##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
  þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the fiscal year ended December 31, 2005
 OR
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the transition period from  to
 Commission File Number 000-14993
 CARMIKE CINEMAS, INC.
  Delaware
    
    58-1469127(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)1301 First Avenue, Columbus, Georgia
    
    31901(Address of Principal Executive Offices)
    
    (Zip Code)
 (706) 576-3400
  None
  common stock, par value $.03 per share
 o þ
 o þ
 þ o
 o
 þ o
  o þ o
 o þ
  Documents Incorporated by Reference




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##### 



Table of Contents
 Page NumberEXPLANATORY NOTEPART I
    
    
    4ITEM 1. BUSINESS
    
    
    4ITEM 1A. RISK FACTORS
    
    
    11ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    17ITEM 2. PROPERTIES
    
    
    17ITEM 3. LEGAL PROCEEDINGS
    
    
    18ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    18PART II
    
    
    20ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    20ITEM 6. SELECTED FINANCIAL DATA
    
    
    20ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    22ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    42ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    42ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    85ITEM 9A. CONTROLS AND PROCEDURES
    
    
    85ITEM 9B. OTHER INFORMATION
    
    
    88PART III
    
    
    89ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    89ITEM 11. EXECUTIVE COMPENSATION
    
    
    92ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    97ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    103ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    103PART IV
    
    
    104ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    104EX-10.11 FORM OF DEFERRED COMPENSATION AGREEMENTEX-10.12 FORM OF TRUST AGREEMENTEX-10.30 MASTER LICENSE AGREEMENTEX-10.31 DIGITAL CINEMA SERVICE AGREEMENTEX-10.32 FORM OF RESTRICTED STOCK GRANT AGREEMENTEX-10.36 FOURTH AMENDMENT TO THE CREDIT AGREEMENTEX-10.37 FIFTH AMENDMENT TO THE CREDIT AGREEMENTEX-21 LIST OF SUBSIDIARIESEX-31.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICEREX-31.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICEREX-32.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICEREX-32.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER




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EXPLANATORY NOTE




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PART I
 
 ITEM 1. BUSINESS.
 Overview
   
    
    Less competition from other exhibitors.We believe a majority of our theatres
have limited competition for patrons. We believe most of our markets are adequately screened
and our smaller markets in particular cannot support significantly more screens.
    
    Lower operating costs.We believe that we benefit from lower labor, occupancy
and maintenance costs than most other large exhibitors. For example, as of December 31,
2005, approximately 41% of our hourly employees worked for the federal minimum wage.
Additionally, we own or operate under joint ownership 87 theatres, or approximately 29% of
our theatres, which we believe provides us with further cost benefits. We believe the
percentage of our owned theatres is among the highest of the large theatre exhibitors.
    
    Fewer alternative entertainment opportunities.In our typical markets, patrons
have fewer entertainment alternatives than in larger markets, where options such as
professional sports and cultural events are more likely to be available.
    
    Greater access to film product.We believe we are the sole exhibitor in many of
our film licensing zones, which we believe provides us with greater flexibility in selecting
films that meet the preferences of patrons in our markets.
  State
    
    Theatres
    
    ScreensAlabama
    
    
    17
    
    
    
    167Arkansas
    
    
    8
    
    
    
    68Colorado
    
    
    8
    
    
    
    57Delaware
    
    
    1
    
    
    
    14Florida
    
    
    10
    
    
    
    80Georgia
    
    
    24
    
    
    
    219Idaho
    
    
    4
    
    
    
    24Illinois
    
    
    13
    
    
    
    118Indiana
    
    
    3
    
    
    
    42Iowa
    
    
    8
    
    
    
    82Kansas
    
    
    1
    
    
    
    12Kentucky
    
    
    6
    
    
    
    31Louisiana
    
    
    2
    
    
    
    16Maryland
    
    
    1
    
    
    
    8Michigan
    
    
    15
    
    
    
    109Minnesota
    
    
    6
    
    
    
    65Missouri
    
    
    1
    
    
    
    8Montana
    
    
    11
    
    
    
    71Nebraska
    
    
    5
    
    
    
    22New Mexico
    
    
    1
    
    
    
    2New York
    
    
    1
    
    
    
    8North Carolina
    
    
    31
    
    
    
    280North Dakota
    
    
    6
    
    
    
    37Ohio
    
    
    7
    
    
    
    53Oklahoma
    
    
    10
    
    
    
    52Oregon
    
    
    1
    
    
    
    12Pennsylvania
    
    
    24
    
    
    
    182South Carolina
    
    
    12
    
    
    
    84South Dakota
    
    
    5
    
    
    
    38Tennessee
    
    
    26
    
    
    
    228Texas
    
    
    12
    
    
    
    106Utah
    
    
    3
    
    
    
    39Virginia
    
    
    8
    
    
    
    58Washington
    
    
    1
    
    
    
    12West Virginia
    
    
    4
    
    
    
    32Wisconsin
    
    
    3
    
    
    
    27Wyoming
    
    
    2
    
    
    
    12Totals
    
    
    301
    
    
    
    2,475
  4




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Theatre Development, Acquisitions and Operations
 Development
  
    
    we believe building a new theatre provides an attractive cash flow opportunity;
    
    we already operate a theatre and could best protect that market by expanding our presence; or
    
    a film licensing zone is currently underserved by an exhibitor.
   Acquisitions
   Average Screens/Theatres
    
    Screens
    
    TheatreTotal at January 1, 2003
    
    
    308
    
    
    
    2,262
    
    
    
    7.3New Construction
    
    
    2
    
    
    
    31Closures
    
    
    (11
    )
    
    
    (40
    )Total at December 31, 2003
    
    
    299
    
    
    
    2,253
    
    
    
    7.5New Construction
    
    
    3
    
    
    
    41Closures
    
    
    (20
    )
    
    
    (106
    )Total at December 31, 2004
    
    
    282
    
    
    
    2,188
    
    
    
    7.8Acquisition of GKC Theatres
    
    
    30
    
    
    
    263New Construction
    
    
    10
    
    
    
    134Reopens
    
    
    2
    
    
    
    16Closures
    
    
    (23
    )
    
    
    (126
    )Total at December 31, 2005
    
    
    301
    
    
    
    2,475
    
    
    
    8.2
 5




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Operations
   Box office admissions.
  Concessions.
   Other revenues. ®
 Film Licensing
  6




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Industry
    
    
    
    
    
    Carmike Cinemas1.
    
    Star Wars
    
    
    1.
    
    
    Star Wars2.
    
    Harry Potter: The Goblet of Fire
    
    
    2.
    
    
    Harry Potter: The Goblet of Fire3.
    
    Chronicles of Narnia
    
    
    3.
    
    
    Chronicles of Narnia4.
    
    War of the Worlds
    
    
    4.
    
    
    War of the Worlds5.
    
    King Kong
    
    
    5.
    
    
    Madagascar6.
    
    Wedding Crashers
    
    
    6.
    
    
    Wedding Crashers7.
    
    Charlie and the Chocolate Factory
    
    
    7.
    
    
    Charlie and the Chocolate Factory8
    
    Batman Begins
    
    
    8
    
    
    The Longest Yard9.
    
    Madagascar
    
    
    9.
    
    
    Hitch10.
    
    Mr. & Mrs. Smith
    
    
    10.
    
    
    Mr. & Mrs. Smith
 Film Rental Fees
  Film Licensing Zones
  Relationship With Distributors
   7




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Digital Cinema
    Management Information Systems
   Competition
     8




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Regulatory Environment
     Employees
  Legal Proceedings
  9




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Trademarks and Trade-Names
  Website Access
   Our Reorganization
      10




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ITEM 1A. RISK FACTORS
  Our business will be adversely affected if there is a decline in the number of motion pictures
available for screening or in the appeal of motion pictures to our patrons.
  Our substantial lease and debt obligations could impair our financial flexibility and our
competitive position.
  
    
    term loans in the aggregate amount of $321.4 million outstanding as of June 30, 2006;
    
    a revolving credit facility providing for borrowings of up to $50.0 million, of which no
amounts were outstanding as of June 30, 2006; and
    
    financing obligations of $214.0 million as of December 31, 2005 inclusive of interest
but net of $57.8 million which is expected to be settled through non-cash consideration
consisting of property subject to financing obligations.
   
    
    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 by, for example, limiting our ability to
enter into new markets or renovate our theatres.
  Our common stock is currently listed for quotation on the Nasdaq National Market. If we were
unable to maintain our listing on the Nasdaq National Market, it may be more difficult for our
stockholders to sell our stock in the public market.
  11




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We may not generate sufficient cash flow to meet our needs.
  Our business is subject to significant competitive pressures.
    12




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Our revenues vary significantly depending upon the timing of the motion picture releases by
distributors.
  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.
     13




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We may be unable to fund our additional capital needs.
    We may be limited in our ability to utilize, or may not be able to utilize, net operating loss
carryforwards to reduce our future tax liability.
   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.
   14




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Our success depends on our ability to retain key personnel.
  We face uncertainties related to digital cinema.
  A prolonged economic downturn could materially affect our business by reducing amounts consumers
spend on attending movies.
  Compliance with the ADA could require us to incur significant capital expenditures and litigation
costs in the future.
   We are subject to other federal, state and local laws which limit the manner in which we may
conduct our business.
  Disruption of our relationship with our primary concession suppliers could harm our margins on
concessions.
  15




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Our development of new theatres poses a number of risks.
   If we determine that assets are impaired, we will be required to recognize a charge to earnings.
   If we fail to remediate our system of disclosure controls and procedures and internal controls over
financial reporting, we may not be able to accurately report our financial results in a timely
manner.
  16




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Our growth strategy includes acquisitions. We may not be able to identify suitable acquisition
candidates, complete acquisitions or integrate acquisitions successfully.
  Our business makes us vulnerable to future fears of terrorism.
  Our certificate of incorporation and bylaws contain provisions that make it more difficult to
effect a change in control of the Company.
   
 ITEM 1B. UNRESOLVED STAFF COMMENTS.
  
 ITEM 2. PROPERTIES.
  17




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ITEM 3. LEGAL PROCEEDINGS.
    
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  EXECUTIVE OFFICERS OF THE REGISTRANT
  Name
    
    Age
    
    TitleMichael W. Patrick
    
    
    56
    
    
    President, Chief Executive Officer and Chairman of the Board of DirectorsFred W. Van Noy
    
    
    49
    
    
    Senior Vice President, Chief Operating Officer and DirectorRichard B. Hare
    
    
    39
    
    
    Senior Vice President  Finance, Treasurer and Chief Financial OfficerAnthony J. Rhead
    
    
    65
    
    
    Senior Vice President  Entertainment/ Digital CinemaLee Champion
    
    
    55
    
    
    Senior Vice President, General Counsel and SecretaryH. Madison Shirley
    
    
    54
    
    
    Senior Vice President  Concessions and Assistant Secretary
 18




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Name
    
    Age
    
    TitleGary F. Krannacker
    
    
    43
    
    
    Vice President  General Manager Theatre OperationsLarry B. Collins
    
    
    59
    
    
    Vice President  FilmJeffrey A. Cole
    
    
    46
    
    
    Assistant Vice President, Controller, and Chief Accounting Officer
 Michael W. Patrick,
 Fred W. Van Noy
 Richard B. Hare
 Anthony J. Rhead,
 Lee Champion,
 H. Madison Shirley
 Gary F. Krannacker
 Larry B. Collins,
 Jeffrey A. Cole,
 19




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
  2005
    
    High
    
    LowFourth Quarter
    
    $
    27.24
    
    
    $
    21.80Third Quarter
    
    
    30.95
    
    
    
    21.65Second Quarter
    
    
    37.44
    
    
    
    30.68First Quarter
    
    
    37.28
    
    
    
    34.00
 2004
    
    High
    
    LowFourth Quarter
    
    $
    39.01
    
    
    $
    34.90Third Quarter
    
    
    39.00
    
    
    
    32.68Second Quarter
    
    
    41.84
    
    
    
    33.80First Quarter
    
    
    38.95
    
    
    
    31.29
    
 ITEM 6. SELECTED FINANCIAL DATA.
   20




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For the Year Ended December 31,2001(1)(2)
    
    
    2002(1)(2)
    
    
    2003(2)
    
    
    2004(2)
    
    
    2005(2)(unaudited)
    
    
    (unaudited)
    
    
    (restated)
    
    
    (restated)(restated)
    
    
    (restated)(in millions, except per share and operating data)Statement of Operations Data:Revenues:Admissions
    
    $
    311.8
    
    
    $
    342.8
    
    
    $
    332.1
    
    
    $
    331.5
    
    
    $
    309.4Concessions and other (3)
    
    
    145.1
    
    
    
    163.6
    
    
    
    161.0
    
    
    
    163.8
    
    
    
    159.5Total revenues (3)
    
    
    456.9
    
    
    
    506.4
    
    
    
    493.1
    
    
    
    495.3
    
    
    
    468.9Costs and expenses:Film exhibition costs
    
    
    171.2
    
    
    
    188.7
    
    
    
    180.4
    
    
    
    174.7
    
    
    
    168.3Concession costs
    
    
    20.2
    
    
    
    19.2
    
    
    
    18.0
    
    
    
    16.9
    
    
    
    16.4Other theatre operating costs
    
    
    177.9
    
    
    
    175.1
    
    
    
    175.4
    
    
    
    178.0
    
    
    
    186.0General and administrative expenses
    
    
    8.8
    
    
    
    15.0
    
    
    
    15.4
    
    
    
    19.2
    
    
    
    19.8Depreciation and amortization (4)
    
    
    43.0
    
    
    
    33.5
    
    
    
    32.5
    
    
    
    33.8
    
    
    
    37.2Gain on sales of property and equipment and
termination of capital lease (3)
    
    
    
    
    
    
    (0.7
    )
    
    
    (3.0
    )
    
    
    (2.4
    )
    
    
    (2.6
    )Impairment of long-lived assets (5)
    
    
    116.5
    
    
    
    (0.3
    )
    
    
    1.1
    
    
    
    0.9
    
    
    
    2.5Total costs and expenses
    
    
    537.6
    
    
    
    430.5
    
    
    
    419.8
    
    
    
    421.1
    
    
    
    427.6Operating income (loss)
    
    
    (80.7
    )
    
    
    76.0
    
    
    
    73.3
    
    
    
    74.2
    
    
    
    41.3Interest expense
    
    
    12.8
    
    
    
    110.1
    
    
    
    47.5
    
    
    
    30.1
    
    
    
    35.3Loss (gain) on extinguishment of debt
    
    
    (1.9
    )
    
    
    
    
    
    
    
    
    
    
    9.3
    
    
    
    5.8Income (loss) before reorganization costs and income taxes
    
    
    (91.6
    )
    
    
    (34.1
    )
    
    
    25.8
    
    
    
    34.8
    
    
    
    0.2Reorganization (costs) benefit
    
    
    (19.5
    )
    
    
    (20.5
    )
    
    
    4.1
    
    
    
    12.4
    
    
    
    2.4Income (loss) before income taxes and cumulative effect
of change in accounting principle(10)
    
    
    (111.1
    )
    
    
    (54.6
    )
    
    
    29.9
    
    
    
    47.2
    
    
    
    2.6Income tax expense (benefit) (8)
    
    
    
    
    
    
    (14.7
    )
    
    
    (77.7
    )
    
    
    19.3
    
    
    
    2.3Income (loss) before cumulative effect of change in
accounting principle (10)
    
    
    (111.1
    )
    
    
    (39.9
    )
    
    
    107.6
    
    
    
    27.9
    
    
    
    0.3Cumulative effect of change in accounting principle (9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Net income (loss)
    
    $
    (111.1
    )
    
    $
    (39.9
    )
    
    $
    107.6
    
    
    $
    27.9
    
    
    $
    0.2Weighted average common shares outstanding (in thousands):Basic
    
    
    11,344
    
    
    
    9,195
    
    
    
    8,991
    
    
    
    11,704
    
    
    
    12,194Diluted
    
    
    11,344
    
    
    
    9,195
    
    
    
    9,448
    
    
    
    12,480
    
    
    
    12,704Earnings (loss) per common share:Basic
    
    $
    (9.80
    )
    
    $
    (4.34
    )
    
    $
    11.97
    
    
    $
    2.39
    
    
    $
    0.01Diluted
    
    $
    (9.80
    )
    
    $
    (4.34
    )
    
    $
    11.39
    
    
    $
    2.24
    
    
    $
    0.01Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.53
    
    
    $
    0.70Balance Sheet Data:Cash and cash equivalents
    
    $
    94.2
    
    
    $
    53.5
    
    
    $
    41.2
    
    
    $
    56.9
    
    
    $
    23.6Property and equipment, net (5)
    
    
    481.0
    
    
    
    465.6
    
    
    
    448.3
    
    
    
    467.7
    
    
    
    569.9Total assets
    
    
    651.7
    
    
    
    583.8
    
    
    
    635.2
    
    
    
    651.8
    
    
    
    738.1Total debt (6)
    
    
    79.0
    
    
    
    442.1
    
    
    
    403.4
    
    
    
    342.9
    
    
    
    432.0Liabilities subject to compromise
    
    
    508.1
    
    
    
    37.4
    
    
    
    21.5
    
    
    
    1.3
    
    
    
    Accumulated deficit
    
    
    (155.6
    )
    
    
    (195.5
    )
    
    
    (87.8
    )
    
    
    (59.9
    )
    
    
    (59.7
    )Total stockholders equity
    
    $
    3.7
    
    
    $
    13.0
    
    
    $
    126.7
    
    
    $
    243.1
    
    
    $
    232.7Other Financial Data:Net cash provided by operating activities
    
    $
    49.2
    
    
    $
    18.1
    
    
    $
    53.1
    
    
    $
    50.6
    
    
    $
    42.9Net cash used in investing activities
    
    
    (1.0
    )
    
    
    (14.6
    )
    
    
    (14.2
    )
    
    
    (43.7
    )
    
    
    (146.5
    )Net cash provided by (used in) financing activities
    
    
    (6.6
    )
    
    
    (44.2
    )
    
    
    (51.1
    )
    
    
    8.8
    
    
    
    70.3Capital expenditures
    
    $
    9.2
    
    
    $
    18.1
    
    
    $
    20.9
    
    
    $
    47.0
    
    
    $
    87.6Operating Data:Theatres at period end (7)
    
    
    323
    
    
    
    308
    
    
    
    299
    
    
    
    282
    
    
    
    301Screens at period end (7)
    
    
    2,333
    
    
    
    2,262
    
    
    
    2,253
    
    
    
    2,188
    
    
    
    2,475Average screens in operation
    
    
    2,386
    
    
    
    2,274
    
    
    
    2,252
    
    
    
    2,207
    
    
    
    2,383Average screens per theatre
    
    
    7.2
    
    
    
    7.3
    
    
    
    7.5
    
    
    
    7.8
    
    
    
    8.2Total attendance (in thousands)
    
    
    64,621
    
    
    
    69,997
    
    
    
    67,189
    
    
    
    63,260
    
    
    
    57,866Average ticket price
    
    $
    4.83
    
    
    $
    4.90
    
    
    $
    4.93
    
    
    $
    5.17
    
    
    $
    5.36Average concession sales per patron
    
    $
    2.10
    
    
    $
    2.17
    
    
    $
    2.18
    
    
    $
    2.33
    
    
    $
    2.52
 21




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(1)
    
    See Notes 2, 3 and 4 of the notes to our audited annual consolidated financial statements
with respect to our bankruptcy and financial reporting in accordance with Statement of
Position 90-7. See Note 3 of the notes to our audited annual consolidated financial statements
with respect to reorganization costs incurred while in bankruptcy.(2)
    
    See Note 1 of the notes to our audited annual consolidated financial statements with respect
to our restatement of prior period amounts.(3)
    
    Gain on sales of property and equipment for the year ended December 31, 2002 as filed with
the SEC, was previously reported in concessions and other revenues. It has been reclassified
in the foregoing table.(4)
    
    Goodwill amortization of $1.5 million is included for the year ended December 31, 2001.(5)
    
    See Notes 3 and 6 of the notes to our audited annual consolidated financial statements with
respect to impairments of long-lived assets and restructuring charges.(6)
    
    Includes current maturities of long-term indebtedness, capital lease obligations and
long-term trade payables; excludes long-term trade payables and liabilities subject to
compromise.(7)
    
    These amounts exclude theatres which we closed upon approval of the Bankruptcy Court as
follows: 17 theatres and 81 screens through December 31, 2001 and an additional eight theatres
and 44 screens through December 31, 2002.(8)
    
    For the period ended December 31, 2003, we determined that it is more likely than not that
certain deferred tax assets would be realized in the future and accordingly, it was
appropriate to release the valuation allowance of $83.9 million resulting in the recognition
of a tax benefit of $77.7 million.(9)
    
    See the caption Recent Accounting Pronouncements in Note 2 of the notes to our audited
annual consolidated financial statements with respect to our adoption of FIN 47, Accounting
for Conditional Asset Retirement Obligations.(10)
    
    Due to rounding, certain amounts do not total properly. 
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 Restatements
  
    
    Where separation of the ground lease and building lease elements of a theatre lease
were required pursuant to the provisions of Statement of Financial Accounting Standards
(SFAS) No. 13, Accounting for Leases(SFAS 13), we had utilized a pro rata method to
fragment leases into building and land elements. The land lease should have been
determined by applying an appropriate incremental borrowing rate to the fair value of the
land with the remaining lease payments being applied to the lease of the building.
    
