UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2010

OR

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

For the transition period from              to             

Commission file number 000-14993

CARMIKE CINEMAS, INC.

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE	58-1469127
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1301 First Avenue, Columbus, Georgia	31901-2109
(Address of Principal Executive Offices)	(Zip Code)

(706) 576-3400

(Registrant’s Telephone Number, Including Area Code)

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

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

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

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

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

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

Common Stock, par value $0.03 per share — 12,882,673 shares outstanding as of October 20, 2010.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)		3
CONDENSED CONSOLIDATED BALANCE SHEETS		3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS		4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS		5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		22
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		29
ITEM 4. CONTROLS AND PROCEDURES		29
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		30
ITEM 1A. RISK FACTORS		30
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		30
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		30
ITEM 4. RESERVED		30
ITEM 5. OTHER INFORMATION		30
ITEM 6. EXHIBITS		31
EXHIBIT INDEX		31
SIGNATURES		32
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32.1 SECTION 906 CERTIFICATION OF CEO
EX-32.2 SECTION 906 CERTIFICATION OF CFO

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CARMIKE CINEMAS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

	September 30, 2010			December 31, 2009
	(Unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	4,510		$	25,696
Restricted cash		79			403
Accounts receivable		4,508			5,010
Inventories		2,771			2,551
Prepaid expenses		6,270			6,791
Total current assets		18,138			40,451
Property and equipment:
Land		54,603			54,671
Buildings and building improvements		272,243			274,050
Leasehold improvements		121,879			125,075
Assets under capital leases		50,924			53,787
Equipment		214,820			214,293
Construction in progress		2,460			431
Total property and equipment		716,929			722,307
Accumulated depreciation and amortization		(343,677	)		(331,728	)
Property and equipment, net of accumulated depreciation		373,252			390,579
Assets held for sale		—			2,249
Intangible assets, net of accumulated amortization		1,139			1,251
Other assets		22,019			19,448
Total assets	$	414,548		$	453,978
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	15,090		$	26,152
Accrued expenses		28,140			33,376
Current maturities of long-term debt, capital leases and long-term financing obligations		4,239			4,261
Total current liabilities		47,469			63,789
Long-term liabilities:
Long-term debt, less current maturities		233,578			248,171
Capital leases and long-term financing obligations, less current maturities		116,208			116,684
Other		14,458			14,032
Total long-term liabilities		364,244			378,887
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred Stock, $1.00 par value per share: 1,000,000 shares authorized, no shares issued		—			—
Common Stock, $0.03 par value per share: 20,000,000 shares authorized, 13,326,872 shares issued and 12,877,673 shares outstanding at September 30, 2010, and 13,266,372 shares issued and 12,862,963 shares outstanding at December 31, 2009		400			395
Treasury stock, 449,199 and 403,409 shares at September 30, 2010 and December 31, 2009, respectively		(11,657	)		(10,945	)
Paid-in capital		288,578			286,903
Accumulated deficit		(274,486	)		(265,051	)
Total stockholders’ equity		2,835			11,302
Total liabilities and stockholders’ equity	$	414,548		$	453,978

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

3

CARMIKE CINEMAS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues:
Admissions	$	82,740		$	82,011		$	249,742		$	251,985
Concessions and other		42,054			40,242			126,643			124,995
Total operating revenues		124,794			122,253			376,385			376,980
Operating costs and expenses:
Film exhibition costs		45,713			45,769			140,161			140,155
Concession costs		4,764			4,382			13,867			12,902
Other theatre operating costs		55,551			55,426			162,742			159,582
General and administrative expenses		4,365			3,879			13,669			11,744
Separation agreement charges		—			—			—			5,462
Depreciation and amortization		8,000			8,658			24,096			26,085
Gain on sale of property and equipment		(658	)		(128	)		(649	)		(278	)
Impairment of long-lived assets		220			17,188			3,944			17,188
Total operating costs and expenses		117,955			135,174			357,830			372,840
Operating income (loss)		6,839			(12,921	)		18,555			4,140
Interest expense		8,786			7,589			27,451			25,343
Loss on extinguishment of debt		5			—			2,573			—
Loss from continuing operations before income tax		(1,952	)		(20,510	)		(11,469	)		(21,203	)
Income tax benefit		(2,543	)		—			(1,984	)		—
Income (loss) from continuing operations		591			(20,510	)		(9,485	)		(21,203	)
Income (loss) from discontinued operations (Note 6)		(61	)		(145	)		50			(620	)
Net income (loss)	$	530		$	(20,655	)	$	(9,435	)	$	(21,823	)
Weighted average shares outstanding:
Basic		12,779			12,683			12,740			12,676
Diluted		12,794			12,683			12,740			12,676
Net income (loss) per common share (Basic and Diluted):
Income (loss) from continuing operations	$	0.05		$	(1.62	)	$	(0.74	)	$	(1.67	)
Loss from discontinued operations, net of tax		(0.01	)		(0.01	)		—			(0.05	)
Net income (loss) per common share	$	0.04		$	(1.63	)	$	(0.74	)	$	(1.72	)

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

4

CARMIKE CINEMAS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended September 30,
	2010			2009
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(9,435	)	$	(21,826	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		24,133			26,097
Amortization of debt issuance costs		2,682			1,585
Impairment of long-lived assets		3,944			17,188
Write-off unamortized debt issuance costs related to the extinguishment of debt		2,573			—
Stock-based compensation		1,680			842
Other		1,181			1,430
Gain on sale of property and equipment		(933	)		(172	)
Changes in operating assets and liabilities:
Accounts receivable and inventories		88			611
Prepaid expenses and other assets		2,258			(1,149	)
Accounts payable		(11,475	)		(414	)
Accrued expenses and other liabilities		(4,753	)		412
Net cash provided by operating activities		11,943			24,604
Cash flows from investing activities:
Purchases of property and equipment		(10,881	)		(10,157	)
Release of restricted cash		324			81
Proceeds from sale of property and equipment		3,879			2,976
Net cash used in investing activities		(6,678	)		(7,100	)
Cash flows from financing activities:
Debt activities:
Issuance of long-term debt		262,350			—
Repayments of long-term debt		(277,722	)		(17,065	)
Debt issuance costs		(9,154	)		—
Short-term borrowings		5,000			—
Repayments of short term borrowings		(5,000	)		—
Repayments of capital lease and long-term financing obligations		(1,213	)		(1,260	)
Issuance of common stock		—			1
Purchase of treasury stock		(712	)		(7	)
Net cash used in financing activities		(26,451	)		(18,331	)
Increase (decrease) in cash and cash equivalents		(21,186	)		(827	)
Cash and cash equivalents at beginning of period		25,696			10,867
Cash and cash equivalents at end of period	$	4,510		$	10,040
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	27,567		$	23,135
Income taxes	$	3,680		$	300
Non-cash investing and financing activities:
Non-cash purchase of property and equipment	$	419		$	6

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

5

CARMIKE CINEMAS, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2010 and 2009

(unaudited)

(in thousands except share and per share data)

NOTE 1—BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Carmike Cinemas, Inc. (referred to as “we”, “us”, “our”, and the “Company”) has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). This information reflects all adjustments which in the opinion of management are necessary for a fair presentation of the statement of financial position as of September 30, 2010 and December 31, 2009, and the results of operations for the three and nine month periods ended September 30, 2010 and 2009 and cash flows for the nine month periods ended September 30, 2010 and 2009. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009. That report includes a summary of our critical accounting policies. There have been no material changes in our accounting policies during the first nine months of 2010.

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

Accounting Estimates

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

Discontinued Operations

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

Impairment of Long-Lived Assets

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

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

6

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (the “FASB”) issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. This guidance was effective for the Company beginning January 1, 2010. The adoption did not have an impact on the Company’s consolidated financial statements.

NOTE 2—IMPAIRMENT OF LONG-LIVED ASSETS

For the three and nine months ended September 30, 2010, impairment charges aggregated to $0.2 million and $3.9 million, respectively. The impairment affected three theatres with 29 screens and 21 theatres with 212 screens for the three and nine months ended September 30, 2010, respectively. The Company recorded impairment charges of $17,188 during the three and nine months ended September 30, 2009. The impairment affected seven theatres with 85 screens for the three and nine months ended September 30, 2009. The impairments were primarily the result of deterioration in operating results of these theatres.

