                                                                                                                                                                                                                        
|10.16*  |  | Carmike Cinemas, Inc. Non-Employee Directors Long-Term Incentive Plan
(filed as Exhibit 4.2 to Carmikes Form S-8 (Registration No. 333-102765)
filed January 28, 2003 and incorporated herein by reference).          
|        |  |                                                                                                                                                                                                                        
|10.17*  |  | Carmike Cinemas, Inc. Employee and Consultant Long-Term Stock Incentive
Plan (filed as Exhibit 4.2 to Carmikes Form S-8 (Registration No.
333-102764) filed on January 28, 2003 and incorporated herein by
reference).
|        |  |                                                                                                                                                                                                                        
|21      |  | List of Subsidiaries.                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                        
|23      |  | Consent of Ernst & Young LLP.                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                        
|99.1    |  | 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.                                                                   
|        |  |                                                                                                                                                                                                                        
|99.2    |  | 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 14(c) of Form 10-K.
|- |  | -------------------------------------------------------------------------------------------------------------------------------

(b)  Reports on Form 8-K

None.

(c)  Exhibits

The response to this portion of Item 14 is submitted as a separate section
of this report.

(d)  Financial Statements Schedules

See Item 14(a) (1) and (2).

52



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

|                      |  |                       |  |                                      
|--------------------- |  | --------------------- |  | -------------------------------------
|                      |  | CARMIKE CINEMAS, INC.
|                      |  |                       |  |                                      
|Date:  March 25, 2003 |  | By:                   |  | /s/ Michael W. Patrick               
|                      |  |                       |  |                                      
|                      |  |                       |  | Michael W. Patrick                   
|                      |  |                       |  | President 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. PatrickMichael W. Patrick                 |  | President, Chief Executive
Officer and Chairman of the Board of Directors                         
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  Martin A. DurantMartin A. Durant                     |  | Senior Vice President-Finance, Treasurer
and Chief Financial Officer (Principal Financial Officer)
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  Philip A. SmitleyPhilip A. Smitley                   |  | Assistant Vice President-Controller
(Principal Accounting Officer)                                
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  Ian M. CummingIan M. Cumming                         |  | Director                                                                                          
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  Elizabeth Cogan FascitelliElizabeth Cogan Fascitelli |  | Director                                                                                          
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  Richard A. FriedmanRichard A. Friedman               |  | Director                                                                                          
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  Alan J. HirschfieldAlan J. Hirschfield               |  | Director                                                                                          
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  John W. Jordan, IIJohn W. Jordan, II                 |  | Director                                                                                          
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  Carl L. Patrick, Jr.Carl L. Patrick, Jr.             |  | Director                                                                                          
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  Kenneth A. PontarelliKenneth A. Pontarelli           |  | Director                                                                                          
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  Roland C. SmithRoland C. Smith                       |  | Director                                                                                          
|                                                         
|                                                          |  |                                                                                                   
|                                                         
|/s/  David W. ZalaznickDavid W. Zalaznick                 |  | Director                                                                                          

53



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##### Table of Contents



Certifications

I, Michael W. Patrick, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Carmike Cinemas, Inc.;                                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;                   
|  
|4. |  | The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and have:                                                                                                   



| | a. |  | Designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly
during the period in which this annual report is being
prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Evaluated the effectiveness of the registrants
disclosures controls and procedures as of a date within 90
days prior to the filing date of this annual report (the
Evaluation Date); and                                                                                                 
|
| | c. |  | Presented in this annual report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of the registrants board of:
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | All significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrants ability to record, process,
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

54



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##### Table of Contents





| |    |  | summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal
controls; and               
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Any fraud, whether or not material, that
involves management or other employees who have a significant
role in the registrants internal controls; and



|6. |  | The registrants other certifying officer and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

March 25, 2003



/s/ Michael W. Patrick
Michael W. Patrick
President, Chief Executive Officer and
Chairman of the Board of Directors