    For purposes of determining whether the lease is a capital lease because the present
value of the minimum lease payments exceeds 90% of the fair value of the leased property,
we used an incorrect incremental borrowing rate. Similarly, to the extent the lease was
determined to be a capital lease, the same incorrect rate was utilized to record the
capital lease obligation.
    
    For certain leases, we incorrectly utilized a period exceeding the term of the lease
for purposes of amortizing leasehold improvements or capital lease assets. Adjustments
were recorded to reflect the amounts computed using the correct lease term.
 22




---



##### Table of Contents




    
    We did not properly re-assess lease classification upon modification of the terms of
certain leases. Accordingly, in some cases, the classification of the leases may have
been incorrectly recorded in the financial statements and/or amounts related to the
capital leases were not correctly adjusted for such modification.
    
    We did not correctly account for certain build-to-suit arrangements in which, for
financial reporting purposes, we were considered the owner of these assets during the
construction period. Upon completion of the construction projects, we determined that we
were unable to meet the requirements for sale-leaseback treatment; accordingly, project
costs funded by the landlord should have been recorded as financing obligations.
    
    We incorrectly capitalized interest on payments we made for construction of
lessor-owned assets under lease arrangements in which we were not considered the owner of
the project for financial reporting purposes. Additionally, for one build-to-suit
construction project, we utilized an incorrect interest rate for purposes of capitalizing
interest, and incorrectly capitalized interest over periods in which construction
activity had been deferred for reasons other than normal construction delays.
    
    We included contingent payments under lease arrangements classified as capital leases
or financing obligations as rent expense, rather than interest expense.
    
    We did not revise deferred rental liability calculations to reflect modifications of
the terms of certain operating leases.
    
    We incorrectly reported the cost of our contribution to lessor assets through the
funding of project costs as leasehold improvements, rather than as building costs, assets
under capital lease or prepaid rent, as appropriate under each arrangement.
    Basic
    
    
    Diluted2003
    
    $
    0.40
    
    
    $
    0.392004
    
    $
    (0.04
    )
    
    $
    (0.04
    )
  Results of Operations
 Financial Reporting During Reorganization
 Financial Reporting
by Entities in Reorganization under the Bankruptcy Code,
 23




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##### Table of Contents



Seasonality
  Revenues
  Expenses
     Net Operating Losses
    24




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##### Table of Contents



Operating Statement Information
  For the Year EndedDecember 31,2005
    
    2004
    
    2003(restated)
    
    (restated)Revenues:Admissions
    
    
    66.0
    %
    
    
    66.9
    %
    
    
    67.3
    %Concessions and other
    
    
    34.0
    
    
    
    33.1
    
    
    
    32.7Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Costs and expenses:Film exhibition costs (1)(2)
    
    
    54.4
    
    
    
    52.7
    
    
    
    54.3Concessions costs (2)
    
    
    10.3
    
    
    
    10.3
    
    
    
    11.2Other theatre operating costs
    
    
    39.7
    
    
    
    35.9
    
    
    
    35.6General and administrative expenses
    
    
    4.2
    
    
    
    3.9
    
    
    
    3.1Depreciation and amortization
    
    
    7.9
    
    
    
    6.8
    
    
    
    6.6Gain on sales of property and equipment and
termination of capital lease
    
    
    (0.6
    )
    
    
    (0.5
    )
    
    
    (0.6
    )Impairment of long-lived assets
    
    
    0.5
    
    
    
    0.2
    
    
    
    0.2Total costs and expenses
    
    
    91.2
    
    
    
    85.0
    
    
    
    85.1Operating income
    
    
    8.8
    
    
    
    15.0
    
    
    
    14.9Interest expense
    
    
    7.5
    
    
    
    6.1
    
    
    
    9.6Loss on extinguishment of debt
    
    
    1.2
    
    
    
    1.9
    
    
    
    Income before reorganization benefit, income taxes,
and cumulative effect of change in accounting
principle
    
    
    0.1
    
    
    
    7.0
    
    
    
    5.3Reorganization benefit
    
    
    0.5
    
    
    
    2.5
    
    
    
    0.8Income before income taxes and cumulative effect of
change in accounting principle
    
    
    0.6
    
    
    
    9.5
    
    
    
    6.1Income tax expense (benefit)
    
    
    0.5
    
    
    
    3.9
    
    
    
    (15.7
    )Income before cumulative effect of change in
accounting principle
    
    
    
    
    
    
    5.6
    
    
    
    21.8Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    Net income available for common stockholders
    
    
    
    %
    
    
    5.6
    %
    
    
    21.8
    %
 
 (1)
    
    Film exhibition costs include advertising expenses net of co-op reimbursements.(2)
    
    All costs are expressed as a percentage of total revenues, except film exhibition costs,
which are expressed as a percentage of admissions revenues, and concession costs, which are
expressed as a percentage of concession and other revenues. 25




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##### Table of Contents



Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
 Revenues
  For Years ended December 31,2005(1)
    
    2004Average theatres
    
    
    299
    
    
    
    288Average screens
    
    
    2,383
    
    
    
    2,207Average attendance per screen
    
    
    24,283
    
    
    
    28,661Average ticket price
    
    $
    5.35
    
    
    $
    5.17Average concession sales per patron
    
    $
    2.52
    
    
    $
    2.33Total attendance (in thousands)
    
    
    57,866
    
    
    
    63,260Total revenues (in thousands)
    
    $
    468,894
    
    
    $
    495,337
 
 (1)
    
    Includes 30 theatres and 263 screens acquired in connection with our acquisition of GKC
Theatres.   Cost of operations
  For Years ended December 31,% VarianceFavorable(in thousands)
    
    2005
    
    2004
    
    (Unfavorable)(restated)Film exhibition costs
    
    $
    168,251
    
    
    $
    174,693
    
    
    
    3.7
    %Concession costs
    
    $
    16,379
    
    
    $
    16,881
    
    
    
    3.0
    %Other theatre operating costs
    
    $
    185,978
    
    
    $
    178,025
    
    
    
    (4.5
    %)General and administrative expenses
    
    $
    19,819
    
    
    $
    19,301
    
    
    
    (2.7
    %)Depreciation and amortization
    
    $
    37,214
    
    
    $
    33,765
    
    
    
    (10.2
    %)Gain on sales of property and equipment and termination of capital lease
    
    $
    2,599
    
    
    $
    2,412
    
    
    
    7.8
    %Impairment of long-lived assets
    
    $
    2,527
    
    
    $
    892
    
    
    
    (183.3
    %)
 26




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##### Table of Contents



Operating Income.
 Interest expense
 Loss on extinguishment of debt.
 Reorganization costs
 27




---



##### Table of Contents



Income
tax expense
 Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
 Revenues
  For Years ended December 31,2004
    
    2003Average theatres
    
    
    288
    
    
    
    303Average screens
    
    
    2,207
    
    
    
    2,252Average attendance per screen
    
    
    28,661
    
    
    
    29,830Average ticket price
    
    $
    5.17
    
    
    $
    4.93Average concession sales per patron
    
    $
    2.33
    
    
    $
    2.18Total attendance (in thousands)
    
    
    63,260
    
    
    
    67,189Total revenues (in thousands)
    
    $
    495,337
    
    
    $
    493,085
   Cost of operations
  For Years ended December 31,% VarianceFavorable(in thousands)
    
    2004
    
    2003
    
    (Unfavorable)(restated)
    
    (restated)Film exhibition costs
    
    $
    174,693
    
    
    $
    180,403
    
    
    
    3.2
    %Concession costs
    
    $
    16,881
    
    
    $
    17,985
    
    
    
    6.1
    %Other theatre operating costs
    
    $
    178,025
    
    
    $
    175,413
    
    
    
    (1.5
    %)General and administrative expenses
    
    $
    19,301
    
    
    $
    15,336
    
    
    
    (25.9
    %)Depreciation and amortization
    
    $
    33,765
    
    
    $
    32,505
    
    
    
    (3.9
    %)Gain on sales of property and equipment and termination of capital lease
    
    $
    2,412
    
    
    $
    3,023
    
    
    
    (20.2
    %)Impairment of long-lived assets
    
    $
    892
    
    
    $
    1,148
    
    
    
    22.3
    %
  28




---



##### Table of Contents



Operating
Income.
 Interest expense
 Loss on extinguishment of debt.
 Reorganization costs
 Income
tax expense
 29




---



##### Table of Contents



Liquidity and Capital Resources
 General
         30




---



##### Table of Contents



Material Credit Agreements and Covenant Compliance
  Recent Financing Transactions
 Senior Secured Credit Facilities
   
    
    a $170.0 million seven year term loan facility used to finance the transactions described
below;
    
    a $185.0 million seven year delayed-draw term loan facility, with a twenty- four month
commitment available to finance permitted acquisitions and related fees and expenses; and
    
    a $50.0 million five year revolving credit facility available for general corporate
purposes.
      31




---



##### Table of Contents




    
    pay dividends or make any other restricted payments;
    
    incur additional indebtedness;
    
    create liens on our assets;
    
    make certain investments;
    
    sell or otherwise dispose of assets;
    
    consolidate, merge or otherwise transfer all or any substantial part of our assets;
    
    enter into transactions with our affiliates; and
    
    engage in any sale-leaseback, synthetic lease or similar transaction involving any of our assets.
    32




---



##### Table of Contents




    
    our failure to pay principal on the loans when due and payable, or its failure to pay
interest on the loans or to pay certain fees and expenses (subject to applicable grace
periods);
    
    the occurrence of a change of control (as defined in the credit agreement); or
    
    a breach or default by us or our subsidiaries on the payment of principal of any
Indebtedness (as defined in the credit agreement) in an aggregate amount greater than $5.0
million.
  Subsequent Event of Default
      33




---



##### Table of Contents



7.50% Senior Subordinated Notes
   
    
    make restricted payments;
    
    create liens on our assets;
    
    consolidate, merge or otherwise transfer or sell all or substantially all of our assets;
    
    engage in certain sales of less than all or substantially all of our assets;
    
    incur additional indebtedness;
    
    issue certain types of stock; and
    
    enter into transactions with affiliates.
      Subsequent Event of Default
  34




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##### Table of Contents



Contractual Obligations
  Payments Due by Period (in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    More than1 year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    TotalTerm loan credit agreement (1)
    
    $
    1,671
    
    
    $
    3,341
    
    
    $
    3,341
    
    
    $
    157,872
    
    
    $
    166,2257.50% senior subordinated notes (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    150,000Long-term interest payments (3)
    
    
    23,004
    
    
    
    45,685
    
    
    
    45,179
    
    
    
    47,333
    
    
    
    161,201Long-term financing obligations (4)
    
    
    9,381
    
    
    
    18,843
    
    
    
    19,485
    
    
    
    166,337
    
    
    
    214,046Capital lease obligations
    
    
    6,757
    
    
    
    14,034
    
    
    
    13,710
    
    
    
    62,582
    
    
    
    97,083Operating leases
    
    
    41,080
    
    
    
    77,619
    
    
    
    69,938
    
    
    
    273,923
    
    
    
    462,560Employment agreement with Chief Executive Officer (5)
    
    
    850
    
    
    
    1,700
    
    
    
    1,700
    
    
    
    
    
    
    
    4,250Total contractual cash obligations
    
    $
    82,743
    
    
    $
    161,222
    
    
    $
    153,353
    
    
    $
    858,047
    
    
    $
    1,255,365
 
 (1)
    
    The term loan has a maturity date of May 19, 2012.(2)
    
    The maturity date for the 7.50% senior subordinated notes was February 15, 2014.(3)
    
    Long-term interest payments include payments for certain variable rate obligations. These
payments were calculated based on rates in effect at December 31, 2005.(4)
    
    Long-term financing obligations exclude $57.8 million which is expected to be settled through
non-cash consideration consisting of property subject to financing obligations.(5)
    
    The employment agreement with our Chief Executive Officer provides for compensation of
$850,000 per year for five years commencing January 31, 2002. The term is automatically
extended each December 31 for an additional year unless either party provides required notice.
The above table does not include bonus payments of up to 50% of our Chief Executive Officers
base salary if certain performance goals are achieved or the amounts equal to 10% of his
taxable annual compensation which are paid pursuant to a deferred compensation arrangement.  Pro Forma Payments Due by Period (in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    More than1 year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    TotalTerm loan credit agreement (1)
    
    $
    1,671
    
    
    $
    3,341
    
    
    $
    3,341
    
    
    $
    157,872
    
    
    $
    166,225Delayed-draw term loan credit agreement (2)
    
    
    780
    
    
    
    3,120
    
    
    
    3,120
    
    
    
    148,980
    
    
    
    156,000Long-term interest payments (3)
    
    
    23,004
    
    
    
    45,685
    
    
    
    45,179
    
    
    
    47,333
    
    
    
    161,201Long-term financing obligations (4)
    
    
    9,381
    
    
    
    18,843
    
    
    
    19,485
    
    
    
    166,337
    
    
    
    214,046Capital lease obligations
    
    
    6,757
    
    
    
    14,034
    
    
    
    13,710
    
    
    
    62,582
    
    
    
    97,083Operating leases
    
    
    41,080
    
    
    
    77,619
    
    
    
    69,938
    
    
    
    273,923
    
    
    
    462,560Employment agreement with Chief Executive Officer (5)
    
    
    850
    
    
    
    1,700
    
    
    
    1,700
    
    
    
    
    
    
    
    4,250Total contractual cash obligations
    
    $
    83,523
    
    
    $
    164,342
    
    
    $
    156,473
    
    
    $
    857,027
    
    
    $
    1,261,365
 35




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##### Table of Contents



(1)
    
    The term loan has a maturity date of May 19, 2012.(2)
    
    The delayed-draw term loan credit agreement has a maturity date of May 19, 2012.(3)
    
    Long-term interest payments include payments for certain variable rate obligations. These
payments were calculated based on rates in effect at December 31, 2005.(4)
    
    Long-term financing obligations exclude $57.8 million which is expected to be settled through
non-cash consideration consisting of property subject to financing obligations.(5)
    
    The employment agreement with our Chief Executive Officer provides for compensation of
$850,000 per year for five years commencing January 31, 2002. The term is automatically
extended each December 31 for an additional year unless either party provides required notice.
The above table does not include bonus payments of up to 50% of our Chief Executive Officers
base salary if certain performance goals are achieved or the amounts equal to 10% of his
taxable annual compensation which are paid pursuant to a deferred compensation arrangement. Off-Balance Sheet Arrangements
  Asset Impairments
   in millions (except number of theatres and screens)
    
    2005
    
    
    2004
    
    
    2003Reduction in carrying values
    
    $
    6.2
    
    
    $
    4.0
    
    
    $
    3.0Reduction in accumulated depreciation and amortization
    
    
    (3.7
    )
    
    
    (3.1
    )
    
    
    (1.9
    )Impairment charge included in operations
    
    $
    2.5
    
    
    $
    0.9
    
    
    $
    1.1Number of theatres affected
    
    
    8
    
    
    
    9
    
    
    
    4Number of screens affected
    
    
    55
    
    
    
    30
    
    
    
    27
  Critical Accounting Policies
  36




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##### Table of Contents



Revenue Recognition
  Expenses
  Property and Equipment
   Building and improvements
    
    20-30 yearsLeasehold improvements*
    
    15-30 yearsCapital leases*
    
    11-25 yearsEquipment
    
    5-15 years
 
 *
    
    Number of years is based on the lesser of the useful life or the reasonably assured term of the
applicable lease. Impairment of Long-lived Assets, Including Goodwill
 Goodwill and
Other Intangible Assets
 Accounting for
the Impairment or Disposal of Long-Lived Assets
 37




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##### Table of Contents



Bankruptcy Matters
  Leases
    Percentage Rent
  Financing Obligations
 The Effect of Lessee Involvement in Asset
Construction Accounting
for Leases:
 38




---



##### Table of Contents



Sale-Leaseback Transactions Involving Real Estate: Sales-Type Leases of Real Estate;
Definition of the Lease Term; and Initial Direct Costs of Direct Financing Leases
 Income Taxes
 Accounting for Income Taxes
 Impact of Recently Issued Accounting Standards
 Accounting for Conditional Asset Retirement Obligations Accounting for Asset Retirement Obligations
  Share-Based Payment Accounting for Stock Issued to Employees
   39




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##### Table of Contents



Consolidation of
Variable Interest Entities (an Interpretation of ARB. 51)
 Accounting for Uncertainty in Income
Taxes  an Interpretation of Statement of Financial Accounting Standards 109
   Recent Developments
      40




---



##### Table of Contents



Information About Forward-Looking Statements
   
    
    our ability to comply with covenants contained in our credit agreement;
    
    our ability to remediate the material weaknesses in our internal control over financial
reporting or the effectiveness of any remediation measures we may undertake;
    
    our ability to maintain our NASDAQ listing;
    
    the availability of suitable motion pictures for exhibition in our markets;
    
    competition in our markets;
    
    competition with other forms of entertainment;
    
    identified weaknesses in internal controls and procedures under Section 404 of the Sarbanes-Oxley Act of 2002;
    
    the effect of our leverage on our financial condition; and
    
    other factors, including the risk factors discussed in Item 1A in this Annual Report on Form 10-K.
 41




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
   
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
  Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
    
    
    43Consolidated Balance Sheets
    
    
    46Consolidated Statements of Operations
    
    
    47Consolidated Statements of Cash Flows
    
    
    48Consolidated Statements of Stockholders Equity
    
    
    49Notes to Consolidated Financial Statements
    
    
    50
 42




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
   Consolidated financial statements and financial statement schedule
 
 Accounting for Conditional Asset Retirement Obligations
 Internal control over financial reporting
 Internal Control  Integrated Framework
   43




---



##### Table of Contents



1.
    
    The Company did not maintain a sufficient complement of personnel with appropriate
skills, training and Company-specific experience in the selection, application and
implementation of generally accepted accounting principles commensurate with the Companys
financial reporting requirements. This control deficiency contributed to the material
weaknesses described below. Additionally, this control deficiency could result in a
misstatement of the Companys accounts and disclosures that would result in a material
misstatement to the Companys interim or annual consolidated financial statements that
would not be prevented or detected. Accordingly, management has determined that this
control deficiency constitutes a material weakness and contributed to the following
material weaknesses.2.
    
    The Company did not maintain effective controls over the financial reporting process.
Specifically, effective controls were not designed and in place to ensure the completeness
and accuracy of supporting schedules and underlying data for routine journal entries and
journal entries recorded as part of the Companys period-end closing and consolidation
process related to all significant accounts and disclosures. This control deficiency
resulted in the restatement of the Companys interim consolidated financial statements for
the quarters ended March 31, June 30, and September 30, 2005 and audit adjustments to the
Companys 2005 annual consolidated financial statements to correct errors related to the
recording of directors fees, discount ticket revenue, capitalized interest, deferred tax
assets and compensation expense primarily affecting accounts payable, general and
administrative expense, admissions revenue, deferred income, interest expense, property,
plant and equipment, accrued expenses and paid in capital. Additionally, this control
deficiency could result in a misstatement of the aforementioned accounts and disclosures
which would result in a material misstatement to the Companys annual or interim
consolidated financial statements that would not be prevented or detected. Accordingly,
management has determined that this control deficiency constitutes a material weakness.3.
    
    The Company did not maintain effective controls over the accounting for leases.
Specifically, the Companys controls over its selection, application and monitoring of its
accounting policies related to the effect of lessee involvement in asset construction,
lease incentives, lease modifications, amortization of leasehold improvements, and deferred
rent were not effective to ensure the accurate accounting for leases entered into. This
control deficiency resulted in the restatement of the Companys 2004 and 2003 annual
consolidated financial statements and its interim consolidated financial statements for the
first three quarters of 2005 and all 2004 quarters and audit adjustments to the 2005
consolidated financial statements to correct errors related to lease accounting primarily
affecting property, plant and equipment, financing obligations, deferred rent, prepaid
rent, rent expense, interest expense and depreciation expense. Additionally, this control
deficiency could result in a misstatement of the aforementioned accounts and disclosures
that would result in a material misstatement to the Companys annual or interim
consolidated financial statements that would not be prevented or detected. Accordingly,
management has determined that this control deficiency constitutes a material weakness.4.
    