The estimated aggregate fair value of the long-lived assets impaired during the three and nine months ended September 30, 2010 was approximately $0.6 million and $13.2 million, respectively. These fair value estimates are considered Level 3 estimates and were derived primarily from discounting estimated future cash flows and reference to appraised values.

NOTE 3—DEBT

Our debt consisted of the following on the dates indicated:

	September 30, 2010			December 31, 2009
Term loan	$	238,063		$	139,634
Less discount on term loan		(2,086	)		—
Delayed draw term loan credit agreement		—			111,152
		235,977			250,786
Current maturities		(2,399	)		(2,615	)
	$	233,578		$	248,171

In January 2010, the Company entered into a $265,000 senior secured term loan facility with an interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 3.5%, or the base rate plus a margin of 2.5% (subject to a floor of 3.0%), as the Company may elect. The debt was issued with a discount of approximately $2,600, which is being amortized to interest expense using the effective interest method over the life of the debt. The proceeds were used to repay the Company’s $170,000 seven year term loan that was due in May 2012 with a then outstanding balance of $139,600 and the $185,000 seven year delayed-draw term loan facility that was due in May 2012 with a then outstanding balance of $111,150. The Company recorded a loss on extinguishment of debt of $2,573 during the nine months ended September 30, 2010 for the write-off of unamortized debt issuance costs. The Company is currently required to make 20 consecutive principal repayments of the senior secured term loan borrowings in the amount of $600 on the last day of each calendar quarter, with a balance of $226,070 due at final maturity on January 27, 2016. During the nine months ended September 30, 2010, the Company voluntarily repaid $25,000 of principal on its new term loan. For the three months ended September 30, 2010 and 2009, the average interest rate on our debt was 5.50% and 3.84%, respectively.

In January 2010, the Company also entered into a new $30,000 revolving credit facility with an interest rate of LIBOR plus a margin of 4.0% (subject to a floor of 2.0%), or base rate plus a margin 3.0% (subject to a 3.0% floor), as the Company may elect. Thereafter, the applicable margins are subject to adjustment based on the Company’s ratio of total debt to EBITDA as reflected in the Company’s quarterly or annual financial statements, with the margins ranging from 3.50% to 4.00% on LIBOR based loans, and from 2.50% to 3.00% on base rate based loans. In addition, the Company is required to pay commitment fees on the unused portion of the new revolving credit facility. The commitment fee rate is initially 0.75% per annum, and is also subject to adjustment thereafter based on the Company’s ratio of total debt to EBITDA, with the rates ranging from 0.50% to 0.75%. The final maturity date of the new revolving credit facility is January 27, 2013. The new $30,000 revolving credit facility replaced the prior $50,000 revolving credit facility that was scheduled to mature in May 2010. There was no outstanding balance on the revolving credit facility at September 30, 2010.

7

The credit agreement requires that mandatory prepayments be made from (1) 100% of the net cash proceeds from certain asset sales, dispositions or issuances of certain debt obligations, (2) 100% of the net cash proceeds from sales-leaseback transactions, (3) various percentages (ranging from 0% to 75% depending on our consolidated leverage ratio) of excess cash flow as defined in the credit agreement, and (4) 50% of the net cash proceeds from the issuance of certain equity and capital contributions.

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

The Company is required as part of the new senior secured term loan facility to enter into interest rate protection to the extent necessary to provide that at least 50% of the term loan is subject to either a fixed interest rate or interest rate protection for a period of not less than three years.

Interest Rate Cap Agreement

On April 15, 2010, the Company entered into a three-year interest rate cap agreement. This agreement caps the interest rate on $125,000 of aggregate principal amount of the Company’s outstanding term loan at 9.5%. The Company has not designated this agreement as an accounting hedge and changes in fair value of the cap agreement are recorded through earnings within interest expense. As of September 30, 2010, the fair value of the interest rate cap was immaterial.

Debt Covenants

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

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

• incur additional indebtedness;

• create liens on their assets;

• make certain investments;

• sell or otherwise dispose of their assets;

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

• enter into transactions with their affiliates; and

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

The senior secured credit agreement places certain restrictions on the Company’s ability to make capital expenditures.

The senior secured term loan facility also contains financial covenants that require the Company to maintain a ratio of funded debt to adjusted EBITDA of no more than 4.75, a ratio of adjusted EBITDA to interest expense of no less than 1.75 and a ratio of total adjusted debt (adjusted for certain leases and financing obligations) to adjusted EBITDA plus rental expense of no more than 7.15. Beginning with the three month period ending March 31, 2011, the financial covenants contain normal and customary periodic changes in the required ratios over the life of the senior secured credit agreement.

As of September 30, 2010, the Company was in compliance with all of the financial covenants in its senior secured credit agreement.

NOTE 4—INCOME TAXES

For the three months and nine months ended September 30, 2010, the Company has utilized the discrete effective tax rate method, as allowed by Accounting Standards Codification (“ASC”) 740-270-30-18, “Income Taxes - Interim Reporting,” to calculate its interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year to date period as if it was the annual period and determines the income tax expense or benefit on that basis. The Company believes that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as (i) the estimated annual effective tax rate method is not reliable due to the high degree of uncertainty in estimating annual pretax earnings and (ii) the Company’s ongoing assessment that the recoverability of its deferred tax assets is not likely.

During 2010, the Company engaged outside tax specialists to assist in tax planning. As result of the tax planning, the Company reduced its 2009 federal and state income tax liability by $2.5 million from the amount estimated in its prior year tax provision. This tax benefit represents a change in estimate, which has been recorded in the three months ended September 30, 2010.

As a result of the limitations imposed by Section 382(g) and the Company’s history of operating losses, the Company’s net deferred tax assets are fully offset by a valuation allowance at September 30, 2010 and December 31, 2009.

8

The Company recognizes a tax benefit associated with an uncertain tax position when, in the Company’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The Company had no substantial uncertain tax position liabilities at September 30, 2010 or December 31, 2009.

The effective tax rate from continuing operations for the nine months ended September 30, 2010 was 17.3%, which differs from the statutory tax rates primarily due to the impact of Section 382 and the valuation allowance, offset by the tax benefit associated with the above referenced tax planning. The Company did not record an income tax provision or benefit in the three or nine months ended September 30, 2009 because it did not project taxable income for the full year and due to limitations on its net operating loss carry-forwards. The Company regularly assesses whether it is more likely than not that our deferred tax asset balance will be recovered from future taxable income, taking into account such factors as our earnings history, carryback and carryforward periods, and tax planning strategies. When sufficient evidence exists that indicates that recovery is uncertain, a valuation allowance is maintained against the deferred tax asset.

NOTE 5—EQUITY BASED COMPENSATION

In March 2004, the Board of Directors adopted the Carmike Cinemas, Inc. 2004 Incentive Stock Plan (the “2004 Incentive Stock Plan”). The Company’s Compensation and Nominating Committee (or similar committee) may grant stock options, stock grants, stock units, and stock appreciation rights under the 2004 Incentive Stock Plan to certain eligible employees and to outside directors. As of September 30, 2010, there were 383,250 shares available for future grants under the 2004 Incentive Stock Plan.

The determination of the fair value of stock option awards on the date of grant using option-pricing models is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables. These variables include the Company’s 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. The expected volatility is based on the historical volatility. The Company uses historical data to estimate stock option exercise and forfeiture rates. The expected term represents the period over which the share-based awards are expected to be outstanding. The risk-free rate is based on U.S. Treasury yields in effect at the time of the grant for the expected term of the stock options. All stock option awards are amortized based on their graded vesting over the requisite service period of the awards.

The Company also issues restricted stock awards to certain key employees and directors. Generally, the restricted stock vests over a one to three year period and compensation expense is recognized over the one to three year period equal to the grant date fair value of the shares awarded to the employee. As of September 30, 2010, the Company has issued and outstanding 66,000 shares of performance-based nonvested stock awards dependent on the achievement of EBITDA targets that vest over a three-year period. Performance-based nonvested stock awards are recognized as compensation expense over the vesting period based on the fair value on the date of grant and the number of shares ultimately expected to vest. The Company has determined the achievement of the performance factor is probable.