55



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##### Table of Contents



Certifications

I, Martin A. Durant, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Carmike Cinemas, Inc.;                                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;                   
|  
|4. |  | The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and have:                                                                                                   



| | a. |  | Designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly
during the period in which this annual report is being
prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Evaluated the effectiveness of the registrants
disclosures controls and procedures as of a date within 90
days prior to the filing date of this annual report (the
Evaluation Date); and                                                                                                 
|
| | c. |  | Presented in this annual report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of the registrants board of
directors:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | All significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrants ability to record, process, summarize and
report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Any fraud, whether or not material, that
involves management or other employees who have a significant
role in the registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

56



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##### Table of Contents





| |  | that could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

March 25, 2003



/s/ Martin A. Durant
Martin A. Durant
Senior Vice President  Finance,
Treasurer and Chief Financial Officer

57



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##### Table of Contents



Schedule II  Valuation and Qualifying Accounts
Carmike Cinemas, Inc. and Subsidiaries
December 31, 2002 (in thousands of dollars)

|                              |                                                            |        |              |          |            |            |                |          |              |           |     |         |            |  |   |        |      |  |   |        | 
|----------------------------- | ---------------------------------------------------------- | ------ | ------------ | -------- | ---------- | ---------- | -------------- | -------- | ------------ | --------- | --- | ------- | ---------- |  | - | ------ | ---- |  | - | ------ | 
|Col. A                        |                                                            | Col. B |              | Col. C   |            | Col. D     |                | Col. E  
|                              |                                                            |        |              |          |            |            |                |         
|                              |                                                            |        |              |          |            |            | Additions      |          |              |           |     |         |            |  |  
|                              |                                                            |        |              |          |            |            |                |          |              |           |     |         |            |  |  
|                              |                                                            |        | Balance at   |          | Charged to |            | Charged to     |          |              |           |     |         | Balance at
|                              |                                                            |        | Beginning of |          | Costs and  |            | Other Accounts |          | Deductions - |           | End
|Description                   |                                                            | Period |              | Expenses |            | - Describe |                | Describe |              | of Period
|                              |                                                            |        |              |          |            |            |                |          |              |          
|Year Ended December 31, 2000: |                                                            |        |              |          |            |            |                |          |              |           |     |         |            |  |   |        |      |  |   |       
|                              | Reserve for restructuring
charge                           |        | $            | 28,343   |            |            | $              | (775     | )(1)         |           | $   | (24,683 | )(3)       |  | $ | (2,885 | )(2) |  | $ | -0-    | 
|                              | Valuation reserve for deferred
income tax assets           |        | $            |         |            |            | $              | 40,951   | (4)          |           | $   |        |            |  | $ |       |      |  | $ | 40,951 | 
|Year Ended December 31, 2001: |                                                            |        |              |          |            |            |                |          |              |           |     |         |            |  |   |        |      |  |   |       
|                              | Valuation reserve for deferred
income tax assets           |        | $            | 40,951   |            |            | $              | 42,192   | (5)          |           | $   |        |            |  | $ |       |      |  | $ | 83,143 | 
|Year Ended December 31, 2002: |                                                            |        |              |          |            |            |                |          |              |           |     |         |            |  |   |        |      |  |   |       
|                              | Valuation reserve (benefit)
for
deferred income tax assets |        | $            | 83,143   |            |            | $              | (3,253   | )(6)         |           | $   |        |            |  | $ |       |      |  | $ | 79,890 | 



---

|(1) |  | Change in estimate of liabilities to be incurred. See Note 5 of Notes to
Consolidated Financial Statements.                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Net payments made during period, including $500,000 payment for early
lease termination in 1999. See Note 5 of Notes to Consolidated Financial
Statements.                                                          
|   
|(3) |  | Amounts outstanding at the Petition Date have been classified to
Liabilities Subject to Compromise. All theatres covered by the
restructuring charge have been approved by the bankruptcy court for lease
rejection.
|   
|(4) |  | Valuation reserve recorded in the year ended December 31, 2000. See Note
11 of Notes to Consolidated Financial Statements.                                                                                          
|   
|(5) |  | Valuation reserve recorded in the year ended December 31, 2001. See Note
11 of Notes to Consolidated Financial Statements.                                                                                          
|   
|(6) |  | Valuation reserve recorded in the year ended December 31, 2002. See Note
11 of Notes to Consolidated Financial Statements.                                                                                          

58