    The Company did not maintain effective controls over the completeness and accuracy of
income taxes. Specifically, the Company did not maintain effective controls over the
preparation and review of income taxes payable, deferred income tax assets and liabilities
and the related income tax provision. This control deficiency resulted in the restatement of the
Companys 2004 and 2003 annual consolidated financial statements and the Companys
first two quarters of 2005 and all 2004 quarters and review or audit adjustments to the third
and fourth quarters of 2005. This control deficiency could result in a
misstatement of income taxes payable, deferred income tax assets and liabilities and the
related income tax provision that would result in a material misstatement of the Companys
annual or interim consolidated financial statements that would not be prevented or
detected. Accordingly, management has determined that this control
deficiency constitutes a material weakness.
  44




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##### Table of Contents



Internal Control  Integrated Framework Internal Control  Integrated Framework
 
 45




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS
 CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands, except share data)
 December 31,2005
    
    
    2004(restated)Assets:Current assets:Cash and cash equivalents
    
    $
    23,609
    
    
    $
    56,944Restricted cash
    
    
    3,602
    
    
    
    Accounts and notes receivable
    
    
    2,056
    
    
    
    1,830Inventories
    
    
    1,802
    
    
    
    1,301Deferred income tax asset
    
    
    6,029
    
    
    
    6,355Prepaid expenses
    
    
    6,287
    
    
    
    6,252Total current assets
    
    
    43,385
    
    
    
    72,682Other assets:Investment in and advances to unconsolidated affiliates
    
    
    3,763
    
    
    
    2,179Deferred income tax asset
    
    
    42,344
    
    
    
    51,247Assets held for sale
    
    
    5,434
    
    
    
    6,534Other
    
    
    32,702
    
    
    
    28,074Total other assets
    
    
    84,243
    
    
    
    88,034Property and equipment:Land
    
    
    62,807
    
    
    
    47,639Construction in progress
    
    
    26,376
    
    
    
    19,696Building and improvements
    
    
    316,161
    
    
    
    227,836Leasehold improvements
    
    
    130,605
    
    
    
    127,567Assets under capital leases
    
    
    89,651
    
    
    
    88,860Equipment
    
    
    216,346
    
    
    
    198,005Total property and equipment
    
    
    841,946
    
    
    
    709,603Accumulated depreciation and amortization
    
    
    (271,999
    )
    
    
    (241,918
    )Property and equipment (net of accumulated depreciation and amortization)
    
    
    569,947
    
    
    
    467,685Goodwill
    
    
    38,460
    
    
    
    23,354Other acquired intangible assets (net of accumulated amortization)
    
    
    2,082
    
    
    
    Total assets
    
    $
    738,117
    
    
    $
    651,755Liabilities and stockholders equity:Current liabilities:Accounts payable
    
    $
    23,516
    
    
    $
    22,453Dividends payable
    
    
    2,154
    
    
    
    2,128Accrued expenses
    
    
    42,443
    
    
    
    34,939Current maturities of long-term debt, capital leases and long-term financing obligations
    
    
    2,435
    
    
    
    1,587Total current liabilities
    
    
    70,548
    
    
    
    61,107Long-term liabilities:Long-term debt, less current maturities
    
    
    313,774
    
    
    
    248,000Capital leases and long-term financing obligations, less current maturities
    
    
    115,809
    
    
    
    93,303Other
    
    
    5,269
    
    
    
    4,904Total long-term liabilities
    
    
    434,852
    
    
    
    346,207Liabilities subject to compromise
    
    
    
    
    
    
    1,348Commitments and contingencies (see Note 14)
    
    
    
    
    
    
    Stockholders equity:Preferred stock, $1.00 par value, authorized 1,000,000 shares, none outstanding at December 31,
2005 and 2004
    
    
    
    
    
    
    Common stock, $0.03 par value, authorized 20,000,000 shares, 12,455,622 shares issued and
12,309,002 shares outstanding at December 31, 2005 and 12,162,622 shares issued and outstanding
as of December 31, 2004
    
    
    374
    
    
    
    365Treasury stock, 146,620 shares at cost
    
    
    (5,210
    )
    
    
    Paid-in capital
    
    
    297,256
    
    
    
    302,608Accumulated deficit
    
    
    (59,703
    )
    
    
    (59,880
    )Total stockholders equity
    
    
    232,717
    
    
    
    243,093Total liabilities and stockholders equity
    
    $
    738,117
    
    
    $
    651,755
 The accompanying notes are an integral part of these consolidated financial statements
 46




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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS
 CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands, except per share data)
 Year Ended December 31,2005
    
    
    2004
    
    
    2003(restated)
    
    
    (restated)Revenues:Admissions
    
    $
    309,402
    
    
    $
    331,479
    
    
    $
    332,070Concessions and other
    
    
    159,492
    
    
    
    163,858
    
    
    
    161,015468,894
    
    
    
    495,337
    
    
    
    493,085Costs and expenses:Film exhibition costs
    
    
    168,251
    
    
    
    174,693
    
    
    
    180,403Concession costs
    
    
    16,379
    
    
    
    16,881
    
    
    
    17,985Other theatre operating costs
    
    
    185,978
    
    
    
    178,025
    
    
    
    175,413General and administrative expenses
    
    
    19,819
    
    
    
    19,301
    
    
    
    15,336Depreciation and amortization
    
    
    37,214
    
    
    
    33,765
    
    
    
    32,505Gain on sales of property and equipment and termination of capital lease
    
    
    (2,599
    )
    
    
    (2,412
    )
    
    
    (3,023
    )Impairment of long-lived assets
    
    
    2,527
    
    
    
    892
    
    
    
    1,148427,569
    
    
    
    421,145
    
    
    
    419,767Operating income
    
    
    41,325
    
    
    
    74,192
    
    
    
    73,318Interest expense
    
    
    35,284
    
    
    
    30,073
    
    
    
    47,496Loss on extinguishment of debt
    
    
    5,795
    
    
    
    9,313
    
    
    
    Income before reorganization benefit, income taxes and cumulative effect of
change in accounting principle
    
    
    246
    
    
    
    34,806
    
    
    
    25,822Reorganization benefit
    
    
    2,388
    
    
    
    12,397
    
    
    
    4,109Income before income taxes and cumulative effect of change in accounting principle
    
    
    2,634
    
    
    
    47,203
    
    
    
    29,931Income tax expense (benefit)
    
    
    2,369
    
    
    
    19,262
    
    
    
    (77,726
    )Income before cumulative effect of change in accounting principle
    
    
    265
    
    
    
    27,941
    
    
    
    107,657Cumulative effect of change in accounting principle (net of taxes)
    
    
    (88
    )
    
    
    
    
    
    
    Net income available for common stockholders
    
    $
    177
    
    
    $
    27,941
    
    
    $
    107,657Weighted average shares outstanding:Basic
    
    
    12,194
    
    
    
    11,704
    
    
    
    8,991Diluted
    
    
    12,704
    
    
    
    12,480
    
    
    
    9,448Income per common share  Basic:Income before cumulative effect of change in accounting principle
    
    $
    0.02
    
    
    $
    2.39
    
    
    $
    11.97Cumulative effect of change in accounting principle (net of taxes)
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    0.00Basic earnings per share
    
    $
    0.01
    
    
    $
    2.39
    
    
    $
    11.97Income per common share  Diluted:Income before cumulative effect of change in accounting principle
    
    $
    0.02
    
    
    $
    2.24
    
    
    $
    11.39Cumulative effect of change in accounting principle (net of taxes)
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    0.00Diluted earnings per share
    
    $
    0.01
    
    
    $
    2.24
    
    
    $
    11.39Dividends declared
    
    $
    0.70
    
    
    $
    0.53
    
    
    $
    
 The accompanying notes are an integral part of these consolidated financial statements.
 47




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands)
 Year Ended December 31,2005
    
    
    2004
    
    
    2003(restated)
    
    
    (restated)Operating activitiesNet income available for common stockholders
    
    $
    177
    
    
    $
    27,941
    
    
    
    107,657Adjustments to reconcile net income available for common stockholders to net
cash provided by operating activities:Depreciation and amortization
    
    
    37,214
    
    
    
    33,765
    
    
    
    32,505Amortization of debt issuance costs
    
    
    2,226
    
    
    
    1,693
    
    
    
    668Impairment of long-lived assets
    
    
    2,527
    
    
    
    892
    
    
    
    1,148Loss on extinguishment of debt
    
    
    3,820
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    2,238
    
    
    
    18,665
    
    
    
    (78,226
    )Stock-based compensation
    
    
    3,274
    
    
    
    5,757
    
    
    
    6,021Non-cash reorganization items
    
    
    (2,388
    )
    
    
    (12,397
    )
    
    
    (4,109
    )Cumulative effect of change in accounting principle
    
    
    140
    
    
    
    
    
    
    
    Gain on sales of property and equipment and termination of capital lease
    
    
    (2,599
    )
    
    
    (2,412
    )
    
    
    (3,023
    )Changes in operating assets and liabilities, net of effect of acquisition:Accounts and notes receivable and inventories
    
    
    45
    
    
    
    507
    
    
    
    244Prepaid expenses and other assets
    
    
    (11,501
    )
    
    
    (3,418
    )
    
    
    (4,577
    )Accounts payable
    
    
    (885
    )
    
    
    (4,308
    )
    
    
    (4,584
    )Accrued expenses and other liabilities
    
    
    8,574
    
    
    
    (16,068
    )
    
    
    (628
    )Net cash provided by operating activities
    
    
    42,862
    
    
    
    50,617
    
    
    
    53,096Investing activitiesPurchases of property and equipment
    
    
    (87,559
    )
    
    
    (46,971
    )
    
    
    (20,934
    )Acquisition of GKC Theatres stock, net of cash acquired
    
    
    (61,596
    )
    
    
    
    
    
    
    Funding of GKC acquisition escrow account
    
    
    (3,200
    )
    
    
    
    
    
    
    Funding of other restricted cash
    
    
    (402
    )
    
    
    
    
    
    
    Acquisition of partnership
    
    
    
    
    
    
    (1,333
    )
    
    
    Proceeds from sale of property and equipment
    
    
    6,268
    
    
    
    4,577
    
    
    
    6,722Net cash used in investing activities
    
    
    (146,489
    )
    
    
    (43,727
    )
    
    
    (14,212
    )Financing activitiesConsolidated Debt:Additional borrowing, net of debt issuance costs
    
    
    182,000
    
    
    
    250,000
    
    
    
    Repayments of long-term debt
    
    
    (115,090
    )
    
    
    (324,443
    )
    
    
    (41,366
    )Repayments of liabilities subject to compromise
    
    
    (958
    )
    
    
    (7,776
    )
    
    
    (11,737
    )Repayments of capital lease and long-term financing obligations
    
    
    (1,507
    )
    
    
    (2,222
    )
    
    
    (2,674
    )Proceeds from long-term financing obligations
    
    
    19,648
    
    
    
    8,460
    
    
    
    4,638Issuance of common stock
    
    
    
    
    
    
    89,053
    
    
    
    Purchase of treasury stock
    
    
    (5,210
    )
    
    
    
    
    
    
    Dividends paid
    
    
    (8,591
    )
    
    
    (4,254
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    70,292
    
    
    
    8,818
    
    
    
    (51,139
    )Increase (decrease) in cash and cash equivalents
    
    
    (33,335
    )
    
    
    15,708
    
    
    
    (12,255
    )Cash and cash equivalents at beginning of year
    
    
    56,944
    
    
    
    41,236
    
    
    
    53,491Cash and cash equivalents at end of year
    
    $
    23,609
    
    
    $
    56,944
    
    
    $
    41,236SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for:Interest (including amounts capitalized of $1,971, $502 and $468 during
2005, 2004 and 2003, respectively)
    
    $
    39,546
    
    
    $
    36,573
    
    
    $
    47,997Income taxes
    
    $
    345
    
    
    $
    500
    
    
    $
    Schedule of non-cash investing and financing activities:Assets acquired through capital lease obligations and operating leases
converted to financing obligations
    
    $
    4,077
    
    
    $
    8,974
    
    
    $
    825Dividends declared not yet payable
    
    $
    2,154
    
    
    $
    2,128
    
    
    $
    
 The accompanying notes are an integral part of these consolidated financial statements.
 48




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##### Table of Contents



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands)
 Paid in
    
    
    AccumulatedCommon Stock
    
    
    Treasury Stock
    
    
    Capital
    
    
    Deficit
    
    
    TotalShares
    
    
    Amount
    
    
    Shares
    
    
    AmountBalance at January 1, 2003, as
originally reported
    
    
    9,088
    
    
    $
    273
    
    
    
    
    
    
    
    
    
    
    $
    208,249
    
    
    $
    (180,704
    )
    
    $
    27,818Restatement adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,774
    )
    
    
    (14,774
    )Balance at January 1, 2003 (restated)
    
    
    9,088
    
    
    
    273
    
    
    
    
    
    
    
    
    
    
    
    208,249
    
    
    
    (195,478
    )
    
    
    13,044Net income (restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107,657
    
    
    
    107,657Stock-based compensation, net
    
    
    60
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    6,021
    
    
    
    
    
    
    
    6,023Balance at December 31, 2003 (restated)
    
    
    9,148
    
    
    
    275
    
    
    
    
    
    
    
    
    
    
    
    214,270
    
    
    
    (87,821
    )
    
    
    126,724Stock issuance
    
    
    3,015
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    88,963
    
    
    
    
    
    
    
    89,053Net income (restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,941
    
    
    
    27,941Dividend declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,382
    )
    
    
    
    
    
    
    (6,382
    )Stock-based compensation, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,757
    
    
    
    
    
    
    
    5,757Balance at December 31, 2004 (restated)
    
    
    12,163
    
    
    
    365
    
    
    
    
    
    
    
    
    
    
    
    302,608
    
    
    
    (59,880
    )
    
    
    243,093Stock issuance
    
    
    293
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177
    
    
    
    177Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (147
    )
    
    
    (5,210
    )
    
    
    
    
    
    
    
    
    
    
    (5,210
    )Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,617
    )
    
    
    
    
    
    
    (8,617
    )Stock-based compensation, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,274
    
    
    
    
    
    
    
    3,274Balance at December 31, 2005
    
    
    12,456
    
    
    $
    374
    
    
    
    (147
    )
    
    $
    (5,210
    )
    
    $
    297,256
    
    
    $
    (59,703
    )
    
    $
    232,717
 The accompanying notes are an integral part of these consolidated financial statements.
 49




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 CARMIKE CINEMAS, INC. and SUBSIDIARIES
December 31, 2005
 NOTE 1  RESTATEMENT
  
    
    Where separation of the ground lease and building lease elements of a theatre lease
was required pursuant to the provisions of Statement of Financial Standards (SFAS) No.
13, Accounting for Leases(SFAS 13), as amended, we had utilized a pro rata method to
fragment leases into building and land elements. The land lease should have been
determined by applying an appropriate incremental borrowing rate to the fair value of the
land with the remaining lease payments being applied to the lease of the building.
    
    For purposes of determining whether the lease is a capital lease because the present
value of the minimum lease payments exceeds 90% of the fair value of the leased property,
we used an incorrect incremental borrowing rate. Similarly, to the extent the lease was
determined to be a capital lease, the same incorrect rate was utilized to record the
capital lease obligation.
    
    For certain leases, we incorrectly utilized a period exceeding the term of the lease
for purposes of amortizing leasehold improvements or capital lease assets. Adjustments
were recorded to reflect the amounts computed using the correct lease term.
    
    We did not correctly re-assess lease classification upon modification of the terms of
certain leases. Accordingly, in some cases, the classification of the leases may have
been incorrectly recorded in the financial statements and/or amounts related to the
capital leases were not correctly adjusted for such modification.
    
    We did not correctly account for certain build-to-suit arrangements in which, for
financial reporting purposes, we were considered the owner of these assets during the
construction period. Upon completion of the construction projects, we determined that we
were unable to meet the requirements for sale-leaseback treatment under SFAS No. 98,
Accounting for Leases: Sale-Leaseback Transactions Involving Real Estate: Sales-Type
Leases of Real Estate; Definition of the Lease Term; and Initial Direct Costs of Direct
Financing Leases(SFAS 98); accordingly, project costs funded by the landlord should
have been recorded as financing obligations.
    
    We incorrectly capitalized interest on payments we made for construction of
lessor-owned assets under lease arrangements in which we were not considered the owner of
the project for financial reporting purposes. Additionally, for one build-to-suit
construction project, we utilized an incorrect interest rate for purposes of capitalizing
interest, and incorrectly capitalized interest over periods in which construction
activity had been deferred for reasons other than normal construction delays.
    
    We included contingent payments under lease arrangements classified as capital leases
or financing obligations as rent expense, rather than interest expense.
    
    We did not revise deferred rental liability calculations to reflect modifications of
the terms on certain of our operating leases.
    
    We incorrectly reported the cost of our contribution to lessor assets through the
funding of project costs as leasehold improvements, rather than as building costs, assets
under capital lease or prepaid rent, as appropriate under each arrangement.
  50




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Basic
    
    Diluted2003
    
    $
    0.40
    
    
    $
    0.392004
    
    $
    (0.04
    )
    
    $
    (0.04
    )
  As of and for the Year EndedDecember 31, 2004(in thousands)As PreviouslyReported (1)
    
    As RestatedBalance Sheet:Current deferred income tax asset
    
    
    
    
    
    
    6,355Current assets
    
    
    66,119
    
    
    
    72,682Deferred income tax asset
    
    
    50,601
    
    
    
    51,247Other assets
    
    
    21,027
    
    
    
    28,074Property and equipment, net
    
    
    470,128
    
    
    
    467,685Total assets
    
    
    639,855
    
    
    
    651,755Current maturities of long-term debt,
capital leases and long-term financing
obligations
    
    
    (2,872
    )
    
    
    (1,587
    )Accrued expenses
    
    
    (35,582
    )
    
    
    (34,939
    )Current liabilities
    
    
    (63,292
    )
    
    
    (61,107
    )Capital lease and long-term financing obligations
less current maturities
    
    
    (72,530
    )
    
    
    (93,303
    )Other liabilities
    
    
    (1,348
    )
    
    
    (4,904
    )Paid-in-capital
    
    
    (308,990
    )
    
    
    (302,608
    )Accumulated deficit
    
    $
    54,670
    
    
    $
    59,880Consolidated Statement of Operations:Concessions and other revenue
    
    $
    162,996
    
    
    $
    163,858Other theatre operating costs
    
    
    179,127
    
    
    
    178,025Depreciation and amortization
    
    
    33,801
    
    
    
    33,765Gain on sale of property and equipment and
termination of capital lease
    
    
    (1,051
    )
    
    
    (2,412
    )Operating income
    
    
    71,050
    
    
    
    74,192Interest expense
    
    
    26,104
    
    
    
    30,073Income tax expense
    
    
    19,603
    
    
    
    19,262Net income available for common stockholders
    
    $
    28,427
    
    
    $
    27,941Income per common share  Basic
    
    $
    2.43
    
    
    $
    2.39
 51




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##### Table of Contents



As of and for the Year EndedDecember 31, 2004(in thousands)As PreviouslyReported (1)
    
    As RestatedEarnings per common share  Diluted
    
    $
    2.28
    
    
    $
    2.23Consolidated Statement of Cash Flows:Net cash provided by operating activities
    
    $
    59,397
    
    
    $
    50,617Net cash used in investing activities
    
    $
    (35,400
    )
    
    $
    (43,727
    )Net cash provided by (used in) financing activities
    
    $
    (8,289
    )
    
    $
    8,818
 
 (1)
    
    As previously reported in our Form 10-K/A Amendment No. 2, for the year ended December 31,
2004, filed on November 9, 2005. Year EndedDecember 31, 2003(in thousands)As PreviouslyReported (1)
    
    As RestatedConsolidated Statement of Operations:Other theatre operating costs
    
    $
    176,781
    
    
    $
    175,413Depreciation and amortization
    
    
    32,764
    
    
    
    32,505Operating income
    
    
    71,692
    
    
    
    73,318Interest expense
    
    
    42,874
    
    
    
    47,496Income tax benefit
    
    
    (71,062
    )
    
    
    (77,726
    )Net Income available for common stockholders
    
    
    103,989
    
    
    
    107,657Income per common share  Basic
    
    $
    11.57
    
    
    $
    11.97Income per common share  Diluted
    
    $
    11.01
    
    
    $
    11.40Consolidated Statement of Stockholders EquityBalance at January 1, 2003, Accumulated Deficit
    
    $
    (180,704
    )
    