The Company’s policy is to issue new shares upon exercise of options and the issuance of stock grants.

The Company’s total stock-based compensation expense was approximately $458 and $364 for the three months ended September 30, 2010 and 2009, respectively, and $1,680 and $842 for the nine months ended September 30, 2010 and 2009, respectively. These amounts were recorded in general and administrative expenses. As of September 30, 2010, the Company had approximately $2,775 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s plans. This cost is expected to be recognized as stock-based compensation expense over a weighted-average period of approximately 2.1 years. This expected cost does not include the impact of any future stock-based compensation awards.

Options – Service Condition Vesting

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

The following table sets forth information about the weighted-average fair value of options granted, and the weighted-average assumptions for such options granted, during the first nine months of 2010 and 2009:

	2010			2009
Fair value of options on grant date	$	6.84		$	5.25
Expected life (years)		6.0			6.0
Risk-free interest rate		2.6	%		2.7	%
Expected dividend yield		—	%		—	%
Expected volatility		71.1	%		68.3	%

9

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

The following table sets forth the summary of option activity for stock options with service vesting conditions as of September 30, 2010:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at January 1, 2010		550,000		$	14.60		7.77
Granted		173,500		$	10.60		9.41	$	23
Exercised		—		$
Forfeited		(14,000	)	$	9.11
Outstanding at September 30, 2010		709,500		$	13.73		7.44	$	177
Exercisable on September 30, 2010		296,668		$	19.88		5.25	$	83
Expected to vest September 30, 2010		392,190		$	9.31		9.00	$	94

Options – Market Condition Vesting

The following table sets forth the summary of option activity for the Company’s stock options with market condition vesting for the nine months ended September 30, 2010:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at January 1, 2010		190,000		$	25.95		7.29
Forfeited		(20,000	)		—
Outstanding at September 30, 2010		170,000		$	25.95		6.54	$	—
Exercisable on September 30, 2010		—		$	—		—	$	—
Expected to vest September 30, 2010		—		$	—		—	$	—

10

Restricted Stock

The following table sets forth the summary of activity for restricted stock grants, including performance based awards, for the nine months ended September 30, 2010:

	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2010		179,500		$	19.56
Granted		134,500		$	11.20
Vested		(141,667	)	$	22.29
Forfeited		(8,000	)	$	13.67
Nonvested at September 30, 2010		164,333		$	10.66

NOTE 6—DISCONTINUED OPERATIONS

Theatres are generally considered for closure due to an expiring lease term, underperformance, or the opportunity to better deploy invested capital. During the three months ended September 30, 2010 and 2009, the Company closed one and two theatres, respectively, and for the nine months ended September 30, 2010 and 2009, the Company closed seven and eight theatres, respectively. With respect to these closures during the three months ended September 30, 2010 and 2009, the Company did not classify any theatres as discontinued operations, and for the nine months ended September 30, 2010 and 2009, the Company classified one and three theatres, respectively, as discontinued operations.

All activity from prior years included in the accompanying consolidated statements of operations has been reclassified to separately reflect the results of operations from theatres closed in 2010 and considered discontinued operations through the respective date of the theatre closings. Assets and liabilities associated with the discontinued operations have not been segregated from assets and liabilities from continuing operations as they are not material.

The following table sets forth the summary of activity for discontinued operations for the three and nine months ended September 30, 2010 and 2009:

	Three Months Ended September 30,
	2010			2009
Revenue from discontinued operations	$	—		$	123
Operating loss before income taxes	$	(32	)	$	(40	)
Income tax expense for discontinued operations	$	(29	)	$	—
Gain (loss) on disposal, before taxes	$	—		$	(105	)
Income tax expense on disposal	$	—		$	—
Income (loss) from discontinued operations	$	(61	)	$	(145	)
	Nine Months Ended September 30,
	2010			2009
Revenue from discontinued operations	$	148		$	754
Operating loss before income taxes	$	(212	)	$	(514	)
Income tax benefit for discontinued operations	$	67		$	—
Gain (loss) on disposal, before taxes	$	284		$	(106	)
Income tax expense on disposal	$	(89	)	$	—
Income (loss) from discontinued operations	$	50		$	(620	)

NOTE 7—COMMITMENTS AND CONTINGENCIES

Contingencies

The Company, in the normal course of business, is involved in routine litigation and legal proceedings, such as personal injury claims, employment matters, contractual disputes and claims alleging Americans with Disabilities Act violations. Currently, there is

11

no pending litigation or proceedings that the Company believes will have a material adverse effect, either individually or in the aggregate, on its business or its financial position, results of operations or cash flow.

NOTE 8—FINANCIAL INSTRUMENTS

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

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

	As of September 30,		As of December 31,
	2010		2009
Carrying amount	$	235,977	$	250,786
Fair value	$	239,286	$	242,886

NOTE 9—NET INCOME (LOSS) PER SHARE

Basic net income (loss) per common share has been computed using the weighted-average number of shares of common stock outstanding during the period. Diluted income (loss) per share is computed using the weighted average number of common shares and common stock equivalents outstanding. For the three months ended September 30, 2010, common stock equivalents totaling 870,413 were excluded from the calculation of diluted earnings per share because of a decline in the average market price of the common stock. As a result of the Company’s net losses, all common stock equivalents aggregating 1,058,792 for the nine months ended September 30, 2010 and 776,957 and 552,218 for the three and nine months ended September 30, 2009, respectively, were excluded from the calculation of diluted loss per share given their anti-dilutive effect.

NOTE 10—GUARANTOR SUBSIDIARIES

On June 8, 2010 the Company filed a registration statement on Form S-3 which was amended on July 7, 2010 and August 13, 2010 and became effective on August 20, 2010. The registration statement registers certain securities, including debt securities which may be guaranteed by certain of Carmike Cinemas, Inc.’s subsidiaries and may be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended.

Carmike Cinemas, Inc. may sell debt securities and if so, it is expected that such securities would be fully and unconditionally guaranteed, on a joint and several basis, by the following 100% directly or indirectly owned subsidiaries: Eastwynn Theatres, Inc., George G. Kerasotes Corporation, GKC Indiana Theatres, Inc., GKC Michigan Theatres, Inc., GKC Theatres, Inc., and Military Services, Inc. Therefore, the Company is providing the following condensed consolidating financial statement information as of September 30, 2010 and December 31, 2009 and for the three and nine months in the periods ended September 30, 2010 and September 30, 2009 in accordance with SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered:

12

CONDENSED CONSOLIDATING BALANCE SHEET

	As of September 30, 2010
	Carmike Cinemas,  Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Assets:
Current assets:
Cash and cash equivalents	$	—		$	4,510		$	—		$	4,510
Restricted cash		79			—			—			79
Accounts receivable		4,485			23			—			4,508
Inventories		543			2,228			—			2,771
Prepaid expenses		1,913			4,357			—			6,270
Total current assets		7,020			11,118			—			18,138
Property and equipment:
Land		13,716			40,887			—			54,603
Buildings and building improvements		50,458			221,785			—			272,243
Leasehold improvements		16,887			104,992			—			121,879
Assets under capital leases		8,675			42,249			—			50,924
Equipment		56,529			158,291			—			214,820
Construction in progress		485			1,975			—			2,460
Total property and equipment		146,750			570,179			—			716,929
Accumulated depreciation and amortization		(71,766	)		(271,911	)		—			(343,677	)
Property and equipment, net of accumulated depreciation		74,984			298,268			—			373,252
Investment in subsidiaries and intercompany receivables		213,122			—			(213,122	)		—
Assets held for sale		—			—			—			—
Other		14,228			7,791			—			22,019
Intangible assets, net of accumulated amortization		—			1,139			—			1,139
Total assets	$	309,354		$	318,316		$	(213,122	)	$	414,548
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	14,685		$	405		$	—		$	15,090
Accrued expenses		24,271			3,869			—			28,140
Current maturities of long-term debt, capital leases and long-term financing obligations		2,632			1,607			—			4,239
Total current liabilities		41,588			5,881			—			47,469
Long-term liabilities:
Long-term debt, less current maturities		233,578			—			—			233,578
Capital leases and long-term financing obligations, less current maturities		28,498			87,710			—			116,208
Intercompany liabilities		—			127,227			(127,227	)		—
Other		2,856			11,602			—			14,458
Total long-term liabilities		264,932			226,539			(127,227	)		364,244
Stockholders’ equity:
Preferred Stock		—			—			—			—
Common Stock		400			1			(1	)		400
Treasury stock		(11,657	)		—			—			(11,657	)
Paid-in capital		288,578			237,800			(237,800	)		288,578
Accumulated deficit		(274,486	)		(151,905	)		151,905			(274,486	)
Total stockholders’ equity		2,835			85,896			(85,896	)		2,835
Total liabilities and stockholders’ equity	$	309,354		$	318,316		$	(213,122	)	$	414,548

