CARMIKE CINEMAS, INC.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2006


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.

(Exact Name of Registrant as Specified in Its Charter)


DELAWARE		58-1469127
(State or Other Jurisdiction of Incorporation or		(I.R.S. Employer Identification No.)
Organization)

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

(706) 576-3400
(Registrant’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.

Large Accelerated Filer o Accelerated Filer þ Non-Accelerated Filer o

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

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

As of August 1, 2006, 12,715,622 shares of common stock, par value $0.03 per share, were outstanding.

EXPLANATORY NOTE

During May of 2006, we determined that it was necessary to restate our previously issued consolidated financial statements for the years ended December 31, 2004 and 2003 because of certain misstatements in those financial statements. Accordingly, we have restated our previously issued consolidated financial statements for the years ended December 31, 2004 and 2003 and the condensed consolidated financial statements for the quarters ended March 31, 2005, June 30, 2005 and 2004 and September 30, 2005 and 2004. The misstatements in our previously issued financial statements are principally attributable to certain errors in accounting for lease transactions and other matters as described in Note 1 of the notes to our condensed consolidated financial statements included herein.

The restatement adjustments increased previously reported accumulated deficit as of January 1, 2005 by $11.6 million and decreased previously reported net income by $0.1 million for the three months ended March 31, 2005. The restatement does not affect our audited consolidated financial statements for the year ended December 31, 2005 filed on Form 10-K, but it does affect our previously filed quarterly reports on Form 10-Q/A for the quarters ended March 31, 2005 and June 30, 2005 and on Form 10-Q for the quarter ended September 30, 2005. We filed Forms 10-Q/A on August 4, 2006 for the quarters ended June 30, 2005 and September 30, 2005 to restate the three-month and year-to-date results in those quarters.

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CONSOLIDATED BALANCE SHEETS

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


	March 31,			December 31,
	2006			2005
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	14,069		$	23,609
Restricted cash		2,286			3,602
Accounts and notes receivable		2,364			2,056
Inventories		1,787			1,802
Deferred income tax asset		6,029			6,029
Prepaid expenses		6,576			6,287

Total current assets		33,111			43,385
Investment in and advances to unconsolidated affiliates		3,785			3,763
Deferred income tax asset		42,940			42,344
Assets held for sale		5,267			5,434
Other		34,410			32,702
Property and equipment, net		556,137			569,947
Goodwill		38,460			38,460
Other acquired intangible assets, net		1,968			2,082


Total assets	$	716,078		$	738,117

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	18,908		$	23,516
Accrued expenses		35,168			42,443
Dividends payable		2,176			2,154
Current maturities of long-term debt, capital lease and long-term financing obligations		2,857			2,435

Total current liabilities		59,109			70,548
Long-term liabilities:
Long-term debt, less current maturities		312,966			313,774
Capital lease and long-term financing obligations, less current maturities		113,865			115,809
Other		7,771			5,269

Total long-term liabilities		434,602			434,852
Commitments and contingencies		—			—
Stockholders’ Equity
Preferred Stock, $1.00 par value, authorized 1,000,000 shares, none outstanding as of March 31, 2006 and December 31, 2005, respectively		—			—
Common Stock, $0.03 par value, authorized 20,000,000 shares, 12,715,622 shares issued and 12,434,658 shares outstanding as of March 31, 2006 and 12,455,622 shares issued and 12,309,002 outstanding as of December 31, 2005		382			374
Paid-in capital		296,120			297,256
Treasury stock at cost, 280,964 shares as of March 31, 2006 and 146,620 shares as of December 31, 2005		(8,258	)		(5,210	)
Accumulated deficit		(65,877	)		(59,703	)

Total stockholders’ equity		222,367			232,717

Total liabilities and stockholders’ equity	$	716,078		$	738,117

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

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands, except per share data)


	Three Months Ended
	March 31,
	2006			2005
				(restated)
Revenues
Admissions	$	72,564		$	67,052
Concessions and other		39,180			34,168

		111,744			101,220

Costs and Expenses
Film exhibition costs		37,275			35,380
Concession costs		4,090			3,596
Other theatre operating costs		50,606			44,105
General and administrative expenses		5,781			3,988
Depreciation and amortization		10,292			8,241
Gain on sales of property and equipment		(144	)		—

		107,900			95,310

Operating income		3,844			5,910
Other expenses
Interest expense		10,614			7,735

Loss before reorganization benefit and income taxes		(6,770	)		(1,825	)
Reorganization benefit		—			2,391

Income (loss) before income taxes		(6,770	)		566
Income tax expense (benefit)		(596	)		242

Net income (loss)	$	(6,174	)	$	324

Weighted average shares outstanding:
Basic		12,338			12,138

Diluted		12,338			12,569

Net income (loss) per common share:
Basic	$	(0.50	)	$	0.03

Diluted	$	(0.50	)	$	0.03

Dividend declared per common share	$	0.175		$	0.175

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands)


	Three Months Ended
	March 31,
	2006			2005
				(restated)
Operating Activities
Net income (loss)	$	(6,174	)	$	324
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		10,292			8,241
Amortization of debt issuance costs		618			557
Deferred income taxes		(596	)		555
Stock-based compensation		1,048			1,140
Non-cash reorganization items		—			(2,391	)
Gain on sales of property and equipment		(144	)		—
Changes in operating assets and liabilities:
Accounts and notes receivable and inventories		(293	)		122
Prepaid expenses		315			(8,920	)
Accounts payable		(4,608	)		(5,152	)
Accrued expenses and other liabilities		(4,583	)		932

Net cash used in operating activities		(4,125	)		(4,592	)
Investing Activities
Proceeds from sales of property and equipment		311			—
Purchases of property and equipment		(4,581	)		(26,099	)
Release of other restricted cash		316			—

Net cash used in investing activities		(3,954	)		(26,099	)
Financing Activities
Debt:
Repayments of debt		(418	)		(351	)
Repayments of liabilities subject to compromise		—			(958	)
Repayments of capital leases and long-term financing obligations		(298	)		(335	)
Receipts from long-term financing obligations		4,457			—
Purchase of treasury stock		(3,048	)		(5,210	)
Dividends paid		(2,154	)		(2,128	)

Net cash used in financing activities		(1,461	)		(8,982	)

Decrease in cash and cash equivalents		(9,540	)		(39,673	)
Cash and cash equivalents at beginning of period		23,609			56,944

Cash and cash equivalents at end of period	$	14,069		$	17,271

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

CARMIKE CINEMAS, INC. and SUBSIDIARIES
For the Three Months Ended March 31, 2006 and 2005

NOTE 1 — RESTATEMENTS

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, 2005, June 30, 2005 and 2004 and September 30, 2005 and 2004 to correct for errors in the financial statements related to our failure to properly account for certain lease related transactions. The following errors in the application of generally accepted accounting principles to lease transactions have been corrected:

	•		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.

In addition, during 2005, we did not 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. As a result, we incorrectly recorded journal entries regarding directors’ fees, discount ticket revenue and capitalized interest, which impacted the quarterly results of operations originally presented in each of the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005.

The financial statements, notes thereto and related disclosures contained in this Quarterly Report on Form 10-Q as of March 31, 2006 and for the quarter then ended, have been restated to adjust for the errors noted above for the three months ended March 31, 2005. These restatements reflect a $11.6 million increase to accumulated deficit at January 1, 2005 as well as adjustments to net property plant and equipment, capital leases, financing obligations, other assets, deferred expenses and accrued expenses. Adjustments were also made to reflect the tax effect of the restatement adjustments.

In addition, we revised our presentation of dividends declared for the three months ended March 31, 2005 totaling $2.1 million to present the charge as a reduction of Paid-in capital, rather than an increase in Accumulated deficit.

The effect of the restatements on earnings per common share was as follows:


	Basic			Diluted
March 31, 2005	$	(0.01	)	$	(0.01	)

The following table summarizes the effects of the restatements on our previously issued unaudited consolidated financial statements for the three months ended March 31, 2005.

Consolidated Statements of Operations and Cash Flows effects for the year ended March 31, 2005:


	Three Months Ended
	March 31, 2005
	(in thousands)
	As Previously
	Reported			As Restated
Consolidated Statement of Operations:
Admissions revenue	$	67,569		$	67,052
Concessions and other revenue		34,114			34,168
Total revenue		101,683			101,220
Other theatre operating costs		44,434			44,105
General and administrative expenses		5,068			3,988
Depreciation and amortization		8,264			8,241
Operating income		4,941			5,910
Interest expense		6,570			7,735
Income tax expense		326			242
Net income available for common stockholders		436			324
Income per common share — Basic	$	0.04		$	0.03
Income per common share — Diluted	$	0.04		$	0.03

Consolidated Statement of Cash Flows:
Net cash used in operating activities	$	(5,717	)		(4,592	)
Net cash used in investing activities	$	(25,505	)		(26,099	)
Net cash used in financing activities	$	(8,451	)		(8,982	)

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. We have prepared the accompanying unaudited Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. This information reflects all adjustments which in the opinion of management are necessary for a fair presentation of the statement of financial position as of March 31, 2006, and the results of operations for the three month periods ending March 31, 2006 and 2005 and the cash flows for the three month periods ending March 31, 2006 and 2005. Except for the restatement adjustments described in Note 1, all adjustments made have been of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. We believe that the disclosures are adequate to make the information presented not misleading. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in our annual report on Form 10-K for the fiscal year ended December 31, 2005 (“2005 Form 10-K”). That report includes a summary of our critical accounting policies. There have been no material changes in our accounting policies during fiscal 2006, except for the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“SFAS 123 (R)”) as noted in “Stock-Based Compensation” below.