    $
    (195,478
    )Total Stockholders Equity at January 1, 2003
    
    $
    27,818
    
    
    $
    13,044Consolidated Statement of Cash Flows:Net cash provided by operating activities
    
    $
    53,263
    
    
    $
    53,096Net cash used in investing activities
    
    $
    (12,206
    )
    
    $
    (14,212
    )Net cash used in financing activities
    
    $
    (53,312
    )
    
    $
    (51,139
    )
 
 (1)
    
    As previously reported in our Form 10-K/A Amendment No. 2, for the year ended December 31,
2004, filed on November 9, 2005. NOTE 2  SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
 Financial Reporting by Entities in Reorganization under the Bankruptcy Code,
 52




---



##### Table of Contents



Description of Business
  Revenue Recognition
  Expenses
     Principles of Consolidation
  Use of Estimates
  53




---



##### Table of Contents



Cash and Cash Equivalents
  Debt Issuance Costs
   Inventories
  Property and Equipment
   Building and improvements
    
    20-30 yearsLeasehold improvements*
    
    15-30 yearsCapital leases*
    
    11-25 yearsEquipment
    
    5-15 years
 
 *
    
    Number of years is based on the lesser of the useful life of the asset or the term of the
applicable lease.  Goodwill and Other Acquired Intangible Assets
 Goodwill and
Other Intangible Assets
  54




---



##### Table of Contents



Goodwill and other intangible assets
(in thousands)
 Goodwill
    
    
    Other IntangiblesBalance at December 31, 2004
    
    $
    23,354
    
    
    $
    Purchased goodwill
    
    
    15,106
    
    
    
    Lease intangibles
    
    
    
    
    
    
    1,774Trade names
    
    
    
    
    
    
    308Balance at December 31, 2005
    
    $
    38,460
    
    
    $
    2,082
   Assets Held for Sale
 Accounting for the Impairment or Disposal of Long-Lived Assets
 Deferred Revenue
  Impairment of Property and Equipment
   Income Taxes
 Accounting for Income Taxes
 55




---



##### Table of Contents



Advertising
  Stock Based Compensation
 Accounting for
Stock Based Compensation-Transition and Disclosure Accounting for Stock-based Compensation
 Accounting for Stock Issued to Employees
  2005
    
    2004
    
    2003Expected life (years)
    
    
    9
    
    
    
    9
    
    
    
    9Risk-free interest rate
    
    
    4.40
    %
    
    
    4.34
    %
    
    
    4.34
    %Dividend yield
    
    
    2.76
    %
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    0.40
    
    
    
    0.40
    
    
    
    0.40
  Year Ended December 31,2005
    
    
    2004
    
    
    2003(restated)
    
    
    (restated)Net income (loss):As reported
    
    $
    177
    
    
    $
    27,941
    
    
    $
    107,657Plus: Expense recorded on
deferred stock compensation,
net of related tax effects
    
    
    3,253
    
    
    
    3,408
    
    
    
    3,764Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects
    
    
    (4,672
    )
    
    
    (3,551
    )
    
    
    (2,983
    )Pro forma  for SFAS 123
    
    $
    (1,242
    )
    
    $
    27,798
    
    
    $
    108,438Basic net earnings (loss) per share:As reported
    
    $
    0.01
    
    
    $
    2.39
    
    
    $
    11.97Pro forma  for SFAS 123
    
    $
    (0.10
    )
    
    $
    2.38
    
    
    $
    12.06Diluted net earnings (loss) per share:As reported
    
    $
    0.01
    
    
    $
    2.24
    
    
    $
    11.39Pro forma  for SFAS 123
    
    $
    (0.10
    )
    
    $
    2.23
    
    
    $
    11.48
 56




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##### Table of Contents



Earnings Per Share
 Earnings Per Share
 Year Ended December 31,(in 000s except per share data)
    
    2005
    
    
    2004
    
    
    2003Weighted average shares outstanding
    
    
    12,293
    
    
    
    11,863
    
    
    
    9,150Less restricted stock issued (1)
    
    
    (99
    )
    
    
    (159
    )
    
    
    (159
    )Basic divisor
    
    
    12,194
    
    
    
    11,704
    
    
    
    8,991Dilutive Shares:Restricted stock awards (1)
    
    
    476
    
    
    
    733
    
    
    
    444Stock options
    
    
    34
    
    
    
    43
    
    
    
    13Diluted divisor
    
    
    12,704
    
    
    
    12,480
    
    
    
    9,448Earnings per share:Basic
    
    $
    0.01
    
    
    $
    2.39
    
    
    $
    11.97Diluted
    
    $
    0.01
    
    
    $
    2.24
    
    
    $
    11.39
 
 (1)
    
    Primarily pertains to stock grants made to certain members of senior management; the issuance
of the underlying shares is dependent upon the achievement of specific performance goals. Leases
    Percentage Rent
  57




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##### Table of Contents



Financing Obligations
 The Effect of Lessee Involvement in Asset
Construction Accounting
for Leases: Sale-Leaseback Transactions Involving Real Estate: Sales-Type Leases of Real Estate;
Definition of the Lease Term; and Initial Direct Costs of Direct Financing Leases
 Interest Expense
  Indemnification
  Benefit Plans
  Recent Accounting Pronouncements
 Accounting for Conditional Asset Retirement Obligations
  Share-Based Payment
  58




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##### Table of Contents



Consolidation of
Variable Interest Entities
 Accounting for Uncertainty in Income
Taxes  an Interpretation of Statement of Financial Accounting Standards 109
   NOTE 3  PROCEEDINGS UNDER CHAPTER 11
   59




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##### Table of Contents




    
    The plan of reorganization provided for the issuance or reservation for future
issuance of ten million (10,000,000) shares of reorganized common stock in the aggregate.
    
    The holders of our 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 common
stock.
    
    The holders of our cancelled Series A preferred stock received in the aggregate
41.2% (4,120,000) of the ten million (10,000,000) shares of reorganized common stock.
    
    Certain holders of $45,685,000 in aggregate principal amount of our cancelled 9
3/8% Senior Subordinated Notes due 2009 issued 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 common stock.
 60




---



##### Table of Contents




    
    We reserved one million (1,000,000) shares of the reorganized common stock for
issuance under the Carmike Cinemas, Inc. 2002 Stock Plan (the 2002 Stock Plan). Under the
2002 Stock Plan, 780,000 shares have been authorized for issuance to Michael W. Patrick
pursuant to his employment agreement and 220,000 shares have been authorized for issuance to
seven other members of senior management.
    
    The holders of Bank Claims in the Chapter 11 Cases received Bank Debt and cash
in the amount of approximately $35 million plus accrued and unpaid post-petition interest on
the Bank Claims from January 15, 2002 to the Reorganization Date. Bank Claims consisted of
claims of certain banks arising under: (i) the Amended and Restated Credit Agreement, dated
as of January 29, 1999, and amended as of March 31, 2000 and (ii) the Term Loan Credit
Agreement dated as of February 25, 1999, as amended as of July 13, 1999, and further amended
as of March 31, 2000, and certain related documents. Bank Debt consisted of borrowings of
approximately $254 million and bears interest, at the greater of: (a) at our option, (i) a
specified base rate plus 3.5% or (ii) LIBOR plus 4.5%; or (b) 7.75% per annum.
    
    We issued $154.3 million of our former 10 3/8% Senior Subordinated Notes due
2009 in exchange for $154.3 million aggregate principal amount of the claims in the Chapter
11 Cases concerning the Original Senior Subordinated Notes.
    
    Leases covering 136 of our underperforming theatres were rejected.
    
    General unsecured creditors received payments in the aggregate of approximately
$53.8 million with an annual interest rate 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, $1.3 million were disputed as of December
31, 2004 and all claims have been satisfied as of December 31, 2005.
    Year Ended December 31,2005
    
    
    2004
    
    
    2003Professional fees
    
    $
    (1,997
    )
    
    $
    30
    
    
    $
    282Change in estimates on claims
    
    
    (391
    )
    
    
    (12,552
    )
    
    
    (4,754
    )Other
    
    
    
    
    
    
    125
    
    
    
    363Total reorganization benefit
    
    $
    (2,388
    )
    
    $
    (12,397
    )
    
    $
    (4,109
    )
  2005
    
    
    2004
    
    
    2003Professional fees
    
    $
    (958
    )
    
    $
    (30
    )
    
    $
    (282
    )Payment of pre-petition liabilities
    
    
    
    
    
    
    (9,300
    )
    
    
    (11,885
    )Other
    
    
    
    
    
    
    (125
    )
    
    
    $
    (958
    )
    
    $
    (9,455
    )
    
    $
    (12,167
    )
 61




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##### Table of Contents



NOTE 4  LIABILITIES SUBJECT TO COMPROMISE
   December 31,2005
    
    
    2004Disputed unsecured claims
    
    $
    
    
    
    $
    1,348
 NOTE 5  ACQUISITION OF GKC THEATRES
 Business Combinations
   Current assets
    
    $
    1,015Land
    
    
    15,049Buildings, leasehold improvements and equipment
    
    
    39,009Goodwill
    
    
    15,106Other intangible assets
    
    
    2,361Other non-current assets
    
    
    123Current liabilities
    
    
    (4,223
    )Non-current deferred tax liabilities
    
    
    (6,844
    )Total purchase price
    
    $
    61,596
 Pro Forma Results of Operations
  62




---



##### Table of Contents



Pro FormaYear Ended
    
    Year EndedDecember 31,
    
    December 31,2005
    
    2004
    
    2005
    
    2004Revenues
    
    $
    468,894
    
    
    $
    495,337
    
    
    $
    485,970
    
    
    $
    550,310Operating income
    
    $
    41,325
    
    
    $
    74,192
    
    
    $
    42,176
    
    
    $
    81,471Net income
    
    $
    177
    
    
    $
    27,941
    
    
    $
    241
    
    
    $
    29,690Earnings per share:Basic
    
    $
    0.01
    
    
    $
    2.39
    
    
    $
    0.02
    
    
    $
    2.54Diluted
    
    $
    0.01
    
    
    $
    2.24
    
    
    $
    0.02
    
    
    $
    2.38
 NOTE 6  IMPAIRMENT OF PROPERTY AND EQUIPMENT
  NOTE 7  OTHER ASSETS
  December 31,2005
    
    
    2004(restated)Prepaid rent  funding of lessors assets
    
    $
    11,232
    
    
    $
    9,778Loan origination fees
    
    
    17,853
    
    
    
    14,567Deposits and binders
    
    
    3,604
    
    
    
    3,689Other
    
    
    13
    
    
    
    40$
    32,702
    
    
    $
    28,074
 NOTE 8  PROPERTY AND EQUIPMENT UNDER CAPITAL LEASES
  December 31,2005
    
    
    2004(restated)Property under capital leases and improvements
    
    $
    89,651
    
    
    $
    88,860Less accumulated amortization
    
    
    (15,714
    )
    
    
    (15,065
    )$
    73,937
    
    
    $
    73,795
 NOTE 9  CAPITALIZED INTEREST AND CASH PAID FOR INTEREST
  63




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##### Table of Contents



Interest
    
    InterestYears ended December 31,
    
    Expensed
    
    Capitalized2005
    
    $
    35,284
    
    
    $
    1,9712004 (restated)
    
    
    30,073
    
    
    
    5022003 (restated)
    
    
    47,496
    
    
    
    468
 NOTE 10  ACCRUED EXPENSES
  December 31,2005
    
    
    2004(restated)Deferred revenues
    
    $
    7,074
    
    
    $
    5,269Accrued rents
    
    
    5,809
    
    
    
    7,660Property taxes
    
    
    9,251
    
    
    
    5,880Accrued interest
    
    
    4,605
    
    
    
    4,714Accrued salaries
    
    
    6,152
    
    
    
    4,781Sales tax
    
    
    2,996
    
    
    
    2,944Income tax
    
    
    1,508
    
    
    
    2,453GKC acquisition deferred payments
    
    
    3,566
    
    
    
    Other accruals
    
    
    1,482
    
    
    
    1,238$
    42,443
    
    
    $
    34,939
 NOTE 11  DEBT
  December 31,2005
    
    
    2004Term loan
    
    $
    166,225
    
    
    $
    Post-bankruptcy Term loan
    
    
    
    
    
    
    99,0007.50% senior subordinated notes
    
    
    150,000
    
    
    
    150,000Industrial revenue bonds; repaid in December 2005
    
    
    
    
    
    
    315316,225
    
    
    
    249,315Current maturities
    
    
    (2,451
    )
    
    
    (1,315
    )$
    313,774
    
    
    $
    248,000
 2005 Financing Transactions
 Senior Secured Credit Facilities
   
    
    a $170.0 million seven year term loan facility used to finance the transactions described
below;
    
    a $185.0 million seven year delayed-draw term loan facility, with a twenty- four month
commitment available to finance permitted acquisitions and related fees and expenses; and
    
    a $50.0 million five year revolving credit facility available for general corporate
purposes.
  64




---



##### Table of Contents




    
    pay dividends or make any other restricted payments;
    
    incur additional indebtedness;
    
    create liens on our assets;
 65




---



##### Table of Contents




    
    make certain investments;
    
    sell or otherwise dispose of assets;
    
    consolidate, merge or otherwise transfer all or any substantial part of our assets;
    
    enter into transactions with our affiliates; and
    
    engage in any sale-leaseback, synthetic lease or similar transaction involving any of our assets.
    
    
    our failure to pay principal on the loans when due and payable, or its failure to pay
interest on the loans or to pay certain fees and expenses (subject to applicable grace
periods);
    
    the occurrence of a change of control (as defined in the credit agreement); or
    
    a breach or default by us or our subsidiaries on the payment of principal of any
Indebtedness (as defined in the credit agreement) in an aggregate amount greater than $5.0
million.
  Subsequent Event of Default
    66




---



##### Table of Contents



7.50% Senior Subordinated Notes
   
    
    make restricted payments;
    
    create liens on our assets;
    
    consolidate, merge or otherwise transfer or sell all or substantially all of our assets;
    
    engage in certain sales of less than all or substantially all of our assets;
    
    incur additional indebtedness;
    
    issue certain types of stock; and
    
    enter into transactions with affiliates.
    67




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##### Table of Contents



Subsequent Event of Default
  Debt Obligations
  After 51 Year
    
    
    2 Years
    
    
    3 Years
    
    
    4 Years
    
    
    5 Years
    
    
    Years
    
    
    TotalTerm loan credit agreement (1)
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    157,870
    
    
    $
    166,225Revolving credit agreement (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.50% senior subordinated notes (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    150,000Total contractual cash obligations
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    307,870
    
    
    $
    316,225
  Pro Forma PresentationAfter 51 Year
    
    
    2 Years
    
    
    3 Years
    
    
    4 Years
    
    
    5 Years
    
    
    Years
    
    
    TotalTerm loan credit agreement (1)
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    1,671
    
    
    $
    157,870
    
    
    $
    166,225Revolving credit agreement (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Delayed-draw term loan credit agreement (4)
    
    $
    780
    
    
    $
    1,560
    
    
    $
    1,560
    
    
    $
    1,560
    
    
    $
    1,560
    
    
    $
    148,980
    
    
    $
    156,000Total contractual cash obligations
    
    $
    2,451
    
    
    $
    3,231
    
    
    $
    3,231
    
    
    $
    3,231
    
    
    $
    3,231
    
    
    $
    306,850
    
    
    $
    322,225
 68




---



##### Table of Contents



(1)
    
    The term loan has a maturity date of May 19, 2012.(2)
    
    The revolving credit agreement has a maturity date of May 19, 2010.(3)
    
    The maturity date for the 7.50% senior subordinated notes was February 15, 2014.(4)
    
    The delayed-draw term loan credit agreement has a maturity date of May 19, 2012.  NOTE 12  INCOME TAXES
    Year Ended December 31,2005
    
    
    2004
    
    
    2003(restated)
    
    
    (restated)Current:Federal
    
    $
    131
    
    
    $
    597
    
    
    $
    500State
    
    
    
    
    
    
    
    
    
    
    Deferred:Federal
    
    
    2,070
    
    
    
    17,421
    
    
    
    (72,750
    )State
    
    
    168
    
    
    
    1,244
    
    
    
    (5,476
    )Total provision for income tax expense (benefit)
    
    $
    2,369
    
    
    $
    19,262
    
    
    $
    (77,726
    )
  Year Ended December 31,2005
    
    
    2004
    
    
    2003(restated)
    
    
    (restated)Pre-tax book income
    
    $
    2,634
    
    
    $
    47,203
    
    
    $
    29,931Federal tax expense
    
    
    922
    
    
    
    16,521
    
    
    
    10,476State tax expense
    
    
    66
    
    
    
    1,180
    
    
    
    748Permanent items (principally related to executive compensation)
    
    
    1,381
    
    
    
    1,561
    
    
    
    (2,155
    )Other
    
    
    
    
    
    
    
    
    
    
    (2,869
    )Change in valuation allowance
    
    
    
    
    
    
    
    
    
    
    (83,926
    )Total tax expense (benefit)
    
    $
    2,369
    
    
    $
    19,262
    
    
    $
    (77,726
    )
  69




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##### Table of Contents



Year EndedDecember 31,2005
    
    
    2004(restated)Alternative minimum tax credit carryforwards
    
    $
    718
    
    
    $
    865Net operating loss carryforwards
    
    
    32,135
    
    
    
    28,857Tax basis of property, equipment and assets over book basis
    
    
    13,944
    
    
    
    22,378Deferred compensation
    
    
    800
    
    
    
    2,255Deferred rent
    
    
    3,909
    
    
    
    3,620Disputed claims
    
    
    
    
    
    
    506Compensation accruals
    
    
    758
    
    
    
    1,121Other
    
    
    1,486
    
    
    
    1,232Total deferred tax asset
    
    
    53,750
    
    
    
    60,834Tax basis of intangible assets under book basis
    
    
    (5,377
    )
    
    
    (3,232
    )Total deferred tax liability
    
    
    (5,377
    )
    
    
    (3,232
    )Net deferred tax asset
    
    $
    48,373
    
    
    $
    57,602
  Year EndedDecember 31,2005
    
    
    2004(restated)Current Assets
    
    $
    6,029
    
    
    $
    6,355Non-Current Assets
    
    
    47,721
    
    
    
    54,479Non-Current Liabilities
    
    
    (5,377
    )
    
    
    (3,232
    )Net Non Current Assets
    
    
    42,344
    
    
    
    51,247Net Deferred Tax Assets
    
    $
    48,373
    
    
    $
    57,602
   NOTE 13  STOCKHOLDERS EQUITY
    December 31,2005
    
    
    2004
    
    
    20032002 Stock Plan
    
    
    536
    
    
    
    796
    
    
    
    840Directors Incentive Plan
    
    
    
    
    
    
    
    
    
    
    60Employee Incentive Plan
    
    
    
    
    
    
    
    
    
    
    1702004 Incentive Stock Plan
    
    
    1,069
    
    
    
    1,055
    
    
    
    1,605
    
    
    
    1,851
    
    
    
    1,070
  70




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##### Table of Contents



Stock Options
   General Stock Option Information
    Weighted
    
    
    WeightedNumber
    
    
    Average
    
    
    Averageof Shares
    
    
    Exercise Price
    
    
    Fair ValueBalance, January 1, 2003
    
    
    10,000
    
    
    $
    19.95
    
    
    $
    11.59Granted
    
    
    335,000
    
    
    $
    29.22
    
    
    $
    16.94Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2003
    
    
    345,000
    
    
    $
    28.95
    
    
    $
    16.78Granted
    
    
    5,000
    
    
    $
    37.46
    
    
    $
    17.54Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2004
    
    
    350,000
    
    
    $
    29.07
    
    
    $
    16.79Granted
    
    
    5,000
    
    
    $
    22.05
    
    
    $
    11.66Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (20,000
    )
    
    $
    35.63
    
    
    $
    20.49Expired
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2005
    
    
    335,000
    
    
    $
    28.58
    
    
    $
    16.50
 71




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeighted AverageNumber of
    
    
    Remaining
    
    
    Number of
    
    
    Weighted AveragePrices
    
    Shares
    
    
    Contractual Life (Years)
    
    
    Shares
    
    
    Fair Value$19.95
    
    
    10,000
    
    
    
    6.62
    
    
    
    10,000
    
    
    $
    11.59$21.40
    
    
    5,000
    
    
    
    7.42
    
    
    
    5,000
    
    
    $
    12.42$21.79
    
    
    150,000
    
    
    
    7.19
    
    
    
    75,000
    
    
    $
    12.82$22.05
    
    
    5,000
    
    
    
    9.87
    
    
    
    5,000
    
    
    $
    11.66$35.63
    
    
    160,000
    
    
    
    7.97
    
    
    
    53,335
    
    
    $
    20.49$37.46
    
    
    5,000
    
    
    