13

CONDENSED CONSOLIDATING BALANCE SHEET

	As of December 31, 2009
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Assets:
Current assets:
Cash and cash equivalents	$	16,232		$	9,464		$	—		$	25,696
Restricted cash		403			—			—			403
Accounts receivable		4,819			191			—			5,010
Inventories		436			2,115			—			2,551
Prepaid expenses		2,553			4,238			—			6,791
Total current assets		24,443			16,008			—			40,451
Property and equipment:
Land		13,080			41,591			—			54,671
Buildings and building improvements		48,763			225,287			—			274,050
Leasehold improvements		16,668			108,407			—			125,075
Assets under capital leases		8,675			45,112			—			53,787
Equipment		55,341			158,952			—			214,293
Construction in progress		431			—			—			431
Total property and equipment		142,958			579,349			—			722,307
Accumulated depreciation and amortization		(66,136	)		(265,592	)		—			(331,728	)
Property and equipment, net of accumulated depreciation		76,822			313,757			—			390,579
Investment in subsidiaries and intercompany receivables		227,125			—			(227,125	)		—
Assets held for sale		1,273			976			—			2,249
Other		11,537			7,911			—			19,448
Intangible assets, net of accumulated amortization		—			1,251			—			1,251
Total assets	$	341,200		$	339,903		$	(227,125	)	$	453,978
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	25,738		$	414		$	—		$	26,152
Accrued expenses		22,105			11,271			—			33,376
Current maturities of long-term debt, capital leases and long-term financing obligations		2,780			1,481			—			4,261
Total current liabilities		50,623			13,166			—			63,789
Long-term liabilities:
Long-term debt, less current maturities		248,171			—			—			248,171
Capital leases and long-term financing obligations, less current maturities		28,491			88,193			—			116,684
Intercompany liabilities		—			134,631			(134,631	)		—
Other		2,613			11,419			—			14,032
Total long-term liabilities		279,275			234,243			(134,631	)		378,887
Stockholders’ equity:
Preferred Stock		—			—			—			—
Common Stock		395			1			(1	)		395
Treasury stock		(10,945	)		—			—			(10,945	)
Paid-in capital		286,903			237,800			(237,800	)		286,903
Accumulated deficit		(265,051	)		(145,307	)		145,307			(265,051	)
Total stockholders’ equity		11,302			92,494			(92,494	)		11,302
Total liabilities and stockholders’ equity	$	341,200		$	339,903		$	(227,125	)	$	453,978

14

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Three Months Ended September 30, 2010
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	13,775		$	68,965		$	—		$	82,740
Concessions and other		13,281			34,787			(6,014	)		42,054
Total operating revenues		27,056			103,752			(6,014	)		124,794
Operating costs and expenses:
Film exhibition costs		7,648			38,065			—			45,713
Concession costs		845			3,919			—			4,764
Other theatre operating costs		10,732			50,833			(6,014	)		55,551
General and administrative expenses		3,758			607			—			4,365
Depreciation and amortization		1,704			6,296			—			8,000
Gain on sale of property and equipment		52			(710	)		—			(658	)
Impairment of long-lived assets		—			220			—			220
Total operating costs and expenses		24,739			99,230			(6,014	)		117,955
Operating income		2,317			4,522			—			6,839
Interest expense		2,538			6,248			—			8,786
Equity in earnings of subsidiaries		(975	)		—			975			—
Loss on extinguishment of debt		5			—			—			5
Income (loss) before income tax and discontinued operations		749			(1,726	)		(975	)		(1,952	)
Income tax expense (benefit)		226			(2,769	)		—			(2,543	)
(Loss) income from continuing operations		523			1,043			(975	)		591
Income (loss) from discontinued operations		7			(68	)		—			(61	)
Net income (loss)	$	530		$	975		$	(975	)	$	530

15

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Nine Months Ended September 30, 2010
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	43,124		$	206,618		$	—		$	249,742
Concessions and other		40,923			103,763			(18,043	)		126,643
Total operating revenues		84,047			310,381			(18,043	)		376,385
Operating costs and expenses:
Film exhibition costs		24,495			115,666			—			140,161
Concession costs		2,530			11,337			—			13,867
Other theatre operating costs		31,869			148,916			(18,043	)		162,742
General and administrative expenses		11,784			1,885			—			13,669
Depreciation and amortization		4,953			19,143			—			24,096
Gain on sale of property and equipment		68			(717	)		—			(649	)
Impairment of long-lived assets		171			3,773			—			3,944
Total operating costs and expenses		75,870			300,003			(18,043	)		357,830
Operating income		8,177			10,378			—			18,555
Interest expense		8,079			19,372			—			27,451
Equity in loss of subsidiaries		6,598			—			(6,598	)		—
Loss on extinguishment of debt		2,573			—			—			2,573
Income (loss) before income tax and discontinued operations		(9,073	)		(8,994	)		6,598			(11,469	)
Income tax expense		358			(2,342	)		—			(1,984	)
Income (loss) from continuing operations		(9,431	)		(6,652	)		6,598			(9,485	)
Income (loss) from discontinued operations		(4	)		54			—			50
Net income (loss)	$	(9,435	)	$	(6,598	)	$	6,598		$	(9,435	)

16

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Three Months Ended September 30, 2009
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	13,618		$	68,393		$	—		$	82,011
Concessions and other		12,889			33,256			(5,903	)		40,242
Total operating revenues		26,507			101,649			(5,903	)		122,253
Operating costs and expenses:
Film exhibition costs		7,755			38,014			—			45,769
Concession costs		775			3,607			—			4,382
Other theatre operating costs		11,024			50,305			(5,903	)		55,426
General and administrative expenses		3,318			561			—			3,879
Separation agreement charges		—			—			—			—
Depreciation and amortization		1,677			6,981			—			8,658
Gain on sale of property and equipment		(2	)		(126	)		—			(128	)
Impairment of goodwill		—			—			—			—
Impairment of long-lived assets		4,520			12,668			—			17,188
Total operating costs and expenses		29,067			112,010			(5,903	)		135,174
Operating (loss) income		(2,560	)		(10,361	)		—			(12,921	)
Interest expense		1,980			5,609			—			7,589
Equity in loss of subsidiaries		16,113			—			(16,113	)		—
Loss on extinguishment of debt		—			—			—			—
Gain on sale of investments		—			—			—			—
(Loss) income before income tax and discontinued operations		(20,653	)		(15,970	)		16,113			(20,510	)
Income tax expense		—			—			—			—
Loss from continuing operations		(20,653	)		(15,970	)		16,113			(20,510	)
Loss from discontinued operations		(2	)		(143	)		—			(145	)
Net income (loss)	$	(20,655	)	$	(16,113	)	$	16,113		$	(20,655	)