Proceedings under Chapter 11. On August 8, 2000, Carmike Cinemas, Inc. (“Carmike”) and its subsidiaries, Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc. (collectively “the Company”) filed voluntary petitions for relief under Chapter 11 (the “Chapter 11 Cases”) of the United States Bankruptcy Code. In connection with the Chapter 11 Cases, the Company was required to report in accordance with Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, (“SOP 90-7”). SOP 90-7 requires, among other things, that (1) pre-petition liabilities that are subject to compromise be segregated in the Company’s consolidated balance sheet as liabilities subject to compromise and (2) the identification of all transactions and events that are directly associated with the reorganization of the Company in the Consolidated Statements of Operations. The Company emerged from the Chapter 11 Cases pursuant to its plan of reorganization effective on January 31, 2002. On February 11, 2005, the Company filed a motion seeking an order entering a final decree closing the bankruptcy cases. On March 15, 2005, the United States Bankruptcy Court of the District of Delaware entered a final decree closing the bankruptcy cases. In conjunction with the closure of the bankruptcy cases, the Company settled the three remaining outstanding disputed landlord by claims payment of amounts and reversed all accrued bankruptcy-related professional fees. A description of the proceedings under the Chapter 11 Cases is contained in Note 3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

Reorganization benefit for the three month period ended March 31, 2005 is as follows (in thousands):


	Three months ended
	March 31, 2005
Change in estimate for general unsecured claims		391
Reversal of accrued professional fees		2,000

	$	2,391

Use of Estimates. The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates.

Earnings (loss) Per Share. Earnings per share calculations contain dilutive adjustments for shares under the various stock plans discussed in Note 7. The following table reflects the effects of those plans on the calculation of earnings per share (in thousands, except per share data)


	Three Months Ended
	March 31,
	2006			2005
				(restated)
Outstanding shares		12,394			12,235
Less restricted stock issued		(56	)		(97	)

Basic shares outstanding		12,338			12,138
Dilutive shares:
Restricted stock		—			68
Stock grants		—			355
Stock options		—			8

		12,338			12,569


Earnings (loss) per share:
Basic	$	(0.50	)	$	0.03

Diluted	$	(0.50	)	$	0.03

Anti-dilutive restricted stock grants and options to purchase common stock outstanding were excluded from the above calculations for the three months ended March 31, 2006. Anti-dilutive restricted stock grants and options totaled 176,000 for the three months ended March 31, 2006.

Stock-Based Compensation. On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”), which requires the measurement and recognition of compensation expense for all stock-based compensation payments and supersedes the current accounting under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”). SFAS 123(R) is effective for all annual periods beginning after June 15, 2005. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to the adoption of SFAS 123(R).

Beginning with the first quarter of fiscal 2006, we adopted SFAS 123(R) using the modified prospective method of adoption. See Note 7 for a description of our stock plans and related disclosures. We currently use the Black-Scholes option pricing model to determine the fair value of our stock options. The determination of the fair value of the awards on the date of grant using an option-pricing model is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates and expected dividends.

We have not granted any stock options during the quarter ended March 31, 2006. If and when we grant stock options in the future, we will consider the guidance in SAB 107 regarding the assumptions used to calculate their estimated fair value. All stock option awards are amortized based on their graded vesting over the requisite service period of the awards.

We may also issue restricted stock awards to certain key employees. Generally, the restricted stock vests over a one to three year period, thus we recognize compensation expense over the one to three year period equal to the grant date value of the shares awarded to the employee. Should the non-vested awards include performance or market conditions, we will examine the appropriate requisite service period to recognize the cost associated with the award on a case-by-case basis.

Prior to the adoption of SFAS 123(R), we applied the intrinsic value-based method of accounting prescribed by APB 25 and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25, issued in March 2000, to account for our fixed plan options and provided the required pro forma disclosures prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, as amended (“SFAS 123”). Under APB 25, compensation was recognized over the grant’s vesting period only if the current market price of the underlying stock on the date of grant exceeds the exercise price.

No options were granted during the three-month period ended March 31, 2006. The following table provides the fair value of the options granted during the three-month period ended March 31, 2005 using the Black-Scholes option pricing model together with a description of the assumptions used to calculate the fair value:


	Three Months Ended
	March 31, 2005
Expected term (years)		9.0
Risk-free interest rate		4.40	%
Expected dividend yield		2.76	%
Expected volatility		0.40

Had compensation cost been determined consistent with SFAS 123 for the three months ended March 31, 2005, utilizing the assumption detailed above, our pro forma net income and pro forma basic and diluted income per share would have decreased to the following amounts (in thousands, except share data):


	Three Months Ended
	March 31, 2005
	(restated)
Net income available for common stock:
As reported	$	324
Plus: expense recorded on deferred stock compensation, net of related tax effects		1,014
Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(1,268	)

Pro forma — for SFAS No. 123	$	70

Diluted net earnings per common share:
As reported	$	0.03
Pro forma — for SFAS No. 123	$	0.01
Basic net earnings per common share:
As reported	$	0.03
Pro forma — for SFAS No. 123	$	0.01

Prior to the adoption of SFAS 123(R), we presented all tax benefits for deductions resulting from the exercise of stock options and disqualifying dispositions as operating cash flows on our consolidated statement of cash flows. SFAS 123(R) requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow. This requirement reduces net operating cash flows and increases net financing cash flows in periods after adoption. Total cash flow will remain unchanged from what would have been reported under prior accounting rules.

NOTE 3 — DESCRIPTION OF BUSINESS

Our primary business is the operation of motion picture theatres which generate revenues principally through admissions and concessions sales. We consider ourselves to be in a single reportable segment. Substantially all revenues are received in cash and credit cards and are recognized as income at the point of sale. Ten major distributors in the motion picture industry produced films which accounted for approximately 90% of admission revenues.

NOTE 4 — ACQUISITION OF GKC THEATRES

On May 19, 2005, we acquired 100% of the stock of George G. Kerasotes Corporation (“GKC Theatres”) for a net purchase price of $61.6 million, adjusted for working capital of $3.9 million. The GKC Theatres acquisition upholds our traditional focus by taking advantage of opportunistic small market acquisitions.

Actual cash paid at closing was $58.9 million. As stipulated, in the purchase agreement, the remainder of the purchase price, $3.2 million, was set aside in an escrow account. The current escrow amount of $1.0 million was settled and remitted to the GKC shareholders in the first quarter of 2006. The short-term escrow amount of $2.2

million will be settled within 18 months of the date of acquisition which is expected to be on or before November 2006, subject to certain outstanding claims.

Pro Forma Results of Operations

The following pro forma results of operations for the three month period ended March 31, 2005 assumes the GKC Theatres acquisition occurred at the beginning of the fiscal year January 1, 2005 and reflects the full results of operations for the three month period presented. The pro forma results have been prepared for comparative purposes only and do not purport to indicate the results of operations which would actually have occurred had the combination been in effect on the date indicated, or which may occur in the future. The results of GKC Theatres have been included in our results of operations since the date of acquisition of May 19, 2005.

(in thousands except per share amounts):


	As Reported
	Three Months Ended		Pro Forma
	March 31, 2005		Three Months Ended
	(restated)		March 31, 2005
Revenues	$	101,220	$	113,332
Income from operations		5,910		7,394
Net Income	$	324	$	924
Earnings per share
Basic:	$	0.03	$	0.08
Diluted:	$	0.03	$	0.07

NOTE 5 — DEBT

Debt consisted of the following (in thousands):


	March 31,			December 31,
	2006			2005
Term loan		165,807			166,225
Delayed draw term loan		—			—
7.500% senior subordinated notes		150,000			150,000

		315,807			316,225
Current maturities		(2,841	)		(2,451	)

	$	312,966		$	313,774

Senior Secured Credit Facilities

On May 19, 2005, we entered into a credit agreement with Bear, Stearns & Co. Inc., as sole lead arranger and sole book runner, Wells Fargo Foothill, Inc., as documentation agent, and Bear Stearns Corporate Lending Inc., as administrative agent. The credit agreement provides for senior secured credit facilities in the aggregate principal amount of $405.0 million.

The senior secured credit facilities consist of:

	•		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.

In addition, the credit agreement provides for future increases (subject to certain conditions and requirements) to the revolving credit and term loan facilities in an aggregate principal amount of up to $125.0 million.

On June 6, 2006, we drew down $156 million of the $185 million delayed-draw term loan to repurchase our outstanding $150 million of 7.50% senior subordinated notes due 2014 and to repay related fees and expenses. At this time, the portion of the delayed-draw term loan commitment which was not used for this repurchase was cancelled.

As described in the fourth and fifth amendments to our senior secured credit agreement, the interest rate for borrowings under our outstanding revolving and term loans is set to a margin above the London interbank offered rate (“Libor”) or base rate, as the case may be, based on our corporate credit ratings from Moody’s Investors Service, Inc. and Standard & Poor’s Rating Services in effect from time to time, with the margin ranging from 2.50% to 3.50% for loans based on Libor and 1.50% to 2.50% for loans based on the base rate. These amendments also temporarily increase the margin described above by 0.50% per annum until such time as our audited financial statements for the year ended December 31, 2005 and our unaudited financial statements for the quarter ended March 31, 2006 are delivered to the lenders. In addition, this 0.50% per annum increase will remain in effect since we were unable to deliver our unaudited financial statements for the quarter ended June 30, 2006 by August 14, 2006 and will continue if we are unable to deliver our unaudited financial statements for the quarter ended September 30, 2006 by November 14, 2006, until such time as these unaudited financial statements are delivered.