    8.25
    
    
    
    5,000
    
    
    $
    17.54Totals
    
    
    335,000
    
    
    
    7.60
    
    
    
    153,335
    
    
    $
    15.51
 Stock Plans
      72




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##### Table of Contents



Status at December 31, 2005Grants and
    
    
    Shares Earned,
    
    
    Shares Earned
    
    
    SharesForfeitures (1)
    
    
    Pending Vesting
    
    
    and Awarded
    
    
    ForfeitedGrants and forfeitures in 2002:Shares granted to Chief Executive
Officer
    
    
    780,000
    
    
    
    520,000
    
    
    
    260,000Shares granted to senior management
    
    
    220,000
    
    
    
    95,980
    
    
    
    86,250
    
    
    
    37,770Forfeitures
    
    
    (14,250
    )Shares granted to senior management
    
    
    11,000
    
    
    
    11,000Grants and forfeitures in 2003:Forfeitures
    
    
    (15,520
    )Grants and forfeitures in 2004:Shares granted to senior management
    
    
    11,130
    
    
    
    1,130
    
    
    
    10,000Forfeitures
    
    
    (8,000
    )Total grants, net of forfeitures
    
    
    984,360
    
    
    
    628,110
    
    
    
    356,250
    
    
    
    37,770
 
 (1)
    
    There were no grants or forfeitures in 2005.  NOTE 14  COMMITMENTS AND CONTINGENCIES
 Leases
  Operating
    
    
    CapitalLeases
    
    
    Leases2006
    
    $
    41,080
    
    
    $
    6,7572007
    
    
    39,864
    
    
    
    6,9842008
    
    
    37,755
    
    
    
    7,0502009
    
    
    36,283
    
    
    
    6,9562010
    
    
    33,655
    
    
    
    6,754Thereafter
    
    
    273,923
    
    
    
    62,582Total minimum lease payments
    
    $
    462,560
    
    
    
    97,083Less amounts representing interest
    
    
    
    
    
    
    (59,042
    )Present value of future minimum lease payments
    
    
    
    
    
    
    38,041Less current maturities
    
    
    
    
    
    
    906Long-term obligations
    
    
    
    
    
    $
    37,135
 Rent expense
  Financing obligations
  73




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##### Table of Contents



FinancingObligations2006
    
    $
    9,3812007
    
    
    9,4162008
    
    
    9,4272009
    
    
    9,6192010
    
    
    9,866Thereafter
    
    
    224,110Total minimum lease payments
    
    
    271,819Less amounts representing interest
    
    
    (194,067
    )Present value of future minimum lease payments
    
    
    77,752Less current maturities
    
    
    (922
    )Long-term obligations
    
    $
    78,674
 Contingent payments under capital leases and financing obligations
  NOTE 15  CONDENSED FINANCIAL DATA
  74




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##### Table of Contents



Condensed Consolidating Balance Sheets
As of December 31, 2005
 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssets:Current assets:Cash and cash equivalents
    
    $
    17,437
    
    
    $
    6,172
    
    
    $
    
    
    
    $
    23,609Restricted Cash
    
    
    3,602
    
    
    
    
    
    
    
    
    
    
    
    3,602Accounts and notes receivable
    
    
    2,548
    
    
    
    (492
    )
    
    
    
    
    
    
    2,056Inventories
    
    
    160
    
    
    
    1,642
    
    
    
    
    
    
    
    1,802Deferred income tax asset (net)
    
    
    4,549
    
    
    
    1,480
    
    
    
    
    
    
    
    6,029Prepaid expenses
    
    
    2,365
    
    
    
    3,922
    
    
    
    
    
    
    
    6,287Total current assets
    
    
    30,661
    
    
    
    12,724
    
    
    
    
    
    
    
    43,385Other assets:Investment in and advances to unconsolidated affiliates
    
    
    356
    
    
    
    3,407
    
    
    
    
    
    
    
    3,763Investment in subsidiaries and intercompany receivables
    
    
    423,162
    
    
    
    
    
    
    
    (423,162
    )
    
    
    Deferred income tax asset (net)
    
    
    23,580
    
    
    
    18,764
    
    
    
    
    
    
    
    42,344Other
    
    
    23,732
    
    
    
    14,404
    
    
    
    
    
    
    
    38,136Property and equipment (net of accumulated
depreciation)
    
    
    129,521
    
    
    
    440,426
    
    
    
    
    
    
    
    569,947Goodwill
    
    
    5,225
    
    
    
    33,235
    
    
    
    
    
    
    
    38,460Other acquired intangible assets (net of accumulated
amortization)
    
    
    
    
    
    
    2,082
    
    
    
    
    
    
    
    2,082Total assets
    
    $
    636,237
    
    
    $
    525,042
    
    
    $
    (423,162
    )
    
    $
    738,117Liabilities and stockholders equity:Current liabilities:Accounts payable
    
    $
    19,574
    
    
    $
    3,942
    
    
    $
    
    
    
    $
    23,516Dividends payable
    
    
    2,154
    
    
    
    
    
    
    
    
    
    
    
    2,154Accrued expenses
    
    
    31,801
    
    
    
    10,642
    
    
    
    
    
    
    
    42,443Current maturities of long-term debt, capital leases
and long-term financing obligations
    
    
    2,435
    
    
    
    
    
    
    
    
    
    
    
    2,435Total current liabilities
    
    
    55,964
    
    
    
    14,584
    
    
    
    
    
    
    
    70,548Long-term liabilities:Long-term debt, less current maturities
    
    
    313,790
    
    
    
    (16
    )
    
    
    
    
    
    
    313,774Capital leases and long-term financing obligations,
less current maturities
    
    
    28,497
    
    
    
    87,312
    
    
    
    
    
    
    
    115,809Other
    
    
    5,269
    
    
    
    
    
    
    
    
    
    
    
    5,269Intercompany liabilities
    
    
    
    
    
    
    235,033
    
    
    
    (235,033
    )
    
    
    Total long-term liabilities
    
    
    347,556
    
    
    
    322,329
    
    
    
    (235,033
    )
    
    
    434,852Liabilities subject to compromise
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity
    
    
    232,717
    
    
    
    188,129
    
    
    
    (188,129
    )
    
    
    232,717Total liabilities and stockholders equity
    
    $
    636,237
    
    
    $
    525,042
    
    
    $
    (423,162
    )
    
    $
    738,117
 75




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##### Table of Contents



Condensed Consolidating Statements of Operations
For Year Ended December 31, 2005
 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Admissions
    
    $
    58,224
    
    
    $
    251,178
    
    
    $
    
    
    
    $
    309,402Concessions and other
    
    
    52,073
    
    
    
    128,698
    
    
    
    (21,279
    )
    
    
    159,492110,297
    
    
    
    379,876
    
    
    
    (21,279
    )
    
    
    468,894Costs and expenses:Film exhibition costs
    
    
    31,559
    
    
    
    136,692
    
    
    
    
    
    
    
    168,251Concession costs
    
    
    2,952
    
    
    
    13,427
    
    
    
    
    
    
    
    16,379Other theatre operating costs
    
    
    43,272
    
    
    
    163,815
    
    
    
    (21,109
    )
    
    
    185,978General and administrative expenses
    
    
    18,274
    
    
    
    1,715
    
    
    
    (170
    )
    
    
    19,819Depreciation and amortization
    
    
    7,859
    
    
    
    29,355
    
    
    
    
    
    
    
    37,214Gain on sales of property and equipment
    
    
    (765
    )
    
    
    (1,834
    )
    
    
    
    
    
    
    (2,599
    )Impairment of long-lived assets
    
    
    519
    
    
    
    2,008
    
    
    
    
    
    
    
    2,527103,670
    
    
    
    345,178
    
    
    
    (21,279
    )
    
    
    427,569Operating income
    
    
    6,627
    
    
    
    34,698
    
    
    
    
    
    
    
    41,325Interest expense
    
    
    5,740
    
    
    
    29,544
    
    
    
    
    
    
    
    35,284Loss on extinguishment of debt
    
    
    5,795
    
    
    
    
    
    
    
    
    
    
    
    5,795Income before reorganization benefit, income taxes,
and cumulative effect of change in accounting
principle
    
    
    (4,908
    )
    
    
    5,154
    
    
    
    
    
    
    
    246Reorganization benefit
    
    
    2,388
    
    
    
    
    
    
    
    
    
    
    
    2,388Income before income taxes and cumulative effect of
change in accounting principle
    
    
    (2,520
    )
    
    
    5,154
    
    
    
    
    
    
    
    2,634Income tax expense (benefit)
    
    
    (837
    )
    
    
    3,206
    
    
    
    
    
    
    
    2,369Income (loss) before cumulative effect of change in
accounting principle
    
    
    (1,683
    )
    
    
    1,948
    
    
    
    
    
    
    
    265Cumulative effect of change in accounting principle
    
    
    (88
    )
    
    
    
    
    
    
    
    
    
    
    (88
    )Income (loss) before equity in earnings of subsidiaries
    
    
    (1,771
    )
    
    
    1,948
    
    
    
    
    
    
    
    177Equity in earnings of subsidiaries
    
    
    1,948
    
    
    
    
    
    
    
    (1,948
    )
    
    
    Net income available for common stockholders
    
    $
    177
    
    
    $
    1,948
    
    
    $
    (1,948
    )
    
    $
    177
 76




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##### Table of Contents



Condensed Consolidating Statements of Cash Flow
For Year Ended December 31, 2005
 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net income available for common stockholders
    
    $
    177
    
    
    $
    1,948
    
    
    $
    (1,948
    )
    
    $
    177Adjustments to reconcile net income available for
common stockholders to net cash provided by operating
activities:Depreciation and amortization
    
    
    7,859
    
    
    
    29,355
    
    
    
    
    
    
    
    37,214Amortization of debt issuance costs
    
    
    2,226
    
    
    
    
    
    
    
    
    
    
    
    2,226Impairment of long-lived assets
    
    
    519
    
    
    
    2,008
    
    
    
    
    
    
    
    2,527Loss on extinguishment of debt
    
    
    3,820
    
    
    
    
    
    
    
    
    
    
    
    3,820Deferred income taxes
    
    
    (365
    )
    
    
    2,603
    
    
    
    
    
    
    
    2,238Stock-based compensation
    
    
    3,274
    
    
    
    
    
    
    
    
    
    
    
    3,274Non-cash reorganization items
    
    
    (2,388
    )
    
    
    
    
    
    
    
    
    
    
    (2,388
    )Cumulative effect of change in accounting principle
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    140Gain on sales of property and equipment
    
    
    (765
    )
    
    
    (1,834
    )
    
    
    
    
    
    
    (2,599
    )Prepayment penalties on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Changes in operating assets and liabilities, net
of effect of acquisition
    
    
    (74,560
    )
    
    
    68,845
    
    
    
    1,948
    
    
    
    (3,767
    )Net cash provided by (used in) operating activities
    
    
    (60,063
    )
    
    
    102,925
    
    
    
    
    
    
    
    42,862Investing activities:Purchases of property and equipment
    
    
    (31,075
    )
    
    
    (56,484
    )
    
    
    
    
    
    
    (87,559
    )Acquisition of GKC Theatres stock, net of cash
acquired
    
    
    
    
    
    
    (61,596
    )
    
    
    
    
    
    
    (61,596
    )Funding of GKC acquisition escrow account
    
    
    (3,200
    )
    
    
    
    
    
    
    
    
    
    
    (3,200
    )Funding of other restricted cash
    
    
    (402
    )
    
    
    
    
    
    
    
    
    
    
    (402
    )Proceeds from sale of property and equipment
    
    
    1,707
    
    
    
    4,561
    
    
    
    
    
    
    
    6,268Net cash used in investing activities
    
    
    (32,970
    )
    
    
    (113,519
    )
    
    
    
    
    
    
    (146,489
    )Financing activities:Additional borrowing, net of debt issuance costs
    
    
    182,000
    
    
    
    
    
    
    
    
    
    
    
    182,000Repayments of debt
    
    
    (116,204
    )
    
    
    (1,351
    )
    
    
    
    
    
    
    (117,555
    )Proceeds from long-term financing obligations
    
    
    11,248
    
    
    
    8,400
    
    
    
    
    
    
    
    19,648Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (5,210
    )
    
    
    
    
    
    
    
    
    
    
    (5,210
    )Dividends paid
    
    
    (8,591
    )
    
    
    
    
    
    
    
    
    
    
    (8,591
    )Net cash provided by financing activities
    
    
    63,243
    
    
    
    7,049
    
    
    
    
    
    
    
    70,292Decrease in cash and cash equivalents
    
    
    (29,790
    )
    
    
    (3,545
    )
    
    
    
    
    
    
    (33,335
    )Cash and cash equivalents at beginning of year
    
    
    47,227
    
    
    
    9,717
    
    
    
    
    
    
    
    56,944Cash and cash equivalents at end of year
    
    $
    17,437
    
    
    $
    6,172
    
    
    $
    
    
    
    $
    23,609
 77




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##### Table of Contents



Condensed Consolidating Balance Sheets
As of December 31, 2004, as Restated
 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssets:Current assets:Cash and cash equivalents
    
    $
    47,227
    
    
    $
    9,717
    
    
    $
    
    
    
    $
    56,944Accounts and notes receivable
    
    
    1,688
    
    
    
    142
    
    
    
    
    
    
    
    1,830Inventories
    
    
    227
    
    
    
    1,074
    
    
    
    
    
    
    
    1,301Deferred income tax asset (net)
    
    
    5,153
    
    
    
    1,202
    
    
    
    
    
    
    
    6,355Prepaid expenses
    
    
    2,329
    
    
    
    3,923
    
    
    
    
    
    
    
    6,252Total current assets
    
    
    56,624
    
    
    
    16,058
    
    
    
    
    
    
    
    72,682Other assets:Investment in and advances unconsolidated affiliates
    
    
    9,417
    
    
    
    2,092
    
    
    
    (9,330
    )
    
    
    2,179Investment in subsidiaries and intercompany receivable
    
    
    338,488
    
    
    
    2,439
    
    
    
    (340,927
    )
    
    
    Deferred income tax asset (net)
    
    
    22,611
    
    
    
    28,636
    
    
    
    
    
    
    
    51,247Other
    
    
    22,758
    
    
    
    11,850
    
    
    
    
    
    
    
    34,608Property and equipment (net of accumulated
depreciation)
    
    
    107,992
    
    
    
    359,693
    
    
    
    
    
    
    
    467,685Goodwill
    
    
    5,914
    
    
    
    17,440
    
    
    
    
    
    
    
    23,354Total assets
    
    $
    563,804
    
    
    $
    438,208
    
    
    $
    (350,257
    )
    
    $
    651,755Liabilities and stockholders equity:Current liabilities:Accounts payable
    
    $
    17,453
    
    
    $
    5,000
    
    
    $
    
    
    
    $
    22,453Dividends payable
    
    
    2,128
    
    
    
    
    
    
    
    
    
    
    
    2,128Accrued expenses
    
    
    28,543
    
    
    
    6,396
    
    
    
    
    
    
    
    34,939Current maturities of long-term debt, capital leases
and long-term financings obligations
    
    
    1,315
    
    
    
    272
    
    
    
    
    
    
    
    1,587Total current liabilities
    
    
    49,439
    
    
    
    11,668
    
    
    
    
    
    
    
    61,107Long-term liabilities:Long-term debt, less current maturities
    
    
    248,000
    
    
    
    
    
    
    
    
    
    
    
    248,000Capital leases and long-term financing obligations,
less current maturities
    
    
    17,305
    
    
    
    75,998
    
    
    
    
    
    
    
    93,303Other
    
    
    4,619
    
    
    
    285
    
    
    
    
    
    
    
    4,904Intercompany liabilities
    
    
    
    
    
    
    221,283
    
    
    
    (221,283
    )
    
    
    Total long-term liabilities
    
    
    269,924
    
    
    
    297,566
    
    
    
    (221,283
    )
    
    
    346,207Liabilities subject to compromise
    
    
    1,348
    
    
    
    
    
    
    
    
    
    
    
    1,348Stockholders equity
    
    
    243,093
    
    
    
    128,974
    
    
    
    (128,974
    )
    
    
    243,093Total liabilities and stockholders equity
    
    $
    563,804
    
    
    $
    438,208
    
    
    $
    (350,257
    )
    
    $
    651,755
 78




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##### Table of Contents



Condensed Consolidating Statements of Operations
For Year Ended December 31, 2004, as Restated
 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Admissions
    
    $
    65,560
    
    
    $
    265,919
    
    
    $
    
    
    
    $
    331,479Concessions and other
    
    
    54,817
    
    
    
    132,147
    
    
    
    (23,106
    )
    
    
    163,858120,377
    
    
    
    398,066
    
    
    
    (23,106
    )
    
    
    495,337Costs and expenses:Film exhibition costs
    
    
    33,315
    
    
    
    141,378
    
    
    
    
    
    
    
    174,693Concession costs
    
    
    3,119
    
    
    
    13,762
    
    
    
    
    
    
    
    16,881Other theatre operating costs
    
    
    39,889
    
    
    
    160,878
    
    
    
    (22,742
    )
    
    
    178,025General and administrative expenses
    
    
    18,293
    
    
    
    1,372
    
    
    
    (364
    )
    
    
    19,301Depreciation and amortization
    
    
    6,979
    
    
    
    26,786
    
    
    
    
    
    
    
    33,765Gain on sales of property and equipment and
termination of capital lease
    
    
    (23
    )
    
    
    (2,389
    )
    
    
    
    
    
    
    (2,412
    )Impairment of long-lived assets
    
    
    362
    
    
    
    530
    
    
    
    
    
    
    
    892101,934
    
    
    
    342,317
    
    
    
    (23,106
    )
    
    
    421,145Operating income
    
    
    18,443
    
    
    
    55,749
    
    
    
    
    
    
    
    74,192Interest expense
    
    
    1,066
    
    
    
    29,007
    
    
    
    
    
    
    
    30,073Loss on extinguishment of debt
    
    
    9,313
    
    
    
    
    
    
    
    
    
    
    
    9,313Income before reorganization benefit and income taxes
    
    
    8,064
    
    
    
    26,742
    
    
    
    
    
    
    
    34,806Reorganization benefit
    
    
    12,397
    
    
    
    
    
    
    
    
    
    
    
    12,397Income before income taxes
    
    
    20,461
    
    
    
    26,742
    
    
    
    
    
    
    
    47,203Income tax expense
    
    
    8,685
    
    
    
    10,577
    
    
    
    
    
    
    
    19,262Net income
    
    
    11,776
    
    
    
    16,165
    
    
    
    
    
    
    
    27,941Equity in earnings of subsidiaries
    
    
    16,165
    
    
    
    
    
    
    
    (16,165
    )
    
    
    Net income available for common stockholders
    
    $
    27,941
    
    
    $
    16,165
    
    
    $
    (16,165
    )
    
    $
    27,941
 79




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Condensed Consolidating Statements of Cash Flow
For Year Ended December 31, 2004, as Restated
 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net income available for common stockholders
    
    $
    27,941
    
    
    $
    16,165
    
    
    $
    (16,165
    )
    
    $
    27,941Adjustments to reconcile net income available for
common stockholders to net cash provided by
operating activities:Depreciation and amortization
    
    
    6,979
    
    
    
    26,786
    
    
    
    
    
    
    
    33,765Amortization of debt issuance costs
    
    
    1,693
    
    
    
    
    
    
    
    
    
    
    
    1,693Impairment of long-lived assets
    
    
    362
    
    
    
    530
    
    
    
    
    
    
    
    892Deferred income taxes
    
    
    8,854
    
    
    
    9,811
    
    
    
    
    
    
    
    18,665Stock-based compensation
    
    
    5,757
    
    
    
    
    
    
    
    
    
    
    
    5,757Non-cash reorganization items
    
    
    (12,397
    )
    
    
    
    
    
    
    
    
    
    
    (12,397
    )Gain on sales of property and equipment and
termination of capital lease
    
    
    (23
    )
    
    
    (2,389
    )
    
    
    
    
    
    
    (2,412
    )Changes in operating assets and liabilities
    
    
    137
    
    
    
    (39,589
    )
    
    
    16,165
    
    
    
    (23,287
    )Net cash provided by operating activities
    
    
    39,303
    
    
    
    11,314
    
    
    
    
    
    
    
    50,617Investing activities:Purchases of property and equipment
    
    
    (18,168
    )
    
    
    (28,803
    )
    
    
    
    
    
    
    (46,971
    )Acquisition of partnership
    
    
    (1,333
    )
    
    
    
    
    
    
    
    
    
    
    (1,333
    )Proceeds from sale of property and equipment
    
    
    213
    
    
    
    4,364
    
    
    
    
    
    
    