17

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Nine Months Ended September 30, 2009
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	42,024		$	209,961		$	—		$	251,985
Concessions and other		40,126			103,078			(18,209	)		124,995
Total operating revenues		82,150			313,039			(18,209	)		376,980
Operating costs and expenses:
Film exhibition costs		23,831			116,324			—			140,155
Concession costs		2,329			10,573			—			12,902
Other theatre operating costs		32,048			145,743			(18,209	)		159,582
General and administrative expenses		9,824			1,920			—			11,744
Separation agreement charges		5,452			10			—			5,462
Depreciation and amortization		5,289			20,796			—			26,085
Gain on sale of property and equipment		29			(309	)		—			(278	)
Impairment of goodwill		—			—			—			—
Impairment of long-lived assets		4,450			12,740			—			17,188
Total operating costs and expenses		83,252			307,796			(18,209	)		372,840
Operating (loss) income		(1,102	)		5,243			—			4,140
Interest expense		6,612			18,731			—			25,343
Equity in loss of subsidiaries		14,057			—			(14,057	)		—
Loss on extinguishment of debt		—			—			—			—
Gain on sale of investments		—			—			—			—
Income (loss) income before income tax and discontinued operations		(21,771	)		(13,488	)		14,057			(21,203	)
Income tax expense		—			—			—			—
Income (loss) from continuing operations		(21,771	)		(13,488	)		14,057			(21,203	)
Loss from discontinued operations		(52	)		(568	)		—			(620	)
Net income (loss)	$	(21,823	)	$	(14,057	)	$	14,057		$	(21,823	)

18

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

	For the Nine Months Ended September 30, 2010
	Carmike Cinemas, Inc.			Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by operating activities		3,296			8,647			—		11,943
Cash flows from investing activities:
Purchases of property and equipment		(1,901	)		(8,980	)				(10,881	)
Proceeds from sale of property and equipment		4			3,875					3,879
Other Investing activities		324			—					324
Net cash used in investing activities		(1,573	)		(5,105	)				(6,678	)
Cash flows from financing activities:
Issuance of long-term debt		262,350			—					262,350
Repayments of long-term debt		(277,845	)		(1,090	)				(278,935	)
Change in intercompany receivable/liabilities		7,406			(7,406	)				—
Other financing activities		(9,866	)		0					(9,866	)
Net cash (used in) provided by financing activities		(17,955	)		(8,496	)		—		(26,451	)
Increase / (decrease) in cash and cash equivalents		(16,232	)		(4,954	)		—		(21,186	)
Cash and cash equivalents at beginning of period		16,232			9,464					25,696
Cash and cash equivalents at end of period		—			4,510			—		4,510

19

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

	For the Nine Months Ended September 30, 2009
	Carmike Cinemas, Inc.			Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	3,771		$	12,268		$	8,565		$	24,604
Cash flows from investing activities:
Purchases of property and equipment		(4,916	)		(5,241	)		—			(10,157	)
Proceeds from sale of property and equipment		80			2,896			—			2,976
Other Investing activities		81			—			—			81
Net cash used in investing activities		(4,755	)		(2,345	)		—			(7,100	)
Cash flows from financing activities:
Repayments of long-term debt		(17,252	)		(1,073	)		—			(18,325	)
Change in intercompany receivable/liabilities		19,488			(19,488	)		—			—
Other financing activities		(6	)		—			—			(6	)
Net cash used in financing activities		2,230			(20,561	)		—			(18,331	)
Increase / (decrease) in cash and cash equivalents		1,246			(10,638	)		8,565			(827	)
Cash and cash equivalents at beginning of period		—			19,432			(8,565	)		10,867
Cash and cash equivalents at end of period	$	1,246		$	8,794		$	—		$	10,040

NOTE 11—RELATED PARTY TRANSACTION

In August 2010, the Company entered into a management agreement with Bigfoot Ventures, Ltd. (“Bigfoot”), the holder of approximately 14% of the Company’s common stock, pursuant to which the Company provides management services for a theatre owned by Bigfoot in Westwood, California. The agreement has an initial term of one year, and may be extended upon the written consent of both parties. Bigfoot paid the Company an initial fee of $25,000 and is required to pay an amount equal to the greater of $5,000 per month or 6% of the theatre’s gross revenues, during the initial term.

NOTE 12—SUBSEQUENT EVENT

On October 14, 2010, the Company finalized the modification of its long-term exhibition agreement with Technicolor Cinema Advertising, LLC (“Screenvision”), the Company’s exclusive provider of on-screen advertising services. The modified exhibition agreement (the “Modified Exhibition Agreement”) extends the Company’s exhibition agreement with Screenvision, which was set to expire on July 1, 2012, for an additional 30 year term through July 1, 2042 (“Expiration Date”). Other than the extension of the term, the operational provisions of the Modified Exhibition Agreement are not significantly different from the existing exhibition agreement, including the ongoing monthly attendance-based payments from Screenvision.

In connection with the Modified Exhibition Agreement, the Company will receive a cash payment of $30 million from Screenvision in January 2011 and, on October 14, 2010, the Company received membership units representing approximately 20% of the issued and outstanding membership units of SV Holdco, LLC (“SV Holdco”), a holding company of the Screenvision business. The units are structured as a profits interest and entitle the Company to receive, upon liquidation of SV Holdco, a pro rata share of the liquidation proceeds, provided that applicable distribution thresholds are satisfied. The Company will also receive additional units (“bonus units”), all of which will be subject to forfeiture, or may forfeit some of its initial units, based upon changes in the Company’s future theatre and screen count. Bonus units and those initial units also subject to forfeiture will each become non-forfeitable on the expiration date, or upon the earlier occurrence of certain events, including (1) a change of control or liquidation of SV Holdco or (2) the consummation of an initial public offering of securities of SV Holdco. As a result, bonus units and forfeitable units will not be reflected in the Company’s consolidated financial statements until such units become non-forfeitable. Both the

20

cash and non-forfeitable unit consideration will be deferred and recognized as concessions and other revenue on a straight line basis over the 30-year term of the Modified Exhibition Agreement.

The Company will apply the equity method of accounting for its non-forfeitable units and will record the related percentage of the earnings or losses of SV Holdco in its Consolidated Statement of Operations beginning on October 14, 2010.

The Company anticipates that it will recognize a tax basis for these units that is lower than its carrying value for financial statement purposes. However, as this tax position may not be sustained upon examination, the Company expects to record a related liability for this uncertain tax position during the fourth quarter of 2010.

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

The Company

We are one of the largest motion picture exhibitors in the United States and as of September 30, 2010 we owned, operated or had an interest in 240 theatres with 2,241 screens located in 36 states. We target small to mid-size non-urban markets with the belief that they provide a number of operating benefits, including lower operating costs and fewer alternative forms of entertainment.

As of September 30, 2010, we had 222 theatres with 2,111 screens on a digital-based platform, including 200 theatres with 591 screens equipped for 3-D. We believe our leading-edge technologies allow us not only greater flexibility in showing feature films, but also provide us with the capability to explore revenue-enhancing alternative content programming. Digital film content can be easily moved to and from auditoriums in our theatres to maximize attendance. The superior quality of digital cinema and our 3-D capability provides a competitive advantage to us in many markets where we compete for film and patrons.

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

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

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

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

Concessions costs fluctuate with our concession revenues. We purchase concession supplies to replace units sold. We purchase substantially all of our concession supplies, except for beverage supplies, from one supplier.

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

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

In light of the continuing challenging conditions in the credit markets and the wider economy, we continue to focus on operating performance improvements. This includes managing our operating costs, implementing pricing initiatives and closing underperforming theatres. We also intend to allocate our available capital primarily to improving the condition of our theatres and reducing our overall leverage. To this end, during the nine months ended September 30, 2010, we made voluntary pre-payments of $25 million to reduce bank debt.

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For a summary of risks and uncertainties relevant to our business, please see “Item 1A. Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2009.

Results of Operations

Comparison of Three and Nine Months Ended September 30, 2010 and September 30, 2009

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Average theatres		240		246		242		248
Average screens		2,244		2,284		2,266		2,286
Average attendance per screen (1)		5,576		5,567		16,252		17,129
Average admission per patron (1)	$	6.61	$	6.46	$	6.78	$	6.45
Average concessions and other sales per patron (1)	$	3.36	$	3.17	$	3.44	$	3.20
Total attendance (in thousands) (1)		12,511		12,713		36,831		39,164
Total revenues (in thousands)	$	124,794	$	122,253	$	376,385	$	376,980

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

Total revenue increased approximately 2.0% to $124.8 million for the three months ended September 30, 2010 compared to $122.3 million for the three months ended September 30, 2009, due to an increase in average admissions per patron from $6.46 in the third quarter of 2009 to $6.61 for the third quarter of 2010 and an increase in average concessions and other sales per patron from $3.17 for the third quarter of 2009 to $3.36 for the third quarter of 2010, partially offset by a decrease in total attendance from 12.7 million in the third quarter of 2009 to 12.5 million for the third quarter of 2010. Attendance was down period over period due to a less favorable movie slate while average admissions per patron increased primarily due to premium 3-D pricing. Average concessions and other sales per patron increased, primarily due to pricing increases on concession products.