In addition, as described in the fifth amendment, we have also agreed, that by October 25, 2006, we will enter into and maintain hedging agreements to the extent necessary to provide that at least 45% of the aggregate principal amount outstanding on our term loans is subject either to a fixed interest rate or interest rate protection through a date not earlier than May 19, 2008. The final maturity date of the term loan facility and delayed-draw term loan facility is May 19, 2012.

The interest rate for borrowings under the revolving credit facility for the initial six-month period was set from time to time at our option (subject to certain conditions set forth in the credit agreement) at either: (1) a specified base rate plus 1.25% or (2) the Eurodollar Base Rate divided by the difference between one and the Eurocurrency Reserve Requirements plus 2.25%. Thereafter, the applicable rates of interest under the revolving credit facility are based on our consolidated leverage ratio, with the margins applicable to base rate loans ranging from 0.50% to 1.25%, and the margins applicable to Eurodollar Loans (as defined in the credit agreement) ranging from 1.50% to 2.25%. The rate at June 6, 2006 was 10.25%; on June 8, 2006, we converted the rate to a 90-day LIBOR-based rate, which was 8.52%. The final maturity date of the revolving credit facility is May 19, 2010.

If we repay the term loans prior to June 2, 2007, we will be subject to a 1% prepayment fee for optional and most mandatory prepayments, unless the prepayment results from a change of control transaction or the issuance by us of subordinated debt of up to $150 million. The credit agreement requires that mandatory prepayments be made from (1) 100% of the net cash proceeds from certain asset sales and dispositions and issuances of certain debt, (2) various percentages (ranging from 75% to 0% depending on our consolidated leverage ratio) of excess cash flow as defined in the credit agreement, and (3) 50% of the net cash proceeds from the issuance of certain equity and capital contributions.

The senior secured credit facilities contain covenants which, among other things, restrict our ability, and that of our restricted subsidiaries, to:

	•		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.

The senior secured credit facilities also contain financial covenants that require us to maintain specified ratios of funded debt to adjusted EBITDA and adjusted EBITDA to interest expense. The terms governing each of these ratios are defined in the credit agreement, as amended.

Generally, the senior secured credit facilities do not place restrictions on our ability to make capital expenditures. However, we may not make any capital expenditure if any default or event of default under the credit agreement has occurred and is continuing or would result, or if such default or event of default would occur as a result of a breach of certain financial covenants contained in the credit agreement on a pro forma basis after giving effect to the capital expenditure.

Our failure to comply with any of these covenants, including compliance with the financial ratios, is an event of default under the senior secured credit facilities, in which case, the administrative agent may, and if requested by the lenders holding a certain minimum percentage of the commitments shall, terminate the revolving credit facility and the delayed-draw term loan commitments with respect to additional advances and may declare all or any portion of the obligations under the revolving credit facility and the term loan facilities due and payable. As of March 31, 2006, we were in compliance with all of the financial covenants. Other events of default under the senior secured credit facilities include:

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

	•		the occurrence of a change of control (as defined in the credit agreement); 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.

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

Subsequent Event of Default

We had not submitted audited financial statements for the year ended December 31, 2005 by the 65th day following the end of the previous fiscal year nor had we submitted unaudited financial statements for the three month period ended March 31, 2006 by the 40th day following the end of such three-month period as required by the financial covenants under our senior secured credit facility.

On April 3, 2006, we obtained a waiver for the covenant regarding delivery of our audited financial statements for the year ended December 31, 2005 by entering into a second amendment to the credit agreement with Bear, Stearns & Co. Inc., and the other lending parties. This second amendment, which had an effective date of March 28, 2006, extended the date by which we were to submit audited financial statements for the year ended December 31, 2005 to the lenders to May 15, 2006. On May 9, 2006, we obtained a second waiver for delivery of such audited financial statements by entering into a third amendment to the credit agreement with Bear, Stearns & Co. Inc. and the other lending parties extending the delivery date to June 30, 2006. The third amendment also included a waiver regarding the delivery of the unaudited financial statements for the three month period ended March 31, 2006, extending the delivery date of such unaudited financial statements to June 30, 2006.

Effective June 2, 2006, we entered into a fourth amendment to our senior secured credit agreement with the lending parties thereunder, which included an extension of the deadline for the delivery of our audited financial statements for the year ended December 31, 2005 and unaudited financial statements for the three month period ended March 31, 2006 until July 27, 2006. Effective July 27, 2006, we entered into a fifth amendment to our senior secured credit agreement, which included (i) an extension of the deadline for the delivery of our audited financial statements for the year ended December 31, 2005 until September 30, 2006; (ii) an extension of the deadline for delivery of our unaudited financial statements for the quarter ended March 31, 2006 until September 30, 2006; and

(iii) an extension of the deadline for delivery of our unaudited financial statements for the quarters ended June 30, 2006 and September 30, 2006 until December 31, 2006.

The fifth amendment also provides that until we have delivered to the lenders the audited financial statements for the year ended December 31, 2005 and the unaudited financial statements for the quarter ended March 31, 2006, the maximum principal amount of indebtedness that we may incur under the $50 million revolving credit facility comprising part of the senior secured credit agreement is $10 million. In addition, the maximum principal amount of indebtedness that we may incur under the revolving credit facility will continue to be limited to $10 million since we were unable to deliver our unaudited financial statements for the quarter ended June 30, 2006 by August 14, 2006 and will continue if we are unable to deliver our unaudited financial statements for the quarter ended September 30, 2006 by November 14, 2006, until such time as these unaudited financial statements are delivered.

We filed our audited financial statements for the year ended December 31, 2005 on Form 10-K on August 4, 2006. In addition, we filed our amended Forms 10-Q/A for the quarters ended June 30, 2005 and September 30, 2005 on August 4, 2006.

The amendments provide for waivers of certain defaults under the credit agreement, including the default resulting from our 7.50% senior subordinated notes being accelerated. In addition, the fourth amendment permitted our existing undrawn $185 million delayed-draw term loan commitment to be used to repay or repurchase our outstanding $150 million of senior subordinated notes and to pay related fees and expenses upon the acceleration of such notes. On June 6, 2006, we drew down $156 million on this delayed-draw term loan to repay our outstanding 7.50% senior subordinated notes, all accrued and unpaid interest thereon and certain other fees and expenses related thereto. These notes are no longer outstanding and the related indenture is no longer in effect. The undrawn portion of the delayed-draw term loan terminated upon the funding of such $156 million. See “7.50% Senior Subordinated Notes” below.

7.50% Senior Subordinated Notes

On February 4, 2004, we completed an offering of $150.0 million in aggregate principal amount of 7.50% senior subordinated notes due February 15, 2014 to institutional investors. As discussed further below, on June 6, 2006, we drew down $156 million on our delayed-draw term loan to repay our outstanding senior subordinated notes, all accrued and unpaid interest thereon and certain other fees and expenses related thereto. The delayed-draw term loan has a maturity date of May 19, 2012. The notes are no longer outstanding and the indenture governing the notes is no longer in effect.

The indenture contained covenants, which, among other things, limited our ability, and that of our restricted subsidiaries, to:

	•		make restricted payments;

	•		create liens on our assets;

	•		consolidate, merge or otherwise transfer or sell all or substantially all of our assets;

	•		engage in certain sales of less than all or substantially all of our assets;

	•		incur additional indebtedness;

	•		issue certain types of stock; and · enter into transactions with affiliates.

In addition, under the terms of the indenture governing the notes, we were prohibited from incurring any subordinated debt that was senior in any respect in right of payment of the notes. We completed an exchange of the notes for registered notes with the same terms in August, 2004.

Upon a change of control, as defined in the indenture, subject to certain exceptions, we were required to offer to repurchase from each holder all or any part of each holder’s notes at a purchase price of 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase.

The indenture contained customary events of default for agreements of that type, including payment defaults, covenant defaults, bankruptcy defaults and cross-acceleration defaults. If any event of default under the indenture occurred and was continuing, then the trustee or the holders of at least 25% in principal amount of the then outstanding notes could declare all the notes to be due and payable immediately. See “Subsequent Event of Default” below.

Our subsidiaries had guaranteed the notes and such guarantees were junior and subordinated to the subsidiary guarantees of our senior debt on the same basis as the notes were junior and subordinated to the senior debt. Interest at 7.50% per annum from the issue date to maturity was payable on the notes each February 15 and August 15. The notes were redeemable at our option under certain conditions.

Subsequent Event of Default

On April 3, 2006, the trustee for the 7.50% senior subordinated notes notified us that we were in violation of the covenant requiring us to file our Annual Report on Form 10-K with the SEC within the time frame specified by the SEC’s rules and regulations, thereby triggering a default under the note indenture. The notice further stated that if this default continued for an additional sixty days then an event of default under the note indenture would occur. We did not file our Annual Report on Form 10-K on or before June 2, 2006 and did not receive the requisite consents to obtain a waiver of the default under the note indenture. Consequently, the default was not cured during the 60-day cure period and therefore constituted an event of default under the note indenture which entitled the trustee under the notes and/or the holders of at least 25% in aggregate principal amount of the outstanding notes to declare all of the notes immediately due and payable. On June 2, 2006, we received notice from the holders of over 25% in aggregate principal amount of the notes that such holders had accelerated the notes. As a consequence, on June 4, 2006, $150 million in aggregate principal amount of the notes (representing all of the outstanding notes) plus accrued and unpaid interest thereon became immediately due and payable. As permitted under the fourth amendment to our senior secured credit agreement with the lending parties thereunder, we borrowed $156 million under our existing delayed-draw term loan commitment and repaid all of the outstanding notes on June 6, 2006. The notes are no longer outstanding and the indenture governing the notes is no longer in effect.