    4,577Net cash used in investing activities
    
    
    (19,288
    )
    
    
    (24,439
    )
    
    
    
    
    
    
    (43,727
    )Financing activities:Additional borrowing, net of debt issuance costs
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    250,000Repayments of debt
    
    
    (332,569
    )
    
    
    (1,872
    )
    
    
    
    
    
    
    (334,441
    )Proceeds from long-term financing obligations
    
    
    
    
    
    
    8,460
    
    
    
    
    
    
    
    8,460Issuance of common stock
    
    
    89,053
    
    
    
    
    
    
    
    
    
    
    
    89,053Dividends paid
    
    
    (4,254
    )
    
    
    
    
    
    
    
    
    
    
    (4,254
    )Net cash provided by financing activities
    
    
    2,230
    
    
    
    6,588
    
    
    
    
    
    
    
    8,818Increase (decrease) in cash and cash equivalents
    
    
    22,245
    
    
    
    (6,537
    )
    
    
    
    
    
    
    15,708Cash and cash equivalents at beginning of year
    
    
    24,982
    
    
    
    16,254
    
    
    
    
    
    
    
    41,236Cash and cash equivalents at end of year
    
    $
    47,227
    
    
    $
    9,717
    
    
    $
    
    
    
    $
    56,944
 80




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Condensed Consolidating Statements of Operations
For Year Ended December 31, 2003, as Restated
 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Admissions
    
    $
    66,057
    
    
    $
    266,013
    
    
    $
    
    
    
    $
    332,070Concessions and other
    
    
    56,130
    
    
    
    128,957
    
    
    
    (24,072
    )
    
    
    161,015122,187
    
    
    
    394,970
    
    
    
    (24,072
    )
    
    
    493,085Costs and expenses:Film exhibition costs
    
    
    33,665
    
    
    
    146,738
    
    
    
    
    
    
    
    180,403Concession costs
    
    
    3,155
    
    
    
    14,830
    
    
    
    
    
    
    
    17,985Other theatre operating costs
    
    
    40,391
    
    
    
    159,094
    
    
    
    (24,072
    )
    
    
    175,413General and administrative expenses
    
    
    15,344
    
    
    
    (8
    )
    
    
    
    
    
    
    15,336Depreciation and amortization
    
    
    6,628
    
    
    
    25,877
    
    
    
    
    
    
    
    32,505Gain on sales of property and equipment
    
    
    (671
    )
    
    
    (2,352
    )
    
    
    
    
    
    
    (3,023
    )Impairment of long-lived assets
    
    
    
    
    
    
    1,148
    
    
    
    
    
    
    
    1,14898,512
    
    
    
    345,327
    
    
    
    (24,072
    )
    
    
    419,767Operating income
    
    
    23,675
    
    
    
    49,643
    
    
    
    
    
    
    
    73,318Interest expense
    
    
    13,877
    
    
    
    33,619
    
    
    
    
    
    
    
    47,496Income before reorganization benefit and income taxes
    
    
    9,798
    
    
    
    16,024
    
    
    
    
    
    
    
    25,822Reorganization benefit
    
    
    4,109
    
    
    
    
    
    
    
    
    
    
    
    4,109Income before income taxes
    
    
    13,907
    
    
    
    16,024
    
    
    
    
    
    
    
    29,931Income tax benefit
    
    
    (29,812
    )
    
    
    (47,914
    )
    
    
    
    
    
    
    (77,726
    )Net income
    
    
    43,719
    
    
    
    63,938
    
    
    
    
    
    
    
    107,657Equity in earnings of subsidiaries
    
    
    63,938
    
    
    
    
    
    
    
    (63,938
    )
    
    
    Net income available for common stockholders
    
    
    107,657
    
    
    
    63,938
    
    
    
    (63,938
    )
    
    
    107,657
 81




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Condensed Consolidating Statements of Cash Flow
For Year Ended December 31, 2003, as Restated
 Carmike
    
    
    GuarantorCinemas, Inc.
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net income available for common stockholders
    
    $
    107,657
    
    
    $
    63,938
    
    
    $
    (63,938
    )
    
    $
    107,657Adjustments to reconcile net income available for
common stockholders to net cash provided by
operating activities:Depreciation and amortization
    
    
    6,628
    
    
    
    25,877
    
    
    
    
    
    
    
    32,505Amortization of debt issuance costs
    
    
    668
    
    
    
    
    
    
    
    
    
    
    
    668Impairment of long-lived assets
    
    
    
    
    
    
    1,148
    
    
    
    
    
    
    
    1,148Deferred income taxes
    
    
    (39,405
    )
    
    
    (38,821
    )
    
    
    
    
    
    
    (78,226
    )Stock-based compensation
    
    
    6,021
    
    
    
    
    
    
    
    
    
    
    
    6,021Non-cash reorganization items
    
    
    (4,109
    )
    
    
    
    
    
    
    
    
    
    
    (4,109
    )Gain on sales of property and equipment
    
    
    (671
    )
    
    
    (2,352
    )
    
    
    
    
    
    
    (3,023
    )Changes in operating assets and liabilities
    
    
    (36,854
    )
    
    
    (36,629
    )
    
    
    63,938
    
    
    
    (9,545
    )Net cash provided by operating activities
    
    
    39,935
    
    
    
    13,161
    
    
    
    
    
    
    
    53,096Investing activities:Purchases of property and equipment
    
    
    (3,460
    )
    
    
    (17,474
    )
    
    
    
    
    
    
    (20,934
    )Proceeds from sale of property and equipment
    
    
    1,967
    
    
    
    4,755
    
    
    
    
    
    
    
    6,722Net cash used in investing activities
    
    
    (1,493
    )
    
    
    (12,719
    )
    
    
    
    
    
    
    (14,212
    )Financing activities:Repayments of debt
    
    
    (53,249
    )
    
    
    (2,528
    )
    
    
    
    
    
    
    (55,777
    )Receipts from long-term financing obligations
    
    
    
    
    
    
    4,638
    
    
    
    
    
    
    
    4,638Net cash (used in) provided by financing activities
    
    
    (53,249
    )
    
    
    2,110
    
    
    
    
    
    
    
    (51,139
    )Increase (decrease) in cash and cash equivalents
    
    
    (14,807
    )
    
    
    2,552
    
    
    
    
    
    
    
    (12,255
    )Cash and cash equivalents at beginning of year
    
    
    39,789
    
    
    
    13,702
    
    
    
    
    
    
    
    53,491Cash and cash equivalents at end of year
    
    $
    24,982
    
    
    $
    16,254
    
    
    
    
    
    
    $
    41,236
 82




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##### Table of Contents



NOTE 16  LITIGATION
    NOTE 17  FINANCIAL INSTRUMENTS
 Concentrations of credit risk
    Cash and cash equivalents:
 Accounts receivable and accounts payable:
 Long-term debt:
 83




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##### Table of Contents



NOTE 18  QUARTERLY RESULTS (UNAUDITED)
   (As Previously Reported)
 1st
    
    
    2nd
    
    
    3rd
    
    
    4thQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    TotalYear ended December 31, 2005Total revenues (1)
    
    $
    101,683
    
    
    $
    119,769
    
    
    $
    116,857
    
    
    
    
    
    
    
    Operating income (1)
    
    
    4,941
    
    
    
    5,742
    
    
    
    11,414
    
    
    
    
    
    
    
    Net income (loss) (2)
    
    
    436
    
    
    
    (2,496
    )
    
    
    1,321
    
    
    
    
    
    
    
    Net income (loss) per common share (3):Basic
    
    $
    0.04
    
    
    $
    (0.20
    )
    
    $
    0.11
    
    
    
    
    
    
    
    Diluted
    
    $
    0.04
    
    
    $
    (0.20
    )
    
    $
    0.10
    
    
    
    
    
    
    
    Year ended December 31, 2004Total revenues
    
    $
    116,928
    
    
    $
    133,096
    
    
    $
    116,928
    
    
    $
    127,523
    
    
    $
    494,475Operating income
    
    
    19,999
    
    
    
    19,594
    
    
    
    11,324
    
    
    
    20,300
    
    
    
    71,217Net income (2)
    
    
    1,689
    
    
    
    10,045
    
    
    
    7,267
    
    
    
    9,426
    
    
    
    28,427Net income per common share (3):Basic
    
    $
    0.16
    
    
    $
    0.84
    
    
    $
    0.61
    
    
    $
    0.81
    
    
    $
    2.43Diluted
    
    $
    0.15
    
    
    $
    0.78
    
    
    $
    0.57
    
    
    $
    0.76
    
    
    $
    2.28
 (As Restated)
 1st
    
    
    2nd
    
    
    3rd
    
    
    4thQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    TotalYear ended December 31, 2005 (4)Total revenues (1)
    
    $
    101,220
    
    
    $
    119,785
    
    
    $
    116,903
    
    
    $
    130,986
    
    
    $
    468,894Operating income (1)
    
    
    5,910
    
    
    
    7,496
    
    
    
    12,153
    
    
    
    15,766
    
    
    
    41,325Net income (loss) (2)
    
    
    324
    
    
    
    (2,379
    )
    
    
    1,042
    
    
    
    1,190
    
    
    
    177Net income (loss) per common share (3):Basic
    
    $
    0.03
    
    
    $
    (0.19
    )
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.01Diluted
    
    $
    0.03
    
    
    $
    (0.19
    )
    
    $
    0.08
    
    
    $
    0.09
    
    
    
    0.01Year ended December 31, 2004 as restated (4)Total revenues
    
    $
    116,928
    
    
    $
    133,189
    
    
    $
    117,089
    
    
    $
    128,131
    
    
    $
    495,337Operating income
    
    
    20,545
    
    
    
    21,531
    
    
    
    11,886
    
    
    
    20,230
    
    
    
    74,192Net income (2)
    
    
    1,270
    
    
    
    10,296
    
    
    
    6,905
    
    
    
    9,470
    
    
    
    27,941Net income per common share (3):Basic
    
    $
    0.12
    
    
    $
    0.86
    
    
    $
    0.58
    
    
    $
    0.78
    
    
    $
    2.39Diluted
    
    $
    0.11
    
    
    $
    0.80
    
    
    $
    0.54
    
    
    $
    0.73
    
    
    $
    2.24
 
 (1)
    
    We acquired GKC Theatres in the second quarter of 2005 which impacted revenues and operating
income (see Note 5 for additional information).(2)
    
    In connection with our asset impairment evaluations, we recognized impairment charges
attributable to theatre released assets in under-performing markets in the fourth quarter of
2005 and 2004 (see Notes 2 and 5 for additional information). 84




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##### Table of Contents



(3)
    
    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.(4)
    
    As described in Note 1, during the second quarter of 2006, we determined that it was
necessary to restate our previously issued financial statements for each of the years ended
December 31, 2004 and 2003, and each of the quarters ended March 31, June 30 and September 30,
2005. Operating income, net income (loss) and net income (loss) per common share have been
restated for each of the quarters ended March 31, June 30 and September 30, 2005 and all
quarters for 2004 as a result of errors in depreciation expense, interest expense and rent
expense accounts for these periods. See Note 1 for detail on the restatements. 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  
 ITEM 9A. CONTROLS AND PROCEDURES.
 Disclosure Controls and Procedures
    Managements Report on Internal Control Over Financial Reporting
  Internal Control Integrated Framework
  85




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##### Table of Contents



1.
    
    We did not maintain a sufficient complement of personnel with appropriate skills,
training and Company-specific experience in the selection, application and implementation
of generally accepted accounting principles commensurate with our financial reporting
requirements. This control deficiency contributed to the material weaknesses described
below. Additionally, this control deficiency could result in a misstatement of accounts
and disclosures that would result in a material misstatement to our interim or annual
consolidated financial statements that would not be prevented or detected. Accordingly,
management has determined that this control deficiency constitutes a material weakness and
contributed to the following material weaknesses.2.
    
    We did not maintain effective control over the recording and processing of journal
entries in our financial reporting process. Specifically, effective controls were not
designed and in place to ensure the completeness and accuracy of supporting schedules and
underlying data for routine journal entries and journal entries recorded as part of our
period-end closing and consolidation process related to all significant accounts and
disclosures. This control deficiency resulted in the restatement of our interim
consolidated financial statements for the first three quarters of 2005 and audit
adjustments to our 2005 annual consolidated financial statements to correct errors related
to the recording of directors fees, discount ticket revenue, capitalized interest, deferred
taxes and compensation expense primarily affecting accounts payable, general and
administrative expense, admissions revenue, deferred income, interest expense, property,
plant and equipment, accrued expenses and paid-in capital. Additionally, this control
deficiency could result in a misstatement of the aforementioned accounts and disclosures
which would result in a material misstatement to our annual or interim consolidated
financial statements that would not be prevented or detected. Accordingly, management has
determined that this control deficiency constitutes a material weakness.3.
    
    We did not maintain effective controls over the accounting for leases. Specifically,
our controls over our selection, application and monitoring of our accounting policies
related to the effect of lessee involvement in asset construction, lease modifications,
amortization of leasehold improvements, and deferred rent were not effective to ensure the
accurate accounting for leases entered into. This control deficiency resulted in the
restatement of our 2004 and 2003 annual consolidated financial statements and our interim
consolidated financial statements for the first three quarters of 2005 and all 2004
quarters and audit adjustments to the 2005 consolidated financial statements to correct
errors related to lease accounting primarily affecting property, plant and equipment,
financing obligations, deferred rent, rent expense, interest expense and depreciation
expense. Additionally, this control deficiency could result in a misstatement of the
aforementioned accounts and disclosures that would result in a material misstatement to our
annual or interim consolidated financial statements that would not be prevented or
detected. Accordingly, management has determined that this control deficiency constitutes a
material weakness.4.
    
    We did not maintain effective controls over the completeness and accuracy of income
taxes. Specifically, we did not maintain effective controls over the preparation and
review of income taxes payable, deferred income tax assets and liabilities and the related
income tax provision. This control deficiency resulted in the
restatement of our 2004 and 2003 annual consolidated financial
statements and our interim consolidated financial statements for the
first two quarters of 2005 and all 2004 quarters and review or audit
adjustments to the third and fourth quarters of 2005. This control deficiency could result in a misstatement of income
taxes payable, deferred income tax assets and liabilities and the related income tax
provision that would result in a material misstatement of the Companys annual or interim
consolidated financial statements that would not be prevented or
detected. Accordingly, management has determined that this control
deficiency constitutes a material weakness.
 Internal Control Integrated Framework
  Plan
of Remediation for Identified Material Weaknesses
  1.
    
    Engaged an outside consultant (other than our independent
registered public accountant) to review and assist management in
accounting for income taxes;
 86




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##### Table of Contents



2.
    
    Formalized processes, procedures and documentation standards relating to the income tax
provision; and3.
    
    Enhanced the levels of review in and accelerated the timing of the preparation of the
quarterly and annual income tax provision.
   1.
    
    Our Controller
reviews and approves all general ledger journal entries.2.
    
    Revised processes, procedures and documentation standards relating to accounting for
lease transactions.3.
    
    Hired new personnel in the accounting and finance areas, including a new Chief
Financial Officer and a new Assistant Controller.
   1.
    
    We will require continuing education during 2006 for our accounting and finance staff to
ensure compliance with current and emerging financial reporting and compliance practices
pertaining to lease transactions.2.
    
    We will require continuing education during 2006 for our tax
manager and staff to ensure compliance with current and emerging tax
reporting and compliance practices.3.
    
    We will take
the steps necessary to appropriately staff the accounting and finance departments.4.
    
    We will retain an outside consulting firm to perform detailed account
analyses and reconciliations designed to assist the accounting staff
in the preparation of the companys financial statements.
  Changes in Internal Control Over Financial Reporting
 87




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##### Table of Contents



ITEM 9B. OTHER INFORMATION.
  88




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 Executive Officers
  Directors
 Name
    
    Age
    
    TitleMichael W. Patrick (1)
    
    56
    
    Chairman of the Board of Directors, President and Chief Executive OfficerJames J. Gaffney (2)
    
    65
    
    DirectorAlan J. Hirschfield (1)(3)
    
    70
    
    DirectorS. David Passman III (1)(3)(4)
    
    53
    
    DirectorCarl L. Patrick (4)
    
    59
    
    DirectorRoland C. Smith (1)(2)
    
    51
    
    DirectorFred W. Van Noy
    
    49
    
    Director, Senior Vice President and Chief Operating OfficerPatricia A. Wilson (2)(3)(4)
    
    55
    
    Director
 
 (1)
    
    Member of our Executive Committee.(2)
    
    Member of our Compensation and Nominating Committee.(3)
    
    Member of our Audit Committee.(4)
    
    Member of our Corporate Governance Committee Michael W. Patrick,
 James J. Gaffney
 Alan J. Hirschfield
 S. David Passman III
 89




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##### Table of Contents



Carl L. Patrick, Jr.
 Roland C. Smith
 Fred W. Van Noy
 Patricia A. Wilson
 Audit Committee of the Board of Directors
   
    
    directly appointing, retaining, overseeing, compensating and terminating the independent auditors;
    
    discussing with the independent auditors their independence;
    
    reviewing with the independent auditors the scope and results of their audit;
    
    pre-approving all audit and permissible non-audit services to be performed by the independent auditors;
    
    reviewing and approving all related party transactions;
 90




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##### Table of Contents




    
    overseeing the financial reporting process and discussing with management and our
independent auditors the interim and annual financial statements that we file with the
SEC; and
    
    reviewing and monitoring our accounting principles, policies and financial and
accounting controls.
  Director Independence
  Certain Relationships and Related Party Transactions
  Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  91




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION.
 Summary Compensation Table
  Annual
    
    
    
    
    
    
    
    
    
    Long-TermCompensation
    
    Awards
    
    Compensation
    
    PayoutsRestricted
    
    SecuritiesStock
    
    Underlying
    
    
    
    
    
    All OtherName and Principal
    
    
    
    
    
    Salary
    
    Bonus
    
    Awards
    
    Options/
    
    LTIP Payouts
    
    CompensationPosition
    
    Year
    
    ($)(1)
    
    ($)(2)
    
    ($)(3)
    
    SARs(#)
    
    ($)(4)
    
    ($)(5)Michael W. Patrick
    
    
    2005
    
    
    
    1,011,094
    
    
    
    438,888
    (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,806President,
Chief
    
    
    2004
    
    
    
    988,399
    
    
    
    798,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    966Executive
Officer and
    
    
    2003
    
    
    
    974,186
    
    
    
    425,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    966Chairman of
the Boardof
DirectorsMartin A. Durant
    
    
    2005
    
    
    
    474,876
    
    
    
    76,125
    
    
    
    
    
    
    
    
    
    
    
    621,863
    
    
    
    1,806Senior Vice
President-
    
    
    2004
    
    
    
    315,587
    
    
    
    174,205
    
    
    
    351,400
    (7)
    
    
    
    
    
    
    
    
    
    
    966Finance,
Treasurer and
    
    
    2003
    
    
    
    279,249
    
    
    
    125,000
    
    
    
    
    
    
    
    35,000
    
    
    
    
    
    
    
    966Chief
Financial
OfficerFred W. Van Noy
    
    
    2005
    
    
    
    434,854
    
    
    
    92,313
    
    
    
    
    
    
    
    
    
    
    
    746,235
    
    
    
    630Senior Vice
President
    
    
    2004
    
    
    
    255,420
    
    
    
    174,205
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    630and Chief
Operating
    
    
    2003
    
    
    
    183,441
    
    
    
    125,000
    
    
    
    41,505
    (8)
    
    
    35,000
    
    
    
    
    
    
    
    630OfficerAnthony J. Rhead
    
    
    2005
    
    
    
    310,103
    
    
    
    88,563
    
    
    
    
    
    
    
    
    
    
    
    373,118
    
    
    
    2,772Senior Vice
President-
    
    
    2004
    
    
    
    227,946
    
    
    
    174,205
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,772Entertainment/
Digital
    
    
    2003
    
    
    
    155,626
    
    
    
    125,000
    
    
    
    
    
    
    
    35,000
    
    
    
    
    
    
    
    2,772CinemaGary F. Krannacker
    
    
    2005
    
    
    
    110,015
    
    
    
    51,185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420Vice President-
    
    
    2004
    
    
    
    105,597
    
    
    
    55,745
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420Operations
    
    
    2003
    
    
    
    82,135
    
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315
 
 (1)
    
    We maintain a deferred compensation program for all of our senior executives, including
the named executive officers, pursuant to which we pay additional cash compensation equal to
10% of an employees annual taxable compensation (including equity-based compensation). We
direct this additional cash compensation first into the participants individual retirement
account, up to the legal limit, with the remainder directed into a trust. Distributions from
the applicable trust are made upon or shortly after normal retirement, disability, death or
termination of employment of a participant. For 2005, the named executive officers deferred
the following amounts: Mr. Patrick $161,094; Mr. Durant $142,376; Mr. Van Noy $134,854; Mr.
Rhead $91,353; and Mr. Krannacker $7,500.(2)
    