Total revenue decreased approximately 0.1% to $376.4 million for the nine months ended September 30, 2010 compared to $376.9 million for the nine months ended September 30, 2009, due to a decrease in total attendance from 39.2 million for the 2009 period to 36.8 million for the 2010 period, partially offset by an increase in average admissions per patron from $6.45 for the 2009 period to $6.78 for the 2010 period and an increase in average concessions and other sales per patron from $3.20 for the 2009 period to $3.44 for the 2010 period.

Admissions revenue increased approximately 0.9% to $82.7 million for the three months ended September 30, 2010 from $82.0 million for the same period in 2009, due to an increase in the average admissions per patron from $6.46 in the third quarter of 2009 to $6.61 for the third quarter of 2010, partially offset by a decrease in total attendance from 12.7 million for the third quarter of 2009 to 12.5 million for the third quarter of 2010.

Admissions revenue decreased approximately 0.9% to $249.7 million for the nine months ended September 30, 2010 from $251.9 million for the same period in 2009, due to a decrease in total attendance from 39.2 million for the 2009 period to 36.8 million for the 2010 period, partially offset by an increase in average admissions per patron from $6.45 for the 2009 period to $6.78 for the 2010 period.

Concessions and other revenue increased approximately 4.4% to $42.1 million for the three months ended September 30, 2010 compared to $40.2 million for the same period in 2009, due to an increase in average concessions and other sales per patron from $3.17 for the third quarter of 2009 to $3.36 for the third quarter of 2010, partially offset by a decrease in total attendance from 12.7 million for the third quarter of 2009 to 12.5 million for the third quarter of 2010.

Concessions and other revenue increased approximately 1.4% to $126.6 million for the nine months ended September 30, 2010 compared to $124.9 million for the same period in 2009, due to an increase in average concessions and other sales per patron from $3.20 for the 2009 period to $3.44 for the 2010 period, partially offset by a decrease in total attendance from 39.2 million for the 2009 period to 36.8 million for the 2010 period.

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We operated 240 theatres with 2,241 screens at September 30, 2010 compared to 246 theatres with 2,282 screens at September 30, 2009.

Operating costs and expenses. The tables below summarize operating expense data for the periods presented.

	Three Months Ended September 30,									Nine Months Ended September 30,
($’s in thousands)	2010			2009			% Change			2010			2009			% Change
Film exhibition costs	$	45,713		$	45,769			(0	)	$	140,161		$	140,155			0
Concession costs	$	4,764		$	4,382			9		$	13,867		$	12,902			7
Other theatre operating costs	$	55,551		$	55,426			0		$	162,742		$	159,582			2
General and administrative expenses	$	4,365		$	3,879			13		$	13,669		$	11,744			16
Depreciation and amortization	$	8,000		$	8,658			(8	)	$	24,096		$	26,085			(8	)
Gain on sale of property and equipment	$	(658	)	$	(128	)		n/m		$	(649	)	$	(278	)		n/m
Impairment of long-lived assets	$	220		$	17,188			n/m		$	3,944		$	17,188			n/m

Film exhibition costs. Film exhibition costs fluctuate in direct relation to the increases and decreases in admissions revenue and the mix of aggregate and term film deals. Film exhibition costs as a percentage of revenues are generally higher for periods with more blockbuster films. Film exhibition costs for the three months ended September 30, 2010 decreased to $45.7 million as compared to $45.8 million for the three months ended September 30, 2009 due to a decrease in admissions revenue primarily as a result of a decrease in attendance. As a percentage of admissions revenue, film exhibition costs for the three months ended September 30, 2010 decreased to 55.2% as compared to 55.8% for the three months ended September 30, 2009 primarily as a result of a reduction in advertising expenses. Film exhibition costs for the nine months ended September 30, 2010 increased from $140.1 million for the nine months ended September 30, 2010 to $140.2 million for the nine months ended September 30, 2010. As a percentage of admissions revenue, film exhibition costs for the nine months ended September 30, 2010 increased to 56.1% as compared to 55.6% for the nine months ended September 30, 2009 primarily as a result of higher film rent on 3-D and top-tier films partially offset by a reduction in advertising expense in the first nine months of 2010.

Concession costs. Concession costs fluctuate with changes in concessions revenue and product sales mix and changes in our cost of goods sold. Concession costs increased to approximately $4.8 million for the three months ended September 30, 2010 from $4.4 million for the three months ended September 30, 2009 due to increased product cost and lower volume based incentives from suppliers. As a percentage of concessions and other revenues, concession costs for the three months ended September 30, 2010 were 11.4% as compared to 10.9% for the three months ended September 30, 2009 primarily due to an increase in cost of concession supplies and lower concession rebates compared to 2009. Concession costs increased to approximately $13.9 million compared to $12.9 million for the nine months ended September 30, 2010 and 2009, respectively, due to higher average concessions and other sales to patrons partially offset by decreased attendance. As a percentage of concessions and other revenues, concession costs were 11.0% for the nine months ended September 30, 2010 and 10.3% for the nine months ended September 30, 2009 due to a decrease in concession volume rebates and an increase in the cost of concession supplies.

Other theatre operating costs. Other theatre operating costs for the three months ended September 30, 2010 increased to $55.6 million as compared to $55.4 million for the three months ended September 30, 2009. The increase in our other theatre operating costs was primarily the result of an increase in theatre occupancy costs and utilities, partially offset by a reduction in professional fees and debit/credit card fees. Other theatre operating costs for the nine months ended September 30, 2010 increased to $162.7 million as compared to $159.6 million for the nine months ended September 30, 2009. The increase in our other theatre operating costs was primarily the result of increases in taxes and licenses, increases in salaries and wages expense, increases in insurance costs and increases in 3-D equipment service charges, which was partially offset by a reduction in repairs and maintenance expenses. Taxes and licenses expense during the nine months ended September 30, 2010 was negatively impacted by the recording of sales and use taxes totaling approximately $1.0 million identified as a result of an audit. The underpayment of such taxes occurred primarily in 2005 and 2006.

General and administrative expenses. General and administrative expenses for the three months ended September 30, 2010 increased to $4.4 million as compared to $3.9 million for the three months ended September 30, 2009. The increase in our general and administrative expenses was due to an increase in legal and professional fees offset by a reduction in salaries expense. General and administrative expenses for the nine months ended September 30, 2010 increased to $13.7 million as compared to $11.7 million for the nine months ended September 30, 2009. This increase in our general and administrative expense was principally due to an increase in employee benefits and legal and professional fees.

Depreciation and amortization. Depreciation and amortization expenses for the three and nine months ended September 30, 2010 decreased approximately 7.6% as compared to the three and nine months ended September 30, 2009. The decrease in depreciation and amortization expenses resulted from a combination of a lower balance of property and equipment due to theatre closures, asset sales, prior period impairments and other property and equipment disposals, as well as a portion of our long-lived assets becoming fully depreciated.

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Net gain on sales of property and equipment. We recognized a gain of $658,000 on the sales of property and equipment for the three months ended September 30, 2010, as compared to a gain of $128,000 for the three months ended September 30, 2009. We recognized a gain of $649,000 on the sales of property and equipment for the nine months ended September 30, 2010, as compared to a gain of $278,000 for the nine months ended September 30, 2009.

Separation agreement charges. We recognized charges of $5.5 million for estimated expenses pertaining to the separation agreement with our former Chairman, Chief Executive Officer and President, Michael W. Patrick during the nine months ended September 30, 2009. We did not record separation charges for the nine months ended September 30, 2010 or the three months ended September 30, 2009 and 2010.