NOTE 6 — INCOME TAXES

At March 31, 2006 we had deferred tax assets of approximately $49.0 million remaining. The income tax benefit of $0.6 million for the three months ended March 31, 2006 reflects a combined effective federal and state tax rate of 8.8%. The effective tax rate was 42.7% for the three months ended March 31, 2005. The change in the effective tax rate is a result of the tax benefit calculated at statutory rates on a projected annual pre-tax loss being offset by nondeductible items.

The sale of shares in the offering of August, 2004, caused the Company to undergo an “ownership change” within the meaning of section 382 (g) of the Internal Revenue Code of 1986, as amended. The ownership change will subject our net operating loss carryforwards to an annual limitation on their use, which will restrict our ability to use them to offset our taxable income in periods following the ownership change.

We have federal and state net operating loss carryforwards of approximately $91.4 million which will begin to expire in the year 2020.

NOTE 7 — STOCK PLANS

Stock Options

Our stock option program is a long-term retention program that is intended to attract, retain and provide incentives for directors, officers and employees in the form of incentive and non-qualified stock options and restricted stock. These plans are described in more detail below. The Board of Directors has the sole authority to

determine who receives such grants, the type, size and timing of such grants, and to specify the terms of any non-competition agreements relating to the grants.

General Stock Option Information

On May 31, 2002, the Board of Directors adopted the Carmike Cinemas, Inc. Non-Employee Directors Long-Term Stock Incentive Plan (the “Directors Incentive Plan”), which was approved by the stockholders on August 14, 2002. There were a total of 75,000 shares reserved under the Directors Incentive Plan. The Board of Directors approved a stock option grant of 5,000 shares each to two independent directors on August 14, 2002. Additionally, the Board of Directors approved stock option grants of 5,000 shares in September 2003 and 5,000 shares in April 2004 for new directors. The option grant price was based on the fair market value of the stock on the date of the grant. These grants of 20,000 shares in the aggregate during 2002, 2003 and 2004 represent the only stock options outstanding under the Directors Incentive Plan prior to the plan being superseded on May 21, 2004, the effective date of the Carmike Cinemas, Inc. 2004 Incentive Stock Plan (the “2004 Incentive Stock Plan”).

On July 19, 2002, the Board of Directors adopted the Carmike Cinemas, Inc. Employee and Consultant Long-Term Stock Incentive Plan (the “Employee Incentive Plan”), which was approved by the stockholders on August 14, 2002. There were a total of 500,000 shares reserved under the Employee Incentive Plan. We granted an aggregate of 150,000 options pursuant to this plan on March 7, 2003 to three members of senior management. The exercise price for the 150,000 stock options is $21.79 per share, and 75,000 options vested on December 31, 2005 and 75,000 options vest on December 31, 2006. On December 18, 2003, we granted an aggregate of 180,000 options to six members of management. The exercise price for the 180,000 options is $35.63 and they vest ratably over three years beginning December 31, 2005 through December 31, 2007. These grants of 330,000 shares in the aggregate during 2003 represent the only stock options outstanding under the Employee Incentive Plan prior to the plan being superseded on May 21, 2004, the effective date of the 2004 Incentive Stock Plan.

The following table sets forth the summary of option activity under our stock option plans for the three months ended March 31, 2006:


				Weighted		Weighted
	Number			Average		Average
	of Shares			Exercise Price		Fair Value
Balance, December 31, 2005		335,000		$	28.58	$	16.50
Granted		—			—		—
Exercised		—			—		—
Settled (1)		(25,000	)	$	21.79		12.82
Forfeited (1)		(60,000	)	$	29.86		17.30
Expired		—			—		—

Balance, March 31, 2006		250,000		$	28.95	$	16.67


(1)		In the quarter ended March 31, 2006, we recorded a $104,000 charge related to the Release and Consulting Agreement entered into with our former Chief Financial Officer (“CFO”) which provided that the former CFO shall be paid the cash equivalent for 25,000 vested stock options granted under Carmike’s 2002 Stock Plan based on the difference between the strike price of $21.74 and the then-market price of $25.36 on December 31, 2005, the date at which the options vested. All of the former CFO’s remaining options were forfeited without regard to vesting.

Information regarding stock options outstanding at March 31, 2006 is summarized below:


	Options Outstanding				Options Exercisable
			Weighted Average				Weighted Average
			Remaining
	Number of
Prices	Shares		Contractual Life (Years)		Number of Shares		Fair Value
$19.95		10,000		6.38		10,000	$	11.59
$21.40		5,000		7.18		5,000	$	12.42
$21.79		100,000		6.94		50,000	$	12.82
$22.05		5,000		9.62		5,000	$	11.66
$35.63		125,000		7.72		41,668	$	20.49
$37.46		5,000		8.01		5,000	$	17.54


Totals		250,000		7.39		116,668	$	15.59

The aggregate intrinsic value of options outstanding and exercisable as of March 31, 2006 was approximately $300,000 and $183,000, respectively. As of March 31, 2006 there was approximately $647,000 in unrecognized compensation costs related to non-vested stock options that is expected to be recognized over a weighted average period of approximately 0.8 years.

Stock Plans

Upon emergence from Chapter 11, our Board of Directors approved a new management incentive plan, the 2002 Stock Plan and authorized 1,000,000 shares for future issuance. The Board of Directors approved the grant of 780,000 shares under the 2002 Stock Plan to Michael W. Patrick, our Chief Executive Officer. Pursuant to the terms of Mr. Patrick’s employment agreement dated January 31, 2002 these shares will be delivered in three equal installments on January 31, 2005, 2006 and 2007 unless, prior to the delivery of any such installment, Mr. Patrick’s employment is terminated for cause (as defined in his employment agreement) or he has violated certain covenants set forth in such employment agreement. In May 2002, our Stock Option Committee (which administered the 2002 Stock Plan prior to August 2002) approved grants of 220,000 shares to a group of seven other members of senior management. These shares were 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 during each of these years. Shares earned will vest and be receivable approximately two years after the calendar year in which they were earned, provided, with certain exceptions, the executive remains one of our employees. One of the seven grants to senior executives includes a grant of 35,000 shares to one of our former employees.

On March 31, 2004, the Board of Directors adopted the 2004 Incentive Stock Plan, which was approved by the stockholders on May 21, 2004. The 2004 Incentive Stock Plan replaced the Employee Incentive Plan and the Directors Incentive Plan. The Compensation and Nominating Committee (or similar committee) may grant stock options, stock grants, stock units, and stock appreciation rights under the 2004 Incentive Stock Plan to certain eligible employees and to outside directors. There are 1,055,000 shares of common stock reserved for issuance pursuant to grants made under the 2004 Incentive Stock Plan in addition to any shares which may be forfeited under the Employee Incentive Plan and the Directors Incentive Plan after the effective date of the 2004 Incentive Stock Plan.

On May 19, 2005, our non-employee directors received annual equity compensation consisting of 250 restricted shares each (an aggregate of 1,500 restricted shares of common stock, of which 250 were later forfeited by a former director) pursuant to the 2004 Incentive Stock Plan, which vested on May 19, 2006. Effective as of the 2006 annual meeting of stockholders, each of our non-employee directors will receive an annual grant of 2,500 restricted shares of common stock at each annual meeting of stockholders which will vest in full at the next annual meeting of stockholders.

On March 27, 2006, 7,500 restricted shares were granted pursuant to the 2004 Incentive Stock Plan to our new Chief Financial Officer, Richard B. Hare. The 7,500 restricted shares will vest ratably over a three year period, commencing with the period ended March 27, 2007, if Mr. Hare remains an employee on such date.

The Company delivered 324,110 shares to management on January 31, 2006 and 367,250 shares to management on January 31, 2005 in conjunction with the 2002 Stock Plan. In order to satisfy the federal and state withholding requirements on these shares, the Company retained 134,344 and 146,620 of these shares respectively in treasury and remitted the corresponding tax withholding in cash on behalf of the stock recipients.

The following table summarizes the activity in the 2002 Stock Plan since January 1, 2005 and its status at March 31, 2006:


			Status at March 31, 2006
	Grants and		Shares Earned,		Shares Earned		Shares
	Forfeitures (1)		Pending Vesting		and Awarded		Forfeited
Balance at January 1, 2005:		984,360		628,110		356,250		37,770
Grants and forfeitures in 2006:
Shares granted to senior management		7,500		7,500

Total grants, net of forfeitures		991,860		635,610		356,250		37,770


(1)		There were no grants or forfeitures in 2005 and no forfeitures in 2006.

As of March 31, 2006 there was approximately $2.9 million of total unrecognized compensation costs related to non-vested share grants under the Plans. The costs are expected to be recognized over a weighted average period of approximately 0.6 years.

We adopted SFAS 123(R) in the first quarter of fiscal 2006 using the modified prospective method under which prior periods are not revised for comparative purposes. Prior to fiscal year 2006, we accounted for our stock-based compensation plans under APB 25. Reflected in the Consolidated Statements of Operations for the three months ended March 31, 2006 and 2005 is $1.0 million and $1.0 million, respectively, of stock-based employee compensation costs. The following table outlines the costs incurred for the three months ended March 31, 2006 and 2005 related to stock-based employee compensation costs:


	Three Months Ended
	March 31,
	2006		2005 (restated)
Costs related to stock options	$	164	$	—
Costs related to stock grants
Service vesting grants		804		804
Performance vesting grants		71		234


Total stock compensation costs	$	1,039	$	1,038

NOTE 8 — CONDENSED CONSOLIDATING FINANCIAL DATA

As of March 31, 2006, the Company and its wholly owned subsidiaries fully, unconditionally, and jointly and severally guaranteed the Company’s obligations under the Company’s 7.500% senior subordinated notes. In 2005, all unconsolidated, non-guarantor affiliates became wholly-owned subsidiaries of us. The condensed financial data for all years reflect this consolidation.