    The bonus amounts for 2005 are estimates, subject to final review and approval by the
Compensation and Nominating Committee of the Board of Directors.(3)
    
    The aggregate number and value of unvested shares of restricted stock held by each named
executive officer as of December 31, 2005 was as set forth below: 92




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##### Table of Contents



Dollar Value of AggregateAggregate Number of Shares
    
    Restricted StockName
    
    of Restricted Stock(#)
    
    Holdings($)Michael W. Patrick (*)
    
    
    520,000
    
    
    
    13,187,200Martin A. Durant (**)
    
    
    22,500
    
    
    
    570,600Fred W. Van Noy (**)
    
    
    25,130
    
    
    
    637,297Anthony J. Rhead (**)
    
    
    24,000
    
    
    
    608,640Gary F. Krannacker
    
    
    
    
    
    
    
 
 *
    
    As part of our reorganization, all management options to purchase additional stock
were cancelled. In connection with the reorganization, we entered into an employment
agreement with Mr. Patrick that provided for a stock award. Pursuant to Mr. Patricks
employment agreement, we agreed to issue and/or deliver an aggregate of 780,000 shares
of common stock in equal installments on each of the third, fourth, and fifth
anniversary dates of January 31, 2002. These shares are reserved for issuance pursuant
to our 2002 Stock Plan. As of January 31, 2006, we have issued 520,000 of these shares
to Mr. Patrick pursuant to his employment agreement.**
    
    In May 2002, we granted stock awards to Messrs. Durant, Van Noy and Rhead. These
shares were to be earned over a three year period, commencing with the year ended
December 31, 2002, with the shares being earned as the executive achieved specific
performance goals set for him during each of these years. Earned shares will vest and be
receivable approximately two years after the calendar year in which they were earned,
provided, with certain exceptions, the executive remains our employee. Each of these
grants was made pursuant to our 2002 Stock Plan. For the year ended December 31, 2002,
we issued stock to these named executive officers in the following amounts for meeting
performance goals in whole or in part for the 2002 performance period: Mr. Durant 17,500
shares; Mr. Van Noy 21,000 shares; and Mr. Rhead 10,500 shares. The shares earned for
the 2002 performance period vested on January 31, 2005 and the dollar value of these
awards are set forth above in the Summary Compensation Table in the LTIP Payout column.
For the year ended December 31, 2003, we issued stock to these named executive officers
in the following amounts for meeting performance goals in whole or in part for the 2003
performance period: Mr. Durant 12,500 shares; Mr. Van Noy 17,130 shares; and Mr. Rhead
16,000 shares. The shares earned for the 2003 performance period vested on January 31,
2006. For the year ended December 31, 2004, we issued stock to these named executive
officers in the following amounts for meeting performance goals in whole or in part for
the 2004 performance period: Mr. Durant 10,000 shares; Mr. Van Noy 8,000 shares; and Mr.
Rhead 8,000 shares. The shares earned for the 2004 performance period will vest on
January 31, 2007. We pay dividends on the shares of restricted stock that are earned and
unvested to the extent we pay dividends on shares of our capital stock. The number of
restricted shares set forth above for Mr. Van Noy also includes 1,130 shares granted to
Mr. Van Noy in May 2004 in further recognition of his performance in 2003, which vested
on January 31, 2006.(4)
    
    Represents the value as of January 31, 2005 of the stock issued to Messrs. Durant, Van Noy
and Rhead in connection with the achievement of certain performance goals during the 2002
performance period as described in footnote three above (Mr. Durant  17,500 shares; Mr. Van
Nov  21,000 shares; and Mr. Rhead  10,500 shares).(5)
    
    All Other Compensation consists of amounts paid by us for term life insurance coverage for
each named executive officer.(6)
    
    We have agreed to pay Mr. Patrick a bonus in any quarter that we pay a dividend equal to the
number of shares remaining to be issued pursuant to his employment agreement multiplied by the
quarterly dividend per share for such quarter. For a description of the number of shares to be
issued to Mr. Patrick pursuant to his employment agreement see footnote three above. Of the
total bonus paid to Mr. Patrick in 2005 and 2004, $136,500 and $273,000 related to this
dividend-related bonus, respectively. As of December 31, 2005, Mr. Patrick had earned
$364,000 of this bonus which had not been paid.(7)
    
    Includes 10,000 restricted shares, which vested on January 15, 2005, granted to Mr. Durant in
October 2004 in recognition of his performance in 2004.(8)
    
    Includes 1,130 restricted shares granted in May 2004 in further recognition of Mr. Van Noys
performance in 2003, which vested January 31, 2006. 93




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##### Table of Contents



Option Grants in Last Fiscal Year
  Fiscal Year-End Option Value Table
  Number ofSecurities Underlying
    
    Value of UnexercisedUnexercised Options at
    
    In-the-Money OptionsDecember 31, 2005
    
    at December 31, 2005 ($)(1)Name
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableMichael W. Patrick
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Martin A. Durant (2)
    
    
    25,000
    
    
    
    25,000
    
    
    $
    89,250
    
    
    $
    89,25011,667
    
    
    
    23,333
    
    
    
    
    
    
    
    Fred W. Van Noy
    
    
    25,000
    
    
    
    25,000
    
    
    $
    89,250
    
    
    $
    89,25011,677
    
    
    
    23,333
    
    
    
    
    
    
    
    Anthony J. Rhead
    
    
    25,000
    
    
    
    25,000
    
    
    $
    89,250
    
    
    $
    89,25011,677
    
    
    
    23,333
    
    
    
    
    
    
    
    Gary F. Krannacker
    
    
    11,677
    
    
    
    23,333
    
    
    
    
    
    
    
    
 
 (1)
    
    An option is in-the-money if the fair market value of the underlying common stock exceeds
the exercise price. Values are based on a per share closing price of $25.36 as reported by the
Nasdaq Stock Market on December 30, 2005.(2)
    
    In connection with Mr. Durants retirement, we entered into a Release and Consulting Services
Agreement with Mr. Durant pursuant to which he forfeited all unexercised options effective
March 31, 2006. This agreement is described below under the caption Release and Consulting
Services Agreement. Employment Contracts and Separation Agreements
   94




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
    
    the executive would receive cash payments equal to two times his base salary in equal
monthly installments over a twenty-four month period;
    
    each outstanding stock option owned by the executive would vest and become immediately exercisable;
    
    any restrictions on any outstanding shares of restricted stock would expire; and
    
    the executive would receive for two years the same employee benefits received prior to the termination or resignation.
    Release and Consulting Services Agreement
   
    
    we will continue to pay Mr. Durant his current base salary for a period of six months
following the effective date (March 31, 2006);
    
    we will pay Mr. Durant his earned but unpaid 2005 cash bonus;
    
    we will pay Mr. Durant a cash bonus in an amount equal to $90,500, subject to Mr.
Durants forfeiture of all unexercised options;
    
    on January 31, 2007 we will deliver the 10,000 unvested restricted shares of common
stock earned by Mr. Durant for 2004 performance pursuant to the 2002 Stock Plan;
    
    we will continue to pay additional cash compensation under Mr. Durants deferred
compensation arrangement with respect to all cash and equity compensation paid pursuant to
this agreement; and
    
    Mr. Durant will continue to receive his current medical benefits for a period of six
months following the effective date and is permitted to keep his current company-provided
automobile.
  95




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Compensation of Directors
    Compensation and Nominating Committee Interlocks and Insider Participation
  96




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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
 Security Ownership of Certain Beneficial Holders
  Beneficial
    
    PercentName and Address of Beneficial Owner
    
    Ownership
    
    of Class (1)Barclays Global Investors, NA (2)
    
    
    1,287,427
    
    
    
    10.1
    %45 Freemont St., 17th Floor
San Francisco, CA 94105Bridger Management, LLC (3)
    
    
    1,046,900
    
    
    
    8.2
    %101 Park Avenue, 48th Floor
New York, NY 10178Dalton, Greiner, Hartman, Maher & Co. LLC (4)
    
    
    711,533
    
    
    
    5.6
    %565 Fifth Avenue, Suite 2101
New York, NY 10017Entrust Capital Inc. (5)
    
    
    674,885
    
    
    
    5.3
    %717 Fifth Avenue
New York, NY 10022FMR Corp. (6)
    
    
    941,500
    
    
    
    7.4
    %82 Devonshire Street
Boston, MA 02109Fine Capital Partners, L.P. (7)
    
    
    894,800
    
    
    
    7.0
    %152 West 57th Street, 37th Floor
New York, NY 10019Oz Management, L.L.C. (8)
    
    
    755,946
    
    
    
    5.9
    %9 West 57th Street, 39th Floor
New York, NY 10019Royce & Associates, LLC (9)
    
    
    765,400
    
    
    
    6.0
    %1414 Avenue of the Americas
New York, NY 10019Stadium Capital Management, Inc. (10)
    
    
    698,614
    
    
    
    5.5
    %19875 Village Office Court, Suite 101 
Bend, OR 97702Watershed Asset Management, LLC (11)
    
    
    642,485
    
    
    
    5.1
    %One Maritime Plaza, Suite 1525
San Francisco, CA, 94111
 
 (1)
    
    Percent of class is with respect to outstanding shares of common stock as of May 31, 2006
(12,715,622 shares of common stock outstanding on that date).(2)
    
    The following information is based on the Schedule 13G filed on January 26, 2006 by Barclays
Global Investors, NA, Barclays Global Fund Advisors, Barclays Global Investors, LTD and
Barclays Global Investors Japan Trust and Banking Company Limited. The Schedule 13G indicates
that Barclays Global Investors, NA is the beneficial owner of 1,147,272 shares but that it has
the sole power to vote or direct the voting of 1,108,839 shares and has sole dispositive power
over 1,147,272 shares. The Schedule 13G also indicates that Barclays Global Fund Advisors is
the beneficial owner of 140,155 shares and that it has sole dispositive power and sole power
to vote or direct the voting of all 140,155 shares. Both Barclays Global Investors, LTD,
Murray House, 1 Royal Mint Court, London, England ECN3N 4HH, and Barclays Global Investors
Japan Trust and Banking Company Limited, Ebisu Prime Square Tower 8th Floor, 1-1-39
Hiroo Shibuya-Ku, Tokyo, 150-0012, Japan, do not report the beneficial ownership of any
shares. 97




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(3)
    
    According to the Schedule 13G filed February 15, 2006, Bridger Management, LLC serves as
principal investment manager to a number of investment funds and discretionary accounts with
respect to which it has voting and dispositive authority over the 1,046,900 shares. Mr.
Roberto Mignone is the Managing Member of Bridger Management, LLC. As such, he may be deemed
to control such entity, and therefore may be deemed to be the beneficial owner of the shares.
Bridger Management, LLC and Mr. Roberto Mignone each disclaim beneficial ownership of the
shares.(4)
    
    According to the Schedule 13G filed February 14, 2006, Dalton, Greiner, Hartman, Maher & Co
LLC is the beneficial owner of 711,533 shares but has the sole power to vote or direct the
voting of 532,083 shares and has sole dispositive power over 711,533 shares.(5)
    
    According to the Schedule 13G filed on May 1, 2006, EnTrust Capital Inc., a Delaware
corporation, EnTrust Partners LLC, a Delaware limited liability company, EnTrust Partners
Offshore LLC, a Delaware limited liability company, EnTrust Capital Waters Fund Ltd., a Cayman
Islands company, EnTrust Dedicated Fund, LP, a Delaware limited partnership, EnTrust Capital
Partners LP, a Delaware limited partnership, EnTrust Capital Partners II LP, Mr. Gregg
Hymowitz, Mark Fife, and Michael Howoritz, are the beneficial owners of 674,885 shares, have
the shared power to vote 674,885 shares, and have the shared power to dispose or to direct the
disposition of 675,885 shares. EnTrust Capital Inc., EnTrust Partners LLC and EnTrust Partners
Offshore are registered investment advisers under the Investment Advisers Act of 1940 and
Messrs. Hymowitz, Fife and Horowitz are control persons of the investment advisors.(6)
    
    According to the Schedule 13G filed February 14, 2006, Fidelity Management & Research Company
(Fidelity), a wholly-owned subsidiary of FMR Corp. and an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 941,500
shares as a result of acting as investment adviser to various investment companies registered
under Section 8 of the Investment Company Act of 1940 (the Fidelity Funds). The ownership of
one investment company, Fidelity Small Cap Independence, amounted to 906,500 shares or 7.4% of
the common stock outstanding. Neither FMR Corp. nor Edward C. Johnson III, Chairman of FMR
Corp., has the sole power to vote or direct the voting of the shares owned directly by the
Fidelity Funds, which power resides with the Fidelity Funds Boards of Trustees. Fidelity
carries out the voting of the shares under written guidelines established by the Fidelity
Funds Boards of Trustees. Members of the Edward C. Johnson III family are the predominant
owners, directly or through trusts, of Series B shares of common stock of FMR Corp.,
representing 49% of the voting power of FMR Corp. The Johnson family group and all other Class
B shareholders have entered into a shareholders voting agreement under which all Class B
shares will be voted in accordance with the majority vote of Class B shares. Accordingly,
through their ownership of voting common stock and the execution of the shareholders voting
agreement, members of the Johnson family may be deemed, under the Investment Company Act of
1940, to form a controlling group with respect to FMR Corp.(7)
    
    According to the Schedule 13D/A filed May 30, 2006, such shares are held directly by private
investment funds managed by Fine Capital Partners, L.P., a Delaware limited partnership
(FCP). FCP, as the investment manager to the private investment funds owning the shares, and
Fine Capital Advisors, LLC, a Delaware limited liability company (FCA), as the general
partner of FCP, have voting and dispositive authority over such shares. Ms. Debra Fine is the
sole Manager of FCA and the President of FCP, and as such, shares dispositive and voting
authority over the shares.(8)
    
    According to the Schedule 13G filed February 14, 2006, Oz Management, Inc. serves as
principal investment manager to a number of investment funds and discretionary accounts with
respect to which it has voting and dispositive authority over the 755,946 shares. Mr. Daniel
S. Och is the Senior Managing Member of Oz Management, Inc. As such, he may be deemed to
control such entity, and therefore may be deemed to be the beneficial owner of the shares. Oz
Management, Inc. and Mr. Daniel S. Och each disclaim beneficial ownership of the shares.(9)
    
    According to the Schedule 13G filed January 11, 2006, Royce & Associates, LLC is an
investment adviser registered under Section 203 of the Investment Advisors Act of 1940, and
has voting and dispositive authority over the 765,400 shares, and therefore may be deemed to
be the beneficial owner of the shares by virtue of such authority. Royce & Associates, LLC
disclaims beneficial ownership of the shares.(10)
    
    According to the Schedule 13G filed February 13, 2006, Stadium Capital Management, LLC, a
Delaware limited liability company is an investment adviser registered under Section 203 of
the Investment Advisers Act of 1940, and has voting and dispositive authority over the 698,614
shares, which are held directly by Stadium Capital Partners, L. P. a California limited
partnership. Alexander M. Seaver and Bradley R. Kent are the Managing Members of Stadium
Capital Management, which is the general partner of Stadium Capital Partners, and as such may
be deemed to control such entities, and therefore may be 98




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deemed to be the beneficial owners of the shares. Stadium Capital Partners filed the
statement jointly with Stadium Capital Management, Messrs. Seaver and Kent, but not as a
member of a group, and expressly disclaim membership in a group.(11)
    
    Such shares are held directly by Watershed Capital Partners, LP and Watershed Capital
Institutional Partners, LP. According to the Schedule 13D filed October 6, 2005, Watershed
Asset Management, LLC, as investment advisor to such limited partnerships, has shared
dispositive and voting authority with respect to such shares. WS Partners, LLC, as general
partner of such limited partnerships, also has shared dispositive and voting authority with
respect to such shares. Ms. Meridee A. Moore is the senior managing member of Watershed Asset
Management, LLC and WS Partners LLC, and as such, shares dispositive and voting authority over
the listed shares. 99




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##### Table of Contents



Security Ownership of Management
  
    
    current directors;
    
    our named executive officers; and
    
    all directors and executive officers as a group.
  Beneficial
    
    Percent ofName of Beneficial Owner
    
    Ownership
    
    Class (1)Michael W. Patrick (2)
    
    
    300,600
    
    
    
    2.4
    %Lee Champion
    
    
    39
    
    
    
    *Martin A. Durant (3)
    
    
    17,917
    
    
    
    *Richard Hare (4)
    
    
    7,500
    
    
    
    *Gary F. Krannacker (5)
    
    
    11,667
    
    
    
    *Anthony J. Rhead (6)
    
    
    54,806
    
    
    
    *Fred W. Van Noy (6)
    
    
    55,583
    
    
    
    *James J. Gaffney (7)
    
    
    5,000
    
    
    
    *Alan J. Hirschfield (8)(9)
    
    
    35,250
    
    
    
    *S. David Passman III (10)
    
    
    5,250
    
    
    
    *Carl L. Patrick, Jr. (11)
    
    
    93,867
    
    
    
    *Ken Peurifoy(12)
    
    
    6,667
    
    
    
    *Roland C. Smith (9)
    
    
    5,250
    
    
    
    *Patricia A. Wilson (13)
    
    
    5,250
    
    
    
    *All directors and executive officers as a group
(13 persons)
    
    
    604,646
    
    
    
    4.8
    %
 
 *
    
    Indicates less than 1%.(1)
    
    Percent of class is with respect to outstanding shares of our common stock as of May 31, 2006
(12,715,622 shares of our common stock outstanding on that date).(2)
    
    Includes 974 shares of our common stock held by Michael W. Patrick, Carmikes President,
Chief Executive Officer and Chairman of the Board of Directors, in an Individual Retirement
Account. Excludes 11,613 shares of common stock held in trust for Michael W. Patrick by C. L.
Patrick, as trustee, the remainder interest of which Michael W. Patrick has purchased, and the
additional 260,000 shares of our common stock issuable to Michael W. Patrick under the 2002
Stock Plan pursuant to his employment agreement.(3)
    
    Includes 10,000 restricted shares to be issued to Mr. Durant based on the achievement of
certain performance measures during 2004. For additional information regarding this grant see
footnote three under the caption Summary Compensation Table.(4)
    
    Represents 7,500 restricted shares granted to Mr. Hare on March 27, 2006 in connection with
his employment with us. One-third of these shares will vest on the anniversary date of the
grant in each of 2007, 2008 and 2009.(5)
    
    Represents options to purchase 11,667 shares that vested on December 31, 2005.(6)
    
    Includes 8,000 restricted shares to be issued to each of Mr. Rhead and Mr. Van Noy based on
the achievement of certain performance measures during 2004. For additional information
regarding these grants, see footnote three under the caption Summary Compensation Table.
Also includes options to purchase 36,667 shares that vested on December 31, 2005. 100




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##### Table of Contents



(7)
    
    Includes option to purchase 5,000 shares that vested on November 10, 2005, the date of grant.(8)
    
    Includes 30,000 shares owned by the Alan J. Hirschfield Living Trust.(9)
    
    Includes option to purchase 5,000 shares that vested on August 14, 2002, the date of grant,
and 250 shares of restricted stock issued under 2004 Incentive Stock Plan which vested May 18,
2006.(10)
    
    Includes option to purchase 5,000 shares that vested on June 2, 2003, the date of grant, and
250 shares of restricted stock issued under the 2004 Incentive Stock Plan which vested May 18,
2006.(11)
    
    Includes 38 shares of common stock owned by Carl L. Patrick, Jr.s wife, as to which shares
Carl L. Patrick, Jr., one of our directors, disclaims beneficial ownership. Includes 97 shares
of common stock held as custodian for his son. Includes 250 shares of restricted stock issued
under the 2004 Incentive Stock Plan which vested May 18, 2006. Excludes 11,613 shares of our
common stock held in trust for Carl L. Patrick, Jr. by Frances E. Patrick, as trustee, the
remainder interest of which Carl L. Patrick, Jr. has purchased.(12)
    
    Includes option to purchase 6,667 shares that vested on December 31, 2005.(13)
    
    Includes option to purchase 5,000 shares that vested on April 1, 2004, the date of grant, and
250 shares of restricted stock issued under our 2004 Incentive Stock Plan which vested May 18,
2006. 101




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##### Table of Contents



Compensation Plans
  (c)Number of securities(a)
    
    
    