Impairment of long-lived assets. Impairment of long-lived assets decreased from $17.2 million for the three and nine months ended September 30, 2009 to $0.2 million and $3.9 million, respectively, for the three and nine months ended September 30, 2010. The $3.9 million of impairment charges for the nine months ended September 30, 2010 pertained to continuing operations. The impairment charges for the nine months ended September 30, 2010 affect 21 theatres with 212 screens and were primarily the result of deterioration in operating results.

Operating Income (loss). Operating income for the three months ended September 30, 2010 was $6.8 million as compared to operating loss of $12.9 million for the three months ended September 30, 2009. This fluctuation is primarily a result of an impairment charge of $17.2 million in the third quarter of 2009 and the factors described above. Operating income for the nine months ended September 30, 2010 increased to $18.6 million as compared to $4.1 million for the nine months ended September 30, 2009. As a percentage of revenues, operating income for the nine months ended September 30, 2010 was 4.9% as compared to 1.1% for the nine months ended September 30, 2009. These fluctuations are primarily a result of the impairment and separation agreement charges incurred in 2009 and the other factors described above.

Interest expense, net. Interest expense, net for the three months ended September 30, 2010 increased 15.8% to $8.8 million from $7.6 million for the three months ended September 30, 2009. The increase was primarily related to a combination of an increase in interest rates partially offset by a decrease in the average debt outstanding. Interest income, included in interest expense, net, was $59,000 for the three months ended September 30, 2010 as compared to $28,000 for the same period in 2009. Interest expense, net for the nine months ended September 30, 2010 increased 8.3% from $25.3 million for the nine months ended September 20, 2009 to $27.5 million. Interest costs in 2010 were also negatively impacted by interest costs of approximately $0.7million associated with underpayment of sales and use taxes related to prior years.

Income tax. During the three and nine months ended September 30, 2010, we recorded income tax benefit of $2.5 million and $2.0 million, respectively. We did not record an income tax provision or benefit in the nine months ended September 30, 2009 because we did not project taxable income for the full year and due to the limitations on our net operating loss carryforwards.

During the three months ended September 30, 2010, we finalized and filed our 2009 federal income tax return. In the completion of our 2009 tax return, we engaged outside tax specialists to assist in tax planning. As result of the tax planning, we reduced our 2009 federal and state income tax by $2.5 million from the amount estimated in the prior year tax provision. This tax benefit represents a change in estimate, which has been recorded in the three months ended September 30, 2010.

Income (loss) from discontinued operations, net of tax benefit. Theatres are generally considered for closure due to an expiring lease term, underperformance, or the opportunity to better deploy invested capital. During the three months ended September 30, 2010 and 2009, we closed one and two theatres, respectively, and for the nine months ended September 30, 2010 and 2009, we closed seven and eight theatres, respectively. With respect to these closures during the three months ended September 30, 2010 and 2009, we did not classify any theatres as discontinued operations, and for the nine months ended September 30, 2010 and 2009, we classified one and three theatres, respectively, as discontinued operations. We reported the results of these operations, including gains or losses on disposal, as discontinued operations. The operations and cash flow of these theatres have been eliminated from our operations, and we will not have any continuing involvement in their operations.

The accompanying condensed consolidated statements of operations separately show the results from discontinued operations through the respective dates of the theatre closings. Assets and liabilities associated with the discontinued operations have not been segregated from assets and liabilities from continuing operations as they are not material. We recorded a loss from discontinued operations, net of tax benefit, for the three months ended September 30, 2010 of $61,000 and income from discontinued operations, net of tax benefit, for the nine months ended September 30, 2010 of $50,000. For the three and nine months ended September 30, 2009 we recorded a loss of $146,000 and $620,000, respectively. The results from discontinued operations include a gain of zero and $284,000 for the three and nine months ended September 30, 2010, respectively, on disposal of assets, net of taxes, and a loss on disposal of assets of $106,000 for the three and nine months ended September 30, 2009.

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Liquidity and Capital Resources

General

We typically maintain current liabilities in excess of our current assets which results in a working capital deficit. We are able to operate with a substantial working capital deficit because our operating revenues are primarily received on a cash basis. Rather than maintain significant cash balances that would result from this pattern of operating cash flows, we utilize operating cash flows in excess of those required for investing activities to make discretionary payments on our debt balances. We had a working capital deficit of $29.3 million as of September 30, 2010 compared to a working capital deficit of $23.3 million at December 31, 2009.

At September 30, 2010, we had available borrowing capacity of $30 million under our revolving credit facility and approximately $4.5 million in cash and cash equivalents on hand as compared to $25.7 million in cash and cash equivalents at December 31, 2009. On January 27, 2010, we terminated our prior $50.0 million revolving credit facility and entered into our existing $30.0 million three year revolving credit facility. The material terms of our new revolving credit facility (including limitations on our ability to freely use all the available borrowing capacity) are described below in “Credit Agreement and Covenant Compliance.”

In October 2010, we modified our existing theatre exhibition agreement with Screenvision, which extends our current theatre exhibition agreement with Screenvision for a 30 year term. As part of the agreement, we will receive $30.0 million from Screenvision in January 2011. We intend to primarily use these funds, net of related taxes, to make additional prepayments on our existing term loan.

Net cash provided by operating activities was $11.9 million for the nine months ended September 30, 2010 compared to net cash provided by operating activities of $24.6 million for the nine months ended September 30, 2009. This decrease in our cash provided by operating activities was due primarily to a reduction in accounts payable and accrued expenses as compared to the prior period. Net cash used in investing activities was $6.7 million for the nine months ended September 30, 2010 compared to $7.1 million for the nine months ended September 30, 2009. The decrease in our net cash used in investing activities is primarily due to an increase in cash used for the purchases of property and equipment and a decrease in proceeds from sales of property and equipment. Capital expenditures were $10.9 million for the nine months ended September 30, 2010 and $10.2 million for the nine months ended September 30, 2009 primarily due to additional 3-D rollouts, Big D renovations, and theatre renovations. Net cash used in financing activities was $26.5 million for the nine months ended September 30, 2010 compared to $18.3 million for the nine months ended September 30, 2009. The increase in our net cash used in financing activities is primarily due to $25.0 million of unscheduled prepayments of long-term debt in the first nine months of 2010 as compared to $5.0 million of unscheduled prepayments of long-term debt in the first nine months of 2009 and the incurrence of $9.0 million of debt issuance costs in the first nine months of 2010.

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

We from time to time close older theatres or do not renew the leases, and the expenses associated with exiting these closed theatres typically relate to costs associated with removing owned equipment for redeployment in other locations and are not material to our operations. In the first nine months of 2010, we closed seven of our underperforming theatres and estimate closing up to an aggregate of ten theatres in 2010.

We plan to make a total of approximately $15 million to $20 million in capital expenditures for calendar year 2010. Pursuant to our January 2010 senior secured credit agreement, the aggregate capital expenditures that we may make, or commit to make for any fiscal year is limited to $22 million, provided that up to $5 million of the unused capital expenditures in a fiscal year may be carried over to the succeeding fiscal year. We have announced plans to install our own large digital format screen. The BigD-Large Format Digital Experience will include a larger screen, enhanced sound and premium seating accommodations. We intend to roll out the BigD-Large Format Digital Experience at up to 24 locations by the end of 2011.

Credit Agreement and Covenant Compliance

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

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

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

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The interest rate for borrowings under the new term loan facility is LIBOR (subject to a 2.00% floor) plus a margin of 3.50%, or the Base Rate (as defined in the Credit Agreement) (subject to a 3.00% floor) plus a margin of 2.50%, as we may elect.

The interest rate for borrowings under the new revolving credit facility is LIBOR (subject to a 2.00% floor) plus an initial margin of 4.00%, or Base Rate (subject to a 3.00% floor) plus margin of 3.00%, as we may elect. Thereafter, the applicable margins are subject to adjustment based on our ratio of total debt to EBITDA as reflected in our quarterly or annual financial statements, with the margins ranging from 3.50% to 4.00% on LIBOR based loans, and from 2.50% to 3.00% on Base Rate based loans.