Condensed consolidating financial data for the guarantor subsidiaries is as follows (in thousands):

Condensed Consolidating Balance Sheets
As of March 31, 2006
(unaudited)


	Carmike		Guarantor
	Cinemas, Inc.		Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	7,833	$	6,236		$	—		$	14,069
Restricted cash		2,286		—			—			2,286
Accounts and notes receivable		3,183		(819	)		—			2,364
Inventories		483		1,304			—			1,787
Deferred income tax asset		4,549		1,480			—			6,029
Prepaid expenses		2,607		3,969			—			6,576

Total current assets		20,941		12,170			—			33,111
Investment in and advances to unconsolidated affiliates		336		3,449			—			3,785
Investment in subsidiaries		411,312		—			(411,312	)		—
Deferred income tax asset		23,950		18,990			—			42,940
Assets held for sale		288		4,979			—			5,267
Other		22,791		11,619			—			34,410
Property and equipment, net		130,170		425,967			—			556,137
Goodwill and other acquired intangibles, net		5,224		35,204			—			40,428

Total assets	$	615,012	$	512,378		$	(411,312	)	$	716,078

Liabilities and stockholders’ equity
Current liabilities:
Account payable	$	14,099	$	4,809		$	—		$	18,908
Accrued expenses		25,773		9,395			—			35,168
Dividends payable		2,176		—			—			2,176
Current maturities of long-term debt, capital lease and long-term financing obligations		2,841		16			—			2,857

Total current liabilities		44,889		14,220			—			59,109
Long-term debt, less current maturities		312,966		—			—			312,966
Capital lease and long-term financing obligations, less current maturities		28,519		85,346			—			113,865
Other		6,271		1,500			—			7,771
Intercompany liabilities		—		211,414			(211,414	)		—
Stockholders’ equity		222,367		199,898			(199,898	)		222,367

Total liabilities and stockholders’ equity	$	615,012	$	512,378		$	(411,312	)	$	716,078

Condensed Consolidating Statements of Operations
For Three Months Ended March 31, 2006
(unaudited)


	Carmike			Guarantor
	Cinemas, Inc.			Subsidiaries			Eliminations			Consolidated
Revenues
Admissions	$	12,769		$	59,795		$	—		$	72,564
Concessions and other		12,730			31,836			(5,386	)		39,180

		25,499			91,631			(5,386	)		111,744

Costs and expenses
Film exhibition costs		6,616			30,659			—			37,275
Concession costs		789			3,301			—			4,090
Other theatre operating costs		12,260			43,679			(5,333	)		50,606
General and administrative expenses		5,278			556			(53	)		5,781
Depreciation and amortization		2,093			8,199			—			10,292
Gain on sales of property and equipment		—			(144	)		—			(144	)

		27,036			86,250			(5,386	)		107,900

Operating income (loss)		(1,537	)		5,381			—			3,844
Interest expense		2,665			7,949			—			10,614

Loss before income taxes		(4,202	)		(2,568	)		—			(6,770	)
Income tax benefit		(370	)		(226	)		—			(596	)

Loss before equity in earnings of subsidiaries		(3,832	)		(2,342	)					(6,174	)
Equity in loss of subsidiaries		(2,342	)		—			2,342			—

Net loss	$	(6,174	)	$	(2,342	)	$	2,342		$	(6,174	)

Condensed Consolidating Statements of Cash Flows
For Three Months Ended March 31, 2006
(unaudited)


	Carmike			Guarantor
	Cinemas, Inc.			Subsidiaries			Eliminations			Consolidated
Operating activities
Net loss	$	(6,174	)	$	(2,342	)	$	2,342		$	(6,174	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,093			8,199			—			10,292
Amortization of debt issuance costs		578			40			—			618
Deferred income taxes		(370	)		(226	)		—			(596	)
Stock-based compensation		1,048			—			—			1,048
Gain on sales of property and equipment		—			(144	)		—			(144	)
Changes in operating assets and liabilities		1,320			(8,147	)		(2,342	)		(9,169	)

Net cash used in operating activities		(1,505	)		(2,620	)		—			(4,125	)
Investing activities
Proceeds from sales of property and equipment		—			311			—			311
Purchases of property and equipment		(2,744	)		(1,837	)		—			(4,581	)
Release of other restricted cash		316			—			—			316

Net cash used in investing activities		(2,428	)		(1,526	)		—			(3,954	)
Financing activities
Repayments of debt		(469	)		(247	)		—			(716	)
Receipts from long-term financing obligations		—			4,457			—			4,457
Purchase of treasury stock		(3,048	)		—			—			(3,048	)
Dividends paid		(2,154	)		—			—			(2,154	)

Net cash provided by (used in) financing activities		(5,671	)		4,210			—			(1,461	)

Increase (decrease) in cash and cash equivalents		(9,604	)		64			—			(9,540	)
Cash and cash equivalents at beginning of period		17,437			6,172			—			23,609

Cash and cash equivalents at end of period	$	7,833		$	6,236		$	—		$	14,069

Condensed Consolidating Balance Sheets
As of December 31, 2005


	Carmike		Guarantor
	Cinemas, Inc.		Subsidiaries			Eliminations			Consolidated
Assets:
Current assets:
Cash and cash equivalents	$	17,437	$	6,172		$	—		$	23,609
Restricted cash		3,602		—			—			3,602
Accounts and notes receivable		2,548		(492	)		—			2,056
Inventories		160		1,642			—			1,802
Deferred income tax asset		4,549		1,480			—			6,029
Prepaid expenses		2,365		3,922			—			6,287

Total current assets		30,661		12,724			—			43,385
Other assets:
Investment in and advances to unconsolidated affiliates		356		3,407			—			3,763
Investment in subsidiaries		423,162		—			(423,162	)		—
Deferred income tax asset		23,580		18,764			—			42,344
Assets held for sale		288		5,146			—			5,434
Other		23,444		9,258			—			32,702
Property and equipment, net		129,521		440,426			—			569,947
Goodwill		5,225		33,235			—			38,460
Other acquired intangible assets, net		—		2,082			—			2,082

Total assets	$	636,237	$	525,042		$	(423,162	)	$	738,117


Liabilities and stockholders’ equity:
Current liabilities:
Account payable	$	19,574	$	3,942		$	—		$	23,516
Dividends payable		2,154		—			—			2,154
Accrued expenses		31,801		10,642			—			42,443
Current maturities of long-term debt, capital lease and long-term financing obligations		2,435		—			—			2,435

Total current liabilities		55,964		14,584			—			70,548
Long-term liabilities:
Long-term debt, less current maturities		313,790		(16	)		—			313,774
Capital lease and long-term financing obligations, less current maturities		28,497		87,312			—			115,809
Other		5,269		—			—			5,269
Intercompany liabilities		—		235,033			(235,033	)		—

Total long-term liabilities		347,556		322,329			(235,033	)		434,852
Stockholders’ equity		232,717		188,129			(188,129	)		232,717

Total liabilities and stockholders’ equity	$	636,237	$	525,042		$	(423,162	)	$	738,117

Condensed Consolidating Statements of Operations
For Three Months Ended March 31, 2005
(Restated)
(unaudited)


	Carmike			Guarantor
	Cinemas, Inc.			Subsidiaries			Eliminations			Consolidated
Revenues
Admissions	$	12,848		$	54,204		$	—		$	67,052
Concessions and other		11,813			27,096			(4,741	)		34,168

		24,661			81,300			(4,741	)		101,220

Costs and expenses
Film exhibition costs		6,748			28,632			—			35,380
Concession costs		702			2,894			—			3,596
Other theatre operating costs		10,252			38,536			(4,683	)		44,105
General and administrative expenses		3,990			56			(58	)		3,988
Depreciation and amortization		1,867			6,374			—			8,241
(Gain) loss on disposal of property and equipment		—			—			—			—

		23,559			76,492			(4,741	)		95,310


Operating income		1,102			4,808			—			5,910
Interest expense		557			7,178			—			7,735

Income (loss) before reorganization costs and income taxes		545			(2,370	)		—			(1,825	)
Reorganization benefit		2,391			—			—			2,391

Income (loss) before income taxes & equity in earnings of subsidiaries		2,936			(2,370	)		—			566
Income tax expense (benefit)		1,254			(1,012	)		—			242

Income (loss) before equity in loss of subsidiaries		1,682			(1,358	)		—			324

Equity in loss of subsidiaries		(1,358	)		—			1,358			—

Net income (loss)	$	324		$	(1,358	)	$	1,358		$	324

Condensed Consolidating Statements of Cash Flows
For Three Months Ended March 31, 2005
(Restated)
(unaudited)


	Carmike			Guarantor
	Cinemas, Inc.			Subsidiaries			Eliminations			Consolidated
Operating activities
Net income (loss)	$	324		$	(1,358	)	$	1,358		$	324
Adjustments to reconcile net income (loss) to net cash provided (used in) by operating activities:
Depreciation and amortization		1,867			6,374			—			8,241
Amortization of debt issuance costs		557			—			—			557
Deferred income taxes		2,880			(2,325	)		—			555
Stock-based compensation		1,140			—			—			1,140
Non-cash reorganization items		(2,391	)		—			—			(2,391	)
Changes in operating assets and liabilities		(22,244	)		10,584			(1,358	)		(13,018	)