    
    
    
    remaining available for(b)
    
    
    future issuance underNumber of securities to be
    
    
    Weighted average
    
    
    equity compensationissued upon exercise of
    
    
    exercise price of
    
    
    plans (excludingoutstanding options,
    
    
    outstanding options,
    
    
    securities reflected inPlan Category
    
    warrants and rights
    
    
    warrants and rights
    
    
    column(a))Equity compensation plans
approved by stockholders:2002 Stock Plan (1)
    
    
    617,110
    
    
    
    N/A
    
    
    
    15,6402004 Incentive Stock Plan (2)
    
    
    336,250
    
    
    $
    28.58
    
    
    
    1,068,750Total/Weighted Average
    
    
    953,360
    
    
    $
    28.58
    
    
    
    1,084,390Equity compensation plans not
approved by stockholders:
    
    None
    
    None
    
    NoneTotal
    
    
    953,360
    
    
    
    
    
    
    
    1,084,390
 
 (1)
    
    A total of 1,000,000 shares were available for issuance under the 2002 Stock Plan. Under the
2002 Stock Plan, 780,000 shares were 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 our common stock on each of the third,
fourth, and fifth anniversary dates of January 31, 2002. We delivered 260,000 shares on
January 31, 2005 and 260,000 shares on January 31, 2006. In addition, we have approved
restricted stock grants of 220,000 shares to our other executive officers. On January 31,
2005, a total of 107,250 shares, which were earned for performance in 2002, vested. As of
March 2006, an aggregate of 204,360 shares were earned for performance in 2002, 2003 and 2004,
and 15,640 were forfeited. 171,360 of these shares vested on or prior to January 31, 2006.(2)
    
    On March 31, 2004, the Board of Directors adopted, and on May 21, 2004 the stockholders
approved, the 2004 Incentive Stock Plan, a successor to the Employee and Consultant Long-Term
Stock Incentive Plan and the Non-Employee Directors Long-Term Stock Incentive Plan. As of the
date of the 2004 Incentive Stock Plans adoption, 350,000 options were outstanding under these
predecessor plans. These options remained outstanding under the 2004 Incentive Stock Plan
following its adoption. As of December 31, 2005, 20,000 of these options had been forfeited.
Accordingly, 330,000 of the options listed as outstanding in the table above were granted
under these predecessor plans. Also included are 5,000 options that were granted to Mr.
Gaffney in connection with his appointment to the Board and 1,250 shares of restricted stock
that have been granted to our outside directors in accordance with our annual equity
compensation policy for non-employee directors. The Compensation and Nominating Committee (or
a similar committee) under the 2004 Incentive Stock Plan may grant stock options, stock
grants, stock units, and stock appreciation rights to certain eligible employees and to
outside directors. There are 1,068,750 shares of our common stock remaining available for
issuance pursuant to grants made under the 2004 Incentive Stock Plan in addition to shares
which may be forfeited under the Employee Incentive Plan and the Directors Incentive Plan. No
further grants shall be made under the Employee Incentive Plan or the Directors Incentive
Plan. 102




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
 Fees Paid to Independent Auditors
  2004
    
    
    2005Audit Fees (1)
    
    $
    1,669,460
    
    
    $
    3,133,298Tax Fees (2)
    
    
    326,754
    
    
    
    137,100All Other Fees
    
    
    
    
    
    
    Total Fees Paid to Auditor
    
    $
    1,996,214
    
    
    $
    3,270,398
 
 (1)
    
    Audit fees and expenses primarily relate to the 2004 and 2005 annual audits, the review of
quarterly reports on Form 10-Q, the review of registration statements and the audit of
internal control over financial reporting.(2)
    
    Tax fees primarily relate to tax compliance and tax advice on Section 382 of the Internal
Revenue Code of 1986, as amended. Audit Committee Policy for Pre-Approval of Independent Auditor Services
    103




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   
      104




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##### Table of Contents



ExhibitNumber
    
    Description2.1
    
    Debtors Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated November
14, 2001 (filed as Exhibit 99 to Carmikes Current Report on Form 8-K filed November 19, 2001 and
incorporated herein by reference).2.2
    
    Debtors Amended Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code, dated November
14, 2001 (filed as Exhibit T-3E1 to Carmikes Form T-3 filed December 11, 2001 and incorporated
herein by reference).2.3
    
    Stock Purchase Agreement, dated as of April 19, 2005, by and among Carmike and each of Beth Kerasotes
(individually and as executor and trustee under the will of George G. Kerasotes) and Marjorie
Kerasotes, the shareholders of George G. Kerasotes Corporation, a Delaware corporation (filed as
Exhibit 2.3 to Carmikes Form 10-Q for the quarter ended March 31, 2005 and incorporated herein by
reference).3.1
    
    Amended and Restated Certificate of Incorporation of Carmike Cinemas, Inc. (filed as Exhibit 3.1 to
Carmikes Amendment to Form 8-A filed January 31, 2002 and incorporated herein by reference).3.2
    
    Amended and Restated By-Laws of Carmike Cinemas, Inc. (filed as Exhibit 3.2 to Carmikes Amendment to
Form 8-A filed January 31, 2002 and incorporated herein by reference).3.3
    
    Amendment No. 1 to the Amended and Restated By-Laws of Carmike Cinemas, Inc. (filed as Exhibit 3.2 to
Carmikes Form 10-Q for the quarter ended June 30, 2003 and incorporated herein by reference).4.1
    
    Indenture, dated as of February 4, 2004, among Carmike Cinemas, Inc., each of the Guarantors named
therein and Wells Fargo Bank Minnesota, National Association, as Trustee (filed as Exhibit 4.2 to
Carmikes Current Report on Form 8-K filed February 20, 2004 and incorporated herein by reference).4.2
    
    Supplemental Indenture, dated as of May 19, 2005, by and among Carmike Cinemas, Inc., the
Guaranteeing Subsidiaries named therein, and Wells Fargo Bank, National Association (successor by
merger with Wells Fargo Bank Minnesota, National Association), as Trustee (filed as Exhibit 4.1 to
Carmikes Current Report on Form 8-K filed May 25, 2005 and incorporated herein by reference).4.3
    
    Exchange and Registration Rights Agreement, dated as of February 4, 2004, among Carmike Cinemas,
Inc., each of the Guarantors named therein and Goldman, Sachs & Co. (filed as Exhibit 4.3 to
Carmikes Current Report on Form 8-K filed February 20, 2004 and incorporated herein by reference).4.4
    
    Registration Rights Agreement, dated as of January 31, 2002, by and among Carmike Cinemas, Inc. and
certain stockholders (filed as Exhibit 99.3 to Amendment No. 1 to Schedule 13D of Goldman, Sachs &
Co., et. al., filed February 8, 2002 and incorporated herein by reference).10.1
    
    $50,000,000 Senior Secured First Priority Revolving Credit Facility, dated as of February 4, 2004,
among Carmike Cinemas, Inc., each of the Guarantors named therein, the Lenders party to the agreement
from time to time, Goldman Sachs Credit Partners L.P., as Syndication Agent, Wells Fargo Foothill,
Inc., as Administrative Agent and Collateral Agent, and CIT Lending Services Corporation and General
Electric Capital Corporation, as Co-Documentation Agents (filed as Exhibit 10.1 to Carmikes Current
Report on Form 8-K filed February 20, 2004 and incorporated herein by reference).10.2
    
    $100,000,000 Senior Secured Second Priority Credit Facility, dated as of February 4, 2004, among
Carmike Cinemas, Inc., each of the Guarantors named therein, the Lenders party to the agreement from
time to time, Goldman Sachs Credit Partners L.P., as Syndication Agent, and National City Bank, as
Administrative Agent and Collateral Agent (filed as Exhibit 10.2 to Carmikes Current Report on Form
8-K filed February 20, 2004 and incorporated herein by reference).10.3
    
    Amendment No. 1 to Credit and Guarantee Agreement, dated as of March 7, 2005, among Carmike Cinemas,
Inc., the Guarantors named therein, Wells Fargo Foothill, Inc., as Administrative Agent and
Collateral Agent and the Lenders as defined therein (filed as Exhibit 10.1 to Carmikes Current
Report on Form 8-K filed March 28, 2005 and incorporated herein by reference).
 105




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##### Table of Contents



ExhibitNumber
    
    Description10.4*
    
    2004 Annual Cash Bonuses for Carmikes Named Executive Officers (filed as Exhibit 99.1 to Carmikes
Current Report on Form 8-K filed March 28, 2005 and incorporated herein by reference).10.5*
    
    2005 Base Salaries for Carmikes Named Executive Officers (filed as Exhibit 99.2 to Carmikes Current
Report on Form 8-K filed March 28, 2005 and incorporated herein by reference).10.6*
    
    2005 Cash Bonus Targets for Carmikes Named Executive Officers (filed as Exhibit 10.2 to Carmikes
Current Report on Form 8-K filed May 25, 2005 and incorporated herein by reference).10.7*
    
    Non-Employee Director Compensation Package (filed as Exhibit 99.3 to Carmikes Current Report on Form
8-K filed March 28, 2005 and incorporated herein by reference).10.8
    
    Credit Agreement, dated as of May 19, 2005, by and among Carmike Cinemas, Inc., as Borrower, the
several banks and other financial institutions or entities from time to time parties to the Credit
Agreement, Bear, Stearns & Co. Inc., as Sole Lead Arranger and Sole Bookrunner, Wells Fargo Foothill,
Inc., as Documentation Agent, and Bear Stearns Corporate Lending Inc., as Administrative Agent (filed
as Exhibit 10.1 to Carmikes Current Report on Form 8-K filed May 25, 2005 and incorporated herein by
reference).10.9
    
    First Amendment, dated as of June 7, 2005, to the Credit Agreement, dated as of May 19, 2005, by and
among Carmike Cinemas, Inc., as Borrower, the several banks and other financial institutions or
entities from time to time parties to the Credit Agreement, Bear, Stearns & Co. Inc., as Sole Lead
Arranger and Sole Bookrunner, Wells Fargo Foothill, Inc., as Documentation Agent, and Bear Stearns
Corporate Lending Inc., as Administrative Agent (filed as Exhibit 10.1 to Carmikes Current Report on
Form 8-K filed June 28, 2005 and incorporated herein by reference).10.10
    
    Stock Purchase Agreement, dated as of June 27, 1997, by and between the Stockholders of Morgan Creek
Theatres, Inc.; Stockholders of SB Holdings, Inc.; members of RDL Consulting Limited Liability
Company; Morgan Creek Theatres, Inc.; SB Holdings, Inc.; RDL Consulting Limited Liability Company;
First International Theatres; Carmike Cinemas, Inc. and Eastwynn Theatres, Inc. (filed as Exhibit
10.2 to Carmikes Form 10-Q (Registration No. 001-11604) for the quarter ended June 30, 1997 and
incorporated herein by reference).10.11*
    
    Form of Deferred Compensation Agreement and Schedule of Officers who have entered into such agreement.10.12*
    
    Form of Trust Agreement in connection with the Deferred Compensation Agreement and Schedule of
Officers identified as beneficiaries of the Trust Agreement.10.13
    
    Aircraft Lease, dated July 1, 1983, as amended June 30, 1986, by and between C.L.P. Equipment and
Carmike Cinemas, Inc. (filed as Exhibit 10(h) to Carmikes Registration Statement on Form S-1
(Registration No. 33-8007) and incorporated herein by reference).10.14
    
    Summary of Extensions of Aircraft Lease Agreement and Equipment Lease Agreement which are Exhibits
10(e) and 10(k) (filed as Exhibit 10(o) to Carmikes Form 10-K (Registration No. 000-14993) for the
year ended December 31, 1991 and incorporated herein by reference).10.15
    
    Second Amended and Restated Master Lease, dated September 1, 2001, between MoviePlex Realty Leasing,
L.L.C. and Carmike Cinemas, Inc. (filed as Exhibit 10.17 to Carmikes Form 10-K for the year ended
December 31, 2001 and incorporated herein by reference).10.16*
    
    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).10.17*
    
    Employment Agreement, dated as of January 31, 2002, between Carmike Cinemas, Inc. and Michael W.
Patrick (filed as Exhibit 10 to Carmikes Form 10-Q for the quarter ended March 31, 2002 and
incorporated herein by reference).10.18*
    
    Carmike Cinemas, Inc. Non-Employee Directors Long-Term stock Incentive Plan (filed as Appendix C to
Carmikes 2002 Definitive Proxy Statement filed July 24, 2002 and incorporated herein by reference).10.19*
    
    Carmike Cinemas, Inc. Employee and Consultant Long-Term stock Incentive Plan (filed as Appendix D to
Carmikes 2002 Definitive Proxy Statement filed July 24, 2002 and incorporated herein by reference).
 106




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##### Table of Contents



ExhibitNumber
    
    Description10.20*
    
    Form of Separation Agreement and schedule of officers who have entered into such agreement (filed as
Exhibit 10.1 to Carmikes Form 10-Q for the quarter ended June 30, 2003 and incorporated herein by
reference).10.21*
    
    Michael W. Patrick Dividend-Related Bonus Agreement, effective as of January 29, 2004, between
Carmike Cinemas, Inc. and Michael W. Patrick (filed as Exhibit 10.3 to Carmikes Form 10-Q for the
quarter ended March 31, 2004 and incorporated herein by reference).10.22
    
    Form of Indemnification Agreement and Schedule of Directors who have entered into such agreement
(filed as Exhibit 10.1 to Carmikes Form S-3 (Registration No. 333-117403) filed July 16, 2004 and
incorporated herein by reference).10.23
    
    Indemnification Agreement, effective as of December 10, 2004, by and between Carmike Cinemas, Inc.
and Fred W. Van Noy (filed as Exhibit 10.1 to Carmikes Current Report on Form 8-K filed on January
24, 2005 and incorporated herein by reference).10.24
    
    Indemnification Agreement, effective as of November 11, 2005, by and between Carmike Cinemas, Inc.
and James J. Gaffney (filed as Exhibit 10.1 to Carmikes Current Report on Form 8-K filed on November
14, 2005 and incorporated herein by reference).10.25
    
    First Amendment to Second Amended and Restated Master Lease, dated as of July 12, 2004, between
MoviePlex Realty Leasing L.L.C. and Carmike Cinemas, Inc. (filed an Exhibit 10.2 to Carmikes Form
S-3 (Registration No. 333-117403) filed July 16, 2004 and incorporated herein by reference).10.26
    
    Letter Agreement, dated as of June 23, 2004, by and among Carmike Cinemas, Inc. and Goldman, Sachs &
Co. regarding the Exchange and Registration Rights Agreement dated January 29, 2004 (filed as Exhibit
10.1 to Carmikes S-4/A (Registration No. 333-115134) filed July 22, 2004 and incorporated herein by
reference).10.27*
    
    Carmike Cinemas, Inc. 2004 Incentive Stock Plan (filed as Appendix A to Carmikes Definitive Proxy
Statement for the 2004 Annual Meeting of Stockholders, filed on April 16, 2004 and incorporated
herein by reference).10.28*
    
    Form of Stock Option Agreement pursuant to the Carmike Cinemas, Inc. 2004 Incentive Stock Plan (filed
as Exhibit 10.2 to Carmikes Current Report on Form 8-K filed on November 14, 2005 and incorporated
herein by reference).10.29*
    
    Form of Restricted Stock Grant Agreement for Carmikes Directors pursuant to the Carmike Cinemas,
Inc. 2004 Incentive Stock Plan (filed as Exhibit 10.3 to
Carmikes Current Report on Form 8-K filed May 25, 2005 and incorporated herein by reference).10.30+
    
    Master License Agreement, dated as of December 16, 2005, by and between Carmike Cinemas, Inc. and
Christie/AIX, Inc.10.31
    
    Digital Cinema Service Agreement, dated as of December 16, 2005, by and between Carmike Cinemas, Inc.
and Christie Digital Systems USA, Inc.10.32*
    
    Form of Restricted Stock Grant Agreement for Carmikes Officers pursuant to the Carmike Cinemas, Inc.
2004 Incentive Stock Plan.10.33*
    
    Release and Consulting Services Agreement, dated as of March 31, 2006, by and between Carmike Cinemas, Inc. and Martin A.
Durant (filed as Exhibit 10.1 to Carmikes Current Report on Form 8-K filed March 15, 2006 and incorporated herein by
reference).10.34
    
    Second Amendment, dated as of March 28, 2006, to the Credit Agreement, dated as of May 19, 2005, by and among Carmike Cinemas,
Inc., the several banks and other financial institutions parties thereto, Wells Fargo Foothill, Inc. and Bear Sterns Corporate
Lending Inc. (filed as Exhibit 10.1 to Carmikes Current Report on Form 8-K filed April 5, 2006 and incorporated herein by
reference).10.35
    
    Third Amendment, dated as of May 9, 2006, to the Credit Agreement, dated as of May 19, 2005, by and among Carmike Cinemas,
Inc., the several banks and other financial institutions parties thereto, Wells Fargo Foothill, Inc. and Bear Sterns Corporate
Lending Inc. (filed as Exhibit 10.1 to Carmikes Current Report on Form 8-K filed May 15, 2006 and incorporated herein by
reference).
 107




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##### Table of Contents



ExhibitNumber
    
    Description10.36
    
    Fourth Amendment, dated as of June 2, 2006, to the Credit Agreement, dated as of May 19, 2005, by and among Carmike Cinemas,
Inc., the several banks and other financial institutions parties thereto, Wells Fargo Foothill, Inc. and Bear Sterns Corporate
Lending Inc.10.37
    
    Fifth Amendment, dated as of July 27, 2006, to the Credit Agreement, dated as of May 19, 2005, by and
among Carmike Cinemas, Inc., the several banks and other financial institutions parties thereto,
Wells Fargo Foothill, Inc. and Bear Sterns Corporate Lending Inc. and First Amendment, dated as of
July 27, 2006, to Guarantee and Collateral Agreement, dated as of May 19, 2005, made by Carmike
Cinemas, Inc. and certain of its subsidiaries in favor of Bear Sterns Corporate Lending Inc.11
    
    Computation of per share earnings (provided in Note 2 to the Notes to Audited Consolidated Financial
Statements included in this report under the caption Earnings Per Share).21
    
    List of Subsidiaries.31.1
    
    Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.32.1
    
    Certificate of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certificate of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Management contract or compensatory plan or arrangement required to be filed as an exhibit
pursuant to Item 15(c) of Form 10-K.+
    
    Certain information contained in this document has been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 24b-2 of the Securities
Exchange Act of 1934.     108




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##### Table of Contents



SIGNATURES
  CARMIKE CINEMAS, INC.Date: August 3, 2006
    By:
    /s/ Michael W. PatrickMichael W. PatrickPresident and Chief Executive Officer  Signature
    
    Title/s/ Michael W. Patrick
    
    President, Chief Executive Officer andMichael W. Patrick
    
    Chairman of the Board of Directors(Principal Executive Officer)/s/ Richard B. Hare
    
    Senior Vice President  Finance, Treasurer andRichard B. Hare
    
    Chief Financial Officer(Principal Financial Officer)/s/ Jeffrey A. Cole
    
    Assistant Vice President  ControllerJeffrey A. Cole
    
    (Principal Accounting Officer)/s/ James J. Gaffney
    
    DirectorJames J. Gaffney/s/ Alan J. Hirschfield
    
    DirectorAlan J. Hirschfield/s/ S. David Passman III
    
    DirectorS. David Passman III/s/ Carl L. Patrick, Jr.
    
    DirectorCarl L. Patrick, Jr./s/ Roland C. Smith
    
    DirectorRoland C. Smith/s/ Fred W. Van Noy
    
    Senior Vice President, Chief Operating Officer and DirectorFred W. Van Noy/s/ Patricia A. Wilson
    
    DirectorPatricia A. Wilson




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##### Table of Contents



Schedule II  Valuation and Qualifying Accounts
Carmike Cinemas, Inc. and Subsidiaries
December 31, 2005 (in thousands)
 Col. A
    
    Col. B
    
    Col. C
    
    Col. D
    
    Col. EAdditionsBalance at
    
    Charged to
    
    Charged to
    
    
    
    
    
    Balance atBeginning of
    
    Costs and
    
    Other Accounts
    
    Deductions
    
    EndDescription
    
    Period
    
    Expenses
    
    - Describe
    
    Describe
    
    of PeriodYear Ended December 31, 2003:Valuation reserve for deferred income tax assets
    
    $
    83,926
    
    
    
    (7,628
    )  (1)
    
    
    (76,298
    )  (2)
    
    
    
    
    
    $
    Year Ended December 31, 2004:Valuation reserve for deferred income tax assets
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Year Ended December 31, 2005:Valuation reserve for deferred income tax assets
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
 
 (1)
    
    Valuation reserve recorded in the year ended December 31, 2003. See Note 12 of notes to
audited annual consolidated financial statements.(2)
    
    Full release of valuation reserve as of December 31, 2003. See Note 12 of notes to audited
annual consolidated financial statements.