The Credit Agreement requires that mandatory prepayments be made from (1) 100% of the net cash proceeds from certain asset sales, dispositions or issuances of certain debt obligations, (2) 100% of the net cash proceeds from sales-leaseback transactions, (3) various percentages (ranging from 0% to 75% depending on our consolidated leverage ratio) of excess cash flow as defined in the credit agreement, and (4) 50% of the net cash proceeds from the issuance of certain equity and capital contributions.

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

Debt Covenants

The senior secured term loan and revolving credit facilities contain covenants which, among other things, limit our ability, and that of our subsidiaries, to:

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

• incur additional indebtedness and financing obligations;

• create liens on our assets;

• make certain investments;

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

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

• enter into transactions with our affiliates; and

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

The Credit Agreement imposes an annual limit of $22.0 million on our ability to make capital expenditures, plus a carryforward of $5.0 million of any unused capital expenditures from the prior year. In addition to the dollar limitation, we may not make any capital expenditure if any default or event of default under the Credit Agreement has occurred and is continuing, or if a breach of the financial covenants contained in the Credit Agreement would result on a pro forma basis after giving effect to the capital expenditure.

Debt Service

Based upon our current level of operations and our 2010 business plan, we believe that cash flow from operations, available cash and available borrowings under our Credit Agreement will be adequate to meet our liquidity needs for the next 12 months.

We are required to make principal repayments of our term loan borrowings in 20 consecutive quarterly installments, each in the amount of $600,000, with the balance of $226,070,000 due at final maturity on January 27, 2016. Any amounts that may become outstanding under our revolving credit facility would be due and payable on January 27, 2013.

Debt Covenant Compliance

The new Credit Agreement also contains financial covenants that require us to maintain a ratio of funded debt to adjusted EBITDA (“leverage ratio”) of no more than 4.75, a ratio of adjusted EBITDA to interest expense (“interest coverage ratio”) of no less than 1.75 and a ratio of total adjusted debt (adjusted for certain leases and financing obligations) to adjusted EBITDA plus rental expense (“EBITDAR ratio”) of no more than 7.15.

As of September 30, 2010, we were in compliance with all of the financial covenants in Credit Agreement. As of September 30, 2010, our leverage, interest coverage and EBITDAR ratios were 3.56, 2.53, and 6.02, respectively.

While we currently believe we will remain in compliance with these financial covenants through September 30, 2011 based on current projections, it is possible that we may not comply with some or all of our financial covenants. In order to avoid such non-compliance, we have the ability to reduce, postpone or cancel certain identified discretionary spending. We could also seek waivers or amendments to the credit agreement in order to avoid non-compliance. However, we can provide no assurance that we will successfully obtain such waivers or amendments from our lenders. If we are unable to comply with some or all of the financial    

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or non-financial covenants and if we fail to obtain future waivers or amendments to the credit agreement, the lenders may terminate our revolving credit facility with respect to additional advances and may declare all or any portion of the obligations under the revolving credit facility and the term loan facilities due and payable.

Other events of default under the new 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);

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

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

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

Contractual Obligations

We did not have any material changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.

Impact of Recently Issued Accounting Standards

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. This guidance is effective for us beginning January 1, 2010 and did not have an impact on our consolidated financial statements.

Forward-Looking Information

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

• general economic conditions in our regional and national markets;

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

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

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

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

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

• competition in our markets;

• competition with other forms of entertainment;

• the effect of leverage on our financial condition;

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• prices and availability of operating supplies;

• impact of continued cost control procedures on operating results;

• the impact of asset impairments;

• the impact of terrorist acts;

• changes in tax laws, regulations and rates;

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

• other factors, including the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009, under the caption “Risk Factors”.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As previously disclosed, on April 15, 2010 we entered into a three-year interest rate cap agreement. This agreement caps the base interest rate on $125,000 of aggregate principal amount of our outstanding term loan at 9.5%. A 100 point basis change in interest rates would not have a material impact on the consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10–Q. This evaluation was carried out under the supervision and with the participation of our management, including our chief executive officer and chief financial officer. Based on this evaluation, these officers have concluded that, as of September 30, 2010, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the three months ended September 30, 2010, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

For information regarding factors that could affect the Company’s results of operations, financial condition and liquidity, see the risk factors discussed under “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. See also “Forward-Looking Statements,” included in Part I, Item 2 of this Quarterly Report on Form 10-Q. Other than as noted below, there have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Our business is subject to significant competitive pressures.

Large multiplex theatres, which we and some of our competitors built, have tended to and are expected to continue to draw audiences away from certain older theatres, including some of our theatres. In addition, demographic changes and competitive pressures can lead to the impairment of a theatre. Over the last several years, we and many of our competitors have closed a number of theatres. Our competitors or smaller entrepreneurial developers may purchase or lease these abandoned buildings and reopen them as theatres in competition with us.

We face varying degrees of competition from other motion picture exhibitors with respect to licensing films, attracting customers, obtaining new theatre sites and acquiring theatre circuits. In those areas where real estate is readily available, there are few barriers preventing competing companies from opening theatres near one of our existing theatres. Competitors have built and are planning to build theatres in certain areas in which we operate. In the past, these developments have resulted and may continue to result in excess capacity in those areas, adversely affecting attendance and pricing at our theatres in those areas. Even where we are the only exhibitor in a film licensing zone (and therefore do not compete for films), we still may experience competition for patrons from theatres in neighboring zones. There have also been a number of consolidations in the film exhibition industry, and the impact of these consolidations could have an adverse effect on our business if greater size would give larger operators an advantage in negotiating licensing terms.

Our theatres also compete with a number of other motion picture delivery systems including network, cable and satellite television, DVD’s, as well as video-on-demand, pay-per-view services and downloads via the Internet. While the impact of these alternative types of motion picture delivery systems on the motion picture exhibition industry is difficult to determine precisely, there is a risk that they could adversely affect attendance at motion pictures shown in theatres.

Our ability to attract patrons is also affected by (1) the DVD release window, which is the time between the release of a film for play in theatres and when the film is available on DVD for general public sale or rental and (2) the video-on-demand release window, which is the time between the release of a film for play in theatres and when the film is available on video-on-demand services for public viewing. Each of these release windows has been narrowing over the past several years. For example, we believe the DVD and video-on-demand release windows currently average approximately four months. It is also possible that these release windows could shorten in the near future. If these release windows continue to shorten, it might impact our ability to attract patrons to our theatres.

Theatres also face competition from a variety of other forms of entertainment competing for the public’s leisure time and disposable income, including sporting events, concerts, live theatre and restaurants.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. RESERVED

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Listing of exhibits

Exhibit Number	Description
2.1	Subscription Agreement between Carmike Cinemas, Inc. and SV Holdco, LLC, dated as of September 27, 2010 (filed as Exhibit 2.1 to Carmike’s Current Report on Form 8-K filed on October 20, 2010 and incorporated herein by reference).
2.2	Amended and Restated Liability Company Agreement of SV Holdco, LLC, dated as of October 14, 2010 (filed as Exhibit 2.2 to Carmike’s Current Report on Form 8-K filed on October 20, 2010 and incorporated herein by reference).
3.1	Amended and Restated Certificate of Incorporation of Carmike Cinemas, Inc. (filed as Exhibit 3.1 to Carmike’s Amendment to Form 8-A filed January 31, 2002 and incorporated herein by reference).
3.2	Certificate of Amendment to amended and Restated Certificate of Incorporation of Carmike Cinemas, Inc, (filed as Exhibit 3.1 to Carmike’s Current Report on Form 8-K filed May 21, 2010 and incorporated herein by reference).
3.3	Amended and Restated By-Laws of Carmike Cinemas, Inc. (filed as Exhibit 3.1 to Carmike’s Current Report on Form 8-K filed on January 22, 2009 and incorporated herein by reference).
11	Computation of per share earnings (provided in Note 9 of the notes to condensed consolidated financial statements included in this report under the caption “Net Income (Loss) Per Share”).
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certificate of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certificate of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

	CARMIKE CINEMAS, INC.
Date: November 1, 2010	By:	/s/ S. David Passman III
		S. David Passman III
		President, Chief Executive Officer and Director
		(Principal Executive Officer)
Date: November 1, 2010	By:	/s/ Richard B. Hare
		Richard B. Hare
		Senior Vice President—Finance, Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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