Net cash provided by (used in) operating activities		(17,867	)		13,275			—			(4,592	)
Investing activities
Purchases of property and equipment		(10,806	)		(15,293	)		—			(26,099	)

Net cash used in investing activities		(10,806	)		(15,293	)		—			(26,099	)
Financing activities
Repayments of debt		(1,364	)		(280	)					(1,644	)
Purchase of treasury stock		(5,210	)		—			—			(5,210	)
Dividends paid		(2,128	)		—			—			(2,128	)

Net cash used in financing activities		(8,702	)		(280	)		—			(8,982	)

Decrease in cash and cash equivalents		(37,375	)		(2,298	)		—			(39,673	)
Cash and cash equivalents at beginning of period		47,227			9,717			—			56,944

Cash and cash equivalents at end of period	$	9,852		$	7,419		$	—		$	17,271

NOTE 9 — LITIGATION PROCEEDINGS

From time to time, we are involved in routine litigation and legal proceedings in the ordinary course of our business, such as personal injury claims, employment matters, contractual disputes and claims alleging ADA violations. Currently, we do not have any pending litigation or proceedings that we believe will have a material adverse effect, either individually or in the aggregate, upon us.

NOTE 10 — RECENTLY ISSUED ACCOUNTING STANDARDS

FIN 48

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of Statement of Financial Accounting Standards 109 (“FIN 48”). FIN 48 is effective January 1, 2007 and would require us to record any change in net assets that results from the application of FIN 48 as an adjustment to retained earnings.

FIN 48 is applicable to all uncertain positions for taxes accounted for under SFAS 109, and is not intended to be applied by analogy to other taxes, such as sales taxes, value-add taxes, or property taxes. The scope of FIN 48 includes any position taken (or expected to be taken) on a tax return, including the decision to exclude from the return certain income or transactions. FIN 48 makes clear that its guidance also applies to positions such as (1) excluding income streams that might be deemed taxable by the taxing authorities, (2) asserting that a particular equity restructuring (e.g., a spin-off transaction) is tax-free when that position might be uncertain, or (3) the decision to not file a tax return in a particular jurisdiction for which such a return might be required.

years by major jurisdictions; and a roll-forward of all unrecognized tax benefits, presented as a reconciliation of the beginning and ending balances of the unrecognized tax benefits on a aggregated basis. We are still in the process of assessing the impact that the adoption of FIN 48 may have on our consolidated results of operations, cash flows or financial position.

FSP 13-1

In October 2005, the FASB issued FASB Staff Position (“FSP”) 13-1, Accounting for Rental Costs Incurred during a Construction Period. FSP 13-1 clarifies there is no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period. Accordingly, we are no longer able to capitalize rental costs during the construction period and began expensing them as pre-opening expense prior to the theatre opening date. This FSP was effective for the first reporting period beginning after December 15, 2005, which is our first quarter in 2006 and had no effect on our financial statements for the quarter ended March 31, 2006.

FAS 154

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections a replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS 154”), which requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. It also requires that a change in depreciation, amortization, or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate affected by a change in accounting principle. We are not currently contemplating an accounting change which would be impacted by SFAS 154.

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

Restatements

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 to correct for errors in the financial statements related to our failure to properly account for certain lease related transactions and other matters. The following errors in the application of generally accepted accounting principles to lease transactions have been corrected:

	•		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.

	•		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.

In addition, during 2005, we did not 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. As a result, we incorrectly recorded journal entries regarding directors’ fees, discount ticket revenue and capitalized interest, which impacts the quarterly results of operations presented in each of the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005.

The financial statements, notes thereto and related disclosures contained in this Quarterly Report on Form 10-Q as of March 31, 2006 have been restated to adjust for the errors noted above as of March 31, 2005 and for the quarter then ended. These restatements reflect a $11.6 million increase to accumulated deficit at January 1, 2005 as well as adjustments to net property plant and equipment, capital leases, financing obligations, other assets, deferred expenses and accrued expenses. Adjustments were also made to reflect the tax effect of the restatement adjustments.

The effect of the restatements on earnings per common share was as follows:


	Basic			Diluted
March 31, 2005	$	(0.01	)	$	(0.01	)

Emergence From Chapter 11

On January 4, 2002, the United States Bankruptcy Court for the District of Delaware entered an order confirming our Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code, dated as of November 14, 2001 (the “Plan”). The Plan became effective on January 31, 2002. A description of the Plan is disclosed in our Annual Report on Form 10-K for the year ended December 31, 2004 under the caption “Our Reorganization.” On February 11, 2005, the Company filed a motion seeking an order entering a final decree closing the bankruptcy cases. On March 15, 2005, the United States Bankruptcy Court of the District of Delaware entered a final decree closing the bankruptcy cases.

GKC Theatres Acquisition

On May 19, 2005, the Company acquired 100% of the stock of George G. Kerasotes Corporation (“GKC Theatres”) for a net purchase price of $61.6 million. With the GKC Theatres acquisition, we added 30 theatres with 263 screens in Illinois, Indiana, Michigan and Wisconsin.

Results Of Operations

Comparison of Three Months Ended March 31, 2006 and 2005

Revenues.

The Company collects substantially all of its revenues from the sales of admission tickets and concessions. The table below provides a comparative summary of the operating data for this revenue generation.


	Three months ended March 31,
	2006		2005
			(restated)
Average theatres		299		281
Average screens		2,465		2,185
Average attendance per screen		5,583		5,838
Average admission price	$	5.27	$	5.26
Average concession sales per patron	$	2.85	$	2.68
Total attendance (in thousands)		13,761		12,755
Total revenues (in thousands)	$	111,744	$	101,220

Total revenues for the three months ended March 31, 2006 compared to the three months ended March 31, 2005 increased 10.4%. This increase is due to a 7.9% increase in total attendance mostly attributed to the acquisition of GKC whose numbers are not presented in the three months ended March 31, 2005. This increase is partially offset by a 2.0% decrease in core attendance driven by a lack of high grossing films compared to the same period in 2005. We operated 297 theatres with 2,454 screens at March 31, 2006 compared to 281 theatres with 2,187 screens at March 31, 2005.

The table below shows the activity of theatre openings and closures for the three months ended March 31, 2006.


							Average Screens/
	Theatres			Screens			Theatre
Total at December 31, 2005		301			2,475			8.2
Closures		(4	)		(21	)

Total at March 31, 2006		297			2,454			8.2

The closures shown above were the result of normal lease expirations. The Company incurred no additional liability due to these closures. Closures generally occur in markets in which the Company has another theatre or has closed the theatre for remodeling or expansion.

The following table sets forth the percentage of total revenues represented by certain items reflected in our consolidated statement of operations for the periods indicated:


	Three Months Ended
	March 31,
	2006			2005
				(restated)
Revenues:
Admissions		64.9	%		66.2	%
Concession & Other		35.1			33.8

Total Revenue		100.0			100.0
Cost and expenses:
Film exhibition costs (1)(2)		51.4	%		52.8	%
Concession costs (2)		10.4			10.5
Other theatre operating costs		45.3			43.6


	Three Months Ended
	March 31,
	2006			2005
General and administrative		5.2			3.9
Depreciation and amortization		9.2			8.1
Gain on sales of property and equipment		(0.1	)		—

Total costs and expenses		96.6			94.2

				(restated)
Operating income		3.4			5.8
Interest expense		9.5			7.6
Loss before reorganization costs and income taxes		(6.1	)		(1.8	)
Reorganization benefit		—			2.4

Income (loss) before income taxes		(6.1	)		0.6
Income tax (benefit) expense		(0.5	)		0.2

Net income (loss) available for common stockholders		(5.5	)%		0.3	%


(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 admission revenues, and concession costs, which are expressed as a percentage of concession and other revenues.

The table below summarizes operating expense data for the periods presented.


	Three months ended,
				March 31,		% variance
	March 31,			2005		favorable/
(in thousands)	2006			(restated)		(unfavorable)
Film exhibition costs	$	37,275		$	35,380		(5.4	)%
Concession costs	$	4,090		$	3,596		(13.7	)%
Other theatre operating costs	$	50,606		$	44,105		(14.7	)%
General and administrative expenses	$	5,781		$	3,988		(45.0	)%
Depreciation and amortization	$	10,292		$	8,241		(24.9	)%
Gain on sales of property and equipment	$	(144	)	$	—		—

Film exhibition costs fluctuate in direct relation to the increases and decreases in admissions revenue. The increase in film exhibition costs for the three months ended March 31, 2006, was due to the increase in admissions for the period. As a percentage of admissions revenue, film exhibition costs were 51.4% for the three months ended March 31, 2006 as compared to 52.8% for the three months ended March 31, 2005 due to higher grossing films which carried a higher percentage cost in 2005.

Concessions costs fluctuate with the changes in concessions revenue. As a percentage of concessions and miscellaneous revenues, concessions costs were 10.4% for the three months ended March 31, 2006 compared to 10.5% for the three months ended March 31, 2005.

Other theatre operating costs for the three months ended March 31, 2006 increased 14.7% compared to the three months ended March 31, 2005 due to an increase in rental payments on completed theatres constructed during 2005, the higher cost of utilities compared to the same period in 2005 and the GKC acquisition. As a percentage of revenue, other theatre operating costs were 45.3% for the three months ended March 31, 2006 as compared to 43.6% for the three months ended March 31, 2005.

General and administrative expenses for the three months ended March 31, 2006 increased 45.0% compared to the three months ended March 31, 2005 due to professional fees, including those related the restatement of our previously issued consolidated financial statements for the years ended December 31, 2004 and December 31, 2003 and for the quarters ended March 31, 2005, June 30, 2005, and September 30, 2005 and overall increases in other

expenses related to the GKC acquisition. As a percentage of revenue, general and administrative expenses were 5.2% for the three months ended March 31, 2006 as compared to 3.9% for the three months ended March 31, 2005.

Depreciation and amortization for the three months ended March 31, 2006 increased 24.9% compared to the three months ended March 31, 2005. This increase reflects the effect of new theatres constructed during 2005 that have been placed in service as well as the GKC acquisition.

The gain on sales of property and equipment for the three months ended March 31, 2006 amounted to $144,000 compared to no gain or loss for the three months ended March 31, 2005. This change reflects the sale of real estate from assets held for sale during the current period.

Operating Income. Operating income for the three months ended March 31, 2006 decreased 35.0% to $3.8 million compared to $5.9 million for the three months ended March 31, 2005. As a percentage of revenues, operating income for the three months ended March 31, 2006 and 2005 was 3.4% and 5.8%, respectively.

Interest expense. Interest expense for the three months ended March 31, 2006 increased 37.2% to $10.6 million from $7.7 million for the three months ended March 31, 2005. The increase is related to higher interest rates on the term loan obtained through our debt refinancing that closed on May 19, 2005 as well as an increase in average debt outstanding due to the financing of the GKC acquisition.

Income tax expense. We recognized income tax benefit of $0.6 million for the three months ended March 31, 2006, representing a combined federal and state effective tax rate of 8.8%, compared to income tax expense of $242,000 for the three months ended March 31, 2005, representing a combined federal and state effective tax rate of 42.7%. The change in the effective tax rate is a result of the tax benefit calculated at statutory rates on a projected annual pre-tax loss being offset by nondeductible items.

Reorganization benefits. We recognized no reorganization benefit or expense for the three months ended March 31, 2006, compared to reorganization benefit of $2.4 million for the three months ended March 31, 2005.

Liquidity And Capital Resources

Our revenues are collected in cash and credit card payments. Because we receive our revenue in cash prior to the payment of related expenses, we have an operating “float” which partially finances our operations. Our current liabilities exceeded our current assets by $26.0 million as of March 31, 2006, as compared to December 31, 2005 when our current liabilities exceeded our current assets by $27.2 million. The working capital deficit decreased due to higher revenues and a reduction in cash used for construction related activity. The existing deficit will be funded through cash on hand, anticipated operating cash flows and the ability to draw from our revolving credit agreement. At March 31, 2006, we had available borrowing capacity of $50 million under our revolving credit facility, except as explained below under the heading “Senior Secured Credit Facilities—Subsequent Event of Default.”

Net cash used in operating activities was $4.1 million for the three months ended March 31, 2006 compared to $4.6 million for the three months ended March 31, 2005. This change is principally due to lower after tax income partially offset by a reduction in cash used for working capital items.

Net cash used in investing activities was $4.0 million for the three months ended March 31, 2006 compared to net cash used in investing activities of $26.1 million for the three months ended March 31, 2005. This decrease was due to fewer construction projects in 2006.

During the three months ended March 31, 2006, we made capital expenditures of approximately $4.6 million for the construction of three theatres and maintenance on our other theatres. Our total budgeted capital expenditures for 2006 are $25.3 million, which we anticipate will be funded by using operating cash flows, available cash from our revolving credit facility and landlord-funded new construction and theatre remodeling, when available. We expect that substantially all of these capital expenditures will continue to consist of new theatre construction and theatre remodeling. Our capital expenditures for any new theatre generally precede the opening of the new theatre by several months. In addition, when we rebuild or remodel an existing theatre, some or all of the auditoriums within the theatre must be closed, which results in lost revenue until the theatre is fully reopened. Therefore, capital

expenditures for new theatre construction, rebuilds and remodeling in a given quarter may not result in revenues from the new theatre or theatres for several quarters.

For the three months ended March 31, 2006, net cash used in financing activities was $1.5 million compared to net cash used in financing activities of $9.0 million for the three months ended March 31, 2005. The decrease in cash used for the three months ended March 31, 2006 is due primarily to the reduction in the amount of treasury shares purchased in the first quarter of 2006 as compared to 2005, as well as receiving $4.5 million as funding of a financing obligation.

Our liquidity needs are funded by operating cash flow, sales of surplus assets, availability under our credit agreements and short term float. The exhibition industry is very seasonal with the studios normally releasing their premiere film product during the holiday season and summer months. This seasonal positioning of film product makes our needs for cash vary significantly from period to period. Additionally, the ultimate performance of the film product at any time during the calendar year will have the most dramatic impact on our cash needs.

Our ability to service our indebtedness will require a significant amount of cash. Our ability to generate this cash will depend largely on future operations. Based upon our current level of operations, we believe that cash flow from operations, available cash, sales of surplus assets and borrowings under our credit agreements will be adequate to meet our liquidity needs. However, the possibility exists that, if our liquidity needs are not met and we are unable to service our indebtedness, we could come into technical default under our senior secured credit facility, causing the lenders to declare all payments immediately due and payable.

We cannot make assurances that our business will continue to generate significant cash flow to fund our liquidity needs. We are dependent to a large degree on the public’s acceptance of the films released by the studios. We are also subject to a high degree of competition and low barriers of entry into our industry. In the future, we may need to refinance all or a portion of our indebtedness on or before maturity. We cannot make assurances that we will be able to refinance any of our indebtedness or raise additional capital through other means, on commercially reasonable terms or at all.

As of March 31, 2006, we were in compliance with all of the financial covenants as defined in our debt agreements.

As of March 31, 2006, we did not have any off-balance sheet financing transactions.

Senior Secured Credit Facilities

The senior secured credit facilities consist of:

	•		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.

On June 6, 2006, we drew down $156 million of the $185 million delayed-draw term loan to repurchase our outstanding $150 million of 7.50% senior subordinated notes due 2014 and to repay related fees and expenses. The delayed-draw term loan has a maturity date of May 19, 2012. At this time, the portion of the delayed-draw term loan commitment which was not used for this repurchase was cancelled.

The interest rate for borrowings under the revolving credit facility for the initial six-month period is set from time to time at our option (subject to certain conditions set forth in the credit agreement) at either: (1) a specified base rate plus 1.25% or (2) the Eurodollar Base Rate divided by the difference between one and the Eurocurrency Reserve Requirements plus 2.25%. Thereafter, the applicable rates of interest under the revolving credit facility are based on our consolidated leverage ratio, with the margins applicable to base rate loans ranging from 0.50% to 1.25%, and the margins applicable to Eurodollar Loans (as defined in the credit agreement) ranging from 1.50% to 2.25%. The rate at June 6, 2006 was 10.25%; on June 8, 2006, we converted the rate to a 90-day LIBOR-based rate, which was 8.52%. The final maturity date of the revolving credit facility is May 19, 2010.

The senior secured credit facilities contain covenants which, among other things, restrict our ability, and that of our restricted subsidiaries, to:

	•		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.

Our failure to comply with any of these covenants, including compliance with the financial ratios, is an event of default under the senior secured credit facilities, in which case, the administrative agent may, and if requested by the lenders holding a certain minimum percentage of the commitments shall, terminate the revolving credit facility and the delayed draw term loan commitments with respect to additional advances and may declare all or any portion of the obligations under the revolving credit facility and the term loan facilities due and payable. As of March 31, 2006, we were in compliance with all of the financial covenants. Other events of default under the senior secured credit facilities include:

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

	•		the occurrence of a change of control (as defined in the credit agreement); 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.

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

Subsequent Event of Default

We had not submitted audited financial statements for the year ended December 31, 2005 by the 65th day following the end of the previous fiscal year nor had we submitted unaudited financial statements for the three month period ended March 31, 2006 by the 40th day following the end of such three month period as required by the financial covenants under our senior secured credit facility.

We filed our audited financial statements for the year ended December 31, 2005 on Form 10-K on August 4, 2006. In addition, we filed our amended Form 10-Q/As for the quarters ended June 30, 2005 and September 30, 2005 on August 4, 2006.

7.50% Senior Subordinated Notes

On February 4, 2004, we completed an offering of $150.0 million in aggregate principal amount of 7.50% senior subordinated notes due February 15, 2014 to institutional investors. As discussed further below, on June 6, 2006, we drew down $156 million on our delayed-draw term loan to repay our outstanding senior subordinated notes, all accrued and unpaid interest thereon and certain other fees and expenses related thereto. The notes are no longer outstanding and the indenture governing the notes is no longer in effect.

The indenture contained covenants, which, among other things, limited our ability, and that of our restricted subsidiaries, to:

	•		make restricted payments;

	•		create liens on our assets;

	•		consolidate, merge or otherwise transfer or sell all or substantially all of our assets;

	•		engage in certain sales of less than all or substantially all of our assets;

	•		incur additional indebtedness;

	•		issue certain types of stock; and

	•		enter into transactions with affiliates.

In addition, under the terms of the indenture governing the notes, we were prohibited from incurring any subordinated debt that was senior in any respect in right of payment to the notes. We completed an exchange of the notes for registered notes with the same terms in August, 2004.

Subsequent Event of Default

Recent Accounting Pronouncements

FIN 48

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of Statement of Financial Accounting Standards 109 (“FIN 48”). FIN 48 is effective January 1, 2007 and would require us to record any change in net assets that results from the application of FIN 48 as an adjustment to retained earnings.

FIN 48 is applicable to all uncertain positions for taxes accounted for under SFAS 109, and is not intended to be applied by analogy to other taxes, such as sales taxes, value-add taxes, or property taxes. The scope of FIN 48 includes any position taken (or expected to be taken) on a tax return, including the decision to exclude from the return certain income or transactions. FIN 48 makes clear that its guidance also applies to positions such a (1) excluding income streams that might be deemed taxable by the taxing authorities, (2) asserting that a particular equity restructuring (e.g., a spin-off transaction) is tax-free when that position might be uncertain, or (3) the decision to not file a tax return in a particular jurisdiction for which such a return might be required.

FIN 48 requires that we make qualitative and quantitative disclosures, including discussion of reasonably possible changes that might occur in the recognized tax benefits over the next 12 months; a description of open tax years by major jurisdictions; and a roll-forward of all unrecognized tax benefits, presented as a reconciliation of the beginning and ending balances of the unrecognized tax benefits on a aggregated basis. We are still in the process of assessing the impact that the adoption of FIN 48 may have on our consolidated results of operations, cash flows or financial position.

FSP 13-1

FAS 154

Seasonality

Typically, movie studios release films with the highest expected revenues during the summer and the holiday period between Thanksgiving and Christmas, causing seasonal fluctuations in revenues. However, movie studios are increasingly introducing more popular film titles throughout the year. In addition, in years where Christmas falls on a weekend day, our revenues are typically lower because our patrons generally have shorter holiday periods away from work or school.

Information About Forward-Looking Statements

This quarterly report contains forward-looking statements within the meaning of the federal securities laws. In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the SEC or in connection with oral statements made to the press, potential investors or others. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words, “believes,” “expects,” “anticipates,” “plans,” “estimates,” “intends,” “projects,” “should,” “will,” or similar expressions. These statements include, among others, statements regarding our strategies, sources of liquidity, the availability of film product and the opening or closing of theatres during 2005 and 2006.

Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on beliefs and assumptions of our management, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding expected pricing levels, competitive conditions and general economic conditions. These assumptions could prove inaccurate. The forward-looking statements also involve risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

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

	•		our ability to maintain our Nasdaq listing;

	•		our ability to operate at expected levels of cash flow;

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

	•		competition in our markets;

	•		competition with other forms of entertainment;

	•		identified material weaknesses in internal over financial reporting;

	•		the effect of our leverage on our financial condition; and

	•		other factors, including the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005, under the caption “Risk Factors.”

We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to various market risks. We have floating rate debt instruments and, therefore, are subject to the market risk related to changes in interest rates. Interest paid on our debt is largely subject to changes in interest rates in the market. Our revolving credit facility and our seven-year term loan credit facility are based on a structure that is priced over an index or rate option. An increase of 1% in interest rates would increase the interest expense on our $166.2 million term loan by approximately $1.7 million on an annual basis. An increase of 1% in interest rates would increase the interest expense on our $156.0 million delayed-draw term loan by approximately $1.6 million on an annual basis. If our $50 million revolving credit agreement was fully drawn, a 1% increase in interest rates would increase interest expense by $500,000 on an annual basis.

We have 27 theatre leases that have increases contingent on changes in the Consumer Price Index (“CPI”). A 1% change in the CPI would increase rent expense by $2.3 million over the remaining lives of these leases, which management does not believe would have a material impact on our consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

As required by Securities and Exchange Commission rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation, these officers have concluded that, in light of the material weaknesses described below, as of March 31, 2006, the Company’s disclosure controls and procedures were not effective at the reasonable assurance level.

As a result of these control deficiencies, management performed additional procedures to ensure that the Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles. Accordingly, the Company believes that the financial statements included in the Company’s quarterly

report on this Form 10-Q fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented in accordance with generally accepted accounting principles.

Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As of December 31, 2005, the Company identified the following material weaknesses in its internal control over financial reporting, which continued to exist as of March 31, 2006:

	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 also resulted in the restatement, discussed in Note 18 to the consolidated financial statements, of the Company’s consolidated financial statements, reported in its Form 10-K/A Amendment No. 2 for the years ended December 31, 2003 and 2004 and its consolidated financial statements for the quarters ended March 31 and June 30, 2005, as well as adjustments to the Company’s consolidated financial statements for the quarter ended September 30, 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.

Plan of Remediation for Identified Material Weaknesses

As of the end of the period covered by this quarterly report, the Company had not fully implemented the remediation described below. Accordingly, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were not effective at the end of the first quarter of 2006.

Subsequent to December 31, 2005, we made the following additional changes in our internal control over financial reporting in an effort to remediate the additional material weaknesses discussed above:

	•		Our Controller reviews and approves all general ledger journal entries.

	•		Revised processes, procedures and documentation standards relating to accounting for lease transactions.

	•		Hired new personnel in the accounting and finance areas, including a new Chief Financial Officer and a new Assistant Controller.

Although we believe the steps taken to date have improved the design effectiveness of our internal control over financial reporting, we have not completed our documentation and testing of the corrective processes and procedures relating thereto. Accordingly, we will continue to monitor the effectiveness of our internal control over financial reporting in the areas impacted by the material weaknesses discussed above.

In addition to the foregoing, the Company’s planned remediation measures in connection with the material weaknesses described above include the following:

	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 utilize outside consultants, other than our independent registered public accounting firm, to assist management in its analysis of lease accounting transactions and related reporting and in the preparation of our financial statements.

	3.		We will assess staffing levels and expertise in our accounting and finance areas and take the steps necessary to appropriately staff the accounting and finance departments.

	4.		We will retain an outside consulting firm to perform detailed, accurate, and timely account analyses and reconciliations that will ensure that all account balances are accurate and properly supported. In addition, our Controller (or authorized delegate) will review and approve all general ledger journal entries.

We, along with our Audit Committee, will consider additional items, or will alter the planned steps identified above as necessary, in order to further remediate these material weaknesses identified herein.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2006, we made the following changes that materially affected or are reasonably likely to materially affect our internal control over financial reporting:

	1.		Implemented an additional level of review to our final closing procedures which requires approval of all journal entries by our Controller.

	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.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

ITEM 1A. RISK FACTORS.

There have been no material changes to our risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Information regarding defaults upon our senior securities is contained in Note 5 of the notes to our condensed consolidated financial statements included herein and under the headings “Subsequent Event of Default” contained in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In addition, we have previously disclosed information regarding defaults upon our senior securities pursuant to Item 2.04 of the Company’s Form 8-K filed with the SEC on June 5, 2006.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.


Exhibit
Number		Description
3.1		Amended and Restated Certificate of Incorporation of Carmike Cinemas, Inc. (filed as Exhibit 3.1 to Carmike’s Amendment to Form 8-A filed January 31, 2002 and incorporated herein by reference).

3.2		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, among Carmike Cinemas, Inc., the Guaranteeing Subsidiaries named therein, and Wells Fargo Bank, National Association (successor by merger with


Exhibit
Number		Description
		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		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).

10.2		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).

11		Computation of per share earnings (provided in Note 2 of our Notes to Consolidated Financial Statements (Unaudited) included in this report under the caption “Earnings Per Share”).

31.1		Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification 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		Certification 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.

Exhibit Index


Exhibit
Number		Description
3.1		Amended and Restated Certificate of Incorporation of Carmike Cinemas, Inc. (filed as Exhibit 3.1 to Carmike’s Amendment to Form 8-A filed January 31, 2002 and incorporated herein by reference).

3.2		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, 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		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).

10.2		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).

11		Computation of per share earnings (provided in Note 2 of our Notes to Consolidated Financial Statements (Unaudited) included in this report under the caption “Earnings Per Share”).

31.1		Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification 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		Certification 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.


	CARMIKE CINEMAS, INC.
Date: August 18, 2006	By:	/s/ Michael W. Patrick
		Michael W. Patrick
		President, Chief Executive Officer and Chairman of the Board of Directors (Duly Authorized Officer)


Date: August 18, 2006	By:	/s/ Richard B. Hare
		Richard B. Hare
		Senior Vice President — Finance, Treasurer and Chief Financial Officer (Principal Financial Officer)


Date: August 18, 2006	By:	/s/ Jeffrey A. Cole
		Jeffrey A. Cole
		Assistant Vice President — Controller (Principal Accounting Officer)


EXPLANATORY NOTE	3
PART I FINANCIAL INFORMATION	4
ITEM 1. FINANCIAL STATEMENTS	4
CONSOLIDATED BALANCE SHEETS	4
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)	5
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)	6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37
ITEM 4. CONTROLS AND PROCEDURES	37
PART II OTHER INFORMATION	40
ITEM 1. LEGAL PROCEEDINGS	40
ITEM 1A. RISK FACTORS	40
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	40
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	40
ITEM 5. OTHER INFORMATION	40
ITEM 6. EXHIBITS	40
SIGNATURES	42
EXHIBIT INDEX	43
EX-31.1 SECTION 302, CERTIFICATION OF THE CEO
EX-31.2 SECTION 302, CERTIFICATION OF THE CFO
EX-32.1 SECTION 906, CERTIFICATION OF THE CEO
EX-32.2 SECTION 906, CERTIFICATION OF THE CFO

1.		I have reviewed this report on Form 10-Q of Carmike Cinemas, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


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


/s/ Richard B. Hare Richard B. Hare
Senior Vice President — Finance,
Treasurer and Chief Financial Officer