10-Q

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 June 30, 2011

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  x    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 — 12,965,673 shares outstanding as of July 25, 2011.

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		23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		30
ITEM 4. CONTROLS AND PROCEDURES		30
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		32
ITEM 1A. RISK FACTORS		32
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		32
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		32
ITEM 4. RESERVED		32
ITEM 5. OTHER INFORMATION		32
ITEM 6. EXHIBITS		33
EXHIBIT INDEX		33
SIGNATURES		34
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

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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)

	June 30,			December 31,
	2011			2010
	(Unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	21,234		$	13,066
Restricted cash		56			335
Accounts receivable		4,737			4,440
Screenvision receivable (Note 9)		—			30,000
Inventories		3,178			2,741
Prepaid expenses and other assets		8,005			6,696
Total current assets		37,210			57,278
Property and equipment:
Land		54,301			54,603
Buildings and building improvements		273,032			272,956
Leasehold improvements		120,166			120,320
Assets under capital leases		48,205			50,924
Equipment		213,183			210,329
Construction in progress		2,742			2,424
Total property and equipment		711,629			711,556
Accumulated depreciation and amortization		(352,819	)		(343,372	)
Property and equipment, net of accumulated depreciation		358,810			368,184
Intangible assets, net of accumulated amortization		580			612
Investments in unconsolidated affiliates (Note 11)		6,820			8,093
Other assets		19,330			20,591
Total assets	$	422,750		$	454,758
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	23,463		$	21,660
Accrued expenses		31,846			27,431
Current maturities of long-term debt, capital leases and long-term financing obligations		3,958			4,240
Total current liabilities		59,267			53,331
Long-term liabilities:
Long-term debt, less current maturities		207,592			233,092
Capital leases and long-term financing obligations, less current maturities		115,402			116,036
Deferred revenue		34,586			35,150
Other		17,131			17,050
Total long-term liabilities		374,711			401,328
Commitments and contingencies (Note 7)
Stockholders’ (deficit) 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: 35,000,000 shares authorized, 13,414,872 shares issued and 12,965,673 shares outstanding at June 30, 2011, and 13,331,872 shares issued and 12,882,673 shares outstanding at December 31, 2010		401			400
Treasury stock, 449,199 shares at cost		(11,657	)		(11,657	)
Paid-in capital		290,173			288,986
Accumulated deficit		(290,145	)		(277,630	)
Total stockholders’ (deficit) equity		(11,228	)		99
Total liabilities and stockholders’ (deficit) equity	$	422,750		$	454,758

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

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CARMIKE CINEMAS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues:
Admissions	$	85,034		$	83,978		$	146,291		$	165,616
Concessions and other		47,131			42,282			82,051			83,882
Total operating revenues		132,165			126,260			228,342			249,498
Operating costs and expenses:
Film exhibition costs		46,810			47,710			78,987			93,668
Concession costs		5,364			4,893			9,256			9,025
Other theatre operating costs		49,833			52,896			99,220			106,230
General and administrative expenses		4,496			4,494			9,229			9,304
Severance agreement charges (Note 12)		845			—			845			—
Depreciation and amortization		7,895			7,948			15,705			15,917
Loss (gain) on sale of property and equipment		80			(19	)		60			8
Write-off of note receivable		750			—			750			—
Impairment of long-lived assets		1,164			3,125			1,325			3,612
Total operating costs and expenses		117,237			121,047			215,377			237,764
Operating income		14,928			5,213			12,965			11,734
Interest expense		8,631			9,777			17,784			18,665
Loss on extinguishment of debt		—			7			—			2,568
Income (loss) before income tax and income (loss) from unconsolidated affiliates		6,297			(4,571	)		(4,819	)		(9,499	)
Income tax expense (Note 4)		815			2,134			7,287			519
Income (loss) from unconsolidated affiliates (Note 11)		497			—			(304	)		—
Income (loss) from continuing operations		5,979			(6,705	)		(12,410	)		(10,018	)
(Loss) income from discontinued operations (Note 6)		(96	)		193			(105	)		56
Net income (loss)	$	5,883		$	(6,512	)	$	(12,515	)	$	(9,962	)
Weighted average shares outstanding:
Basic		12,796			12,756			12,790			12,720
Diluted		12,827			12,756			12,790			12,720
Net loss per common share (Basic and Diluted):
Income (loss) from continuing operations	$	0.47		$	(0.53	)	$	(0.97	)	$	(0.79	)
(Loss) income from discontinued operations, net of tax		(0.01	)		0.02			(0.01	)		0.01
Net income (loss)	$	0.46		$	(0.51	)	$	(0.98	)	$	(0.78	)

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

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CARMIKE CINEMAS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2011			2010
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(12,515	)	$	(9,962	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		15,768			16,123
Amortization of debt issuance costs		1,959			1,864
Impairment on long-lived assets		1,325			3,724
Loss on extinguishment of debt		—			2,568
Stock-based compensation		1,188			1,222
Loss from unconsolidated subsidiaries		304			—
Other		318			885
Write-off of note receivable		750			—
Gain on sale of property and equipment		(173	)		(274	)
Changes in operating assets and liabilities:
Accounts receivable and inventories		(1,530	)		63
Screenvision receivable		30,000			—
Prepaid expenses and other assets		(246	)		1,052
Accounts payable		759			1,843
Accrued expenses and other liabilities		3,292			(1,653	)
Distribution from unconsolidated affiliates		205			—
Net cash provided by operating activities		41,404			17,455
Cash flows from investing activities:
Purchases of property and equipment		(6,248	)		(5,613	)
Release of restricted cash		279			307
Proceeds from sale of property and equipment		444			774
Net cash used in investing activities		(5,525	)		(4,532	)
Cash flows from financing activities:
Debt activities:
Short-term borrowings		—			5,000
Repayment of short-term borrowings		—			(5,000	)
Issuance of long-term debt		—			262,350
Repayments of long-term debt		(26,161	)		(272,100	)
Debt issuance costs		(588	)		(9,000	)
Repayments of capital lease and long-term financing obligations		(962	)		(784	)
Purchase of treasury stock		—			(712	)
Net cash used in financing activities		(27,711	)		(20,246	)
Increase (decrease) in cash and cash equivalents		8,168			(7,323	)
Cash and cash equivalents at beginning of period		13,066			25,696
Cash and cash equivalents at end of period	$	21,234		$	18,373
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	16,631		$	19,769
Income taxes	$	6,122		$	3,721
Non-cash investing and financing activities:
Non-cash purchase of property and equipment	$	2,865		$	598

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 six months ended June 30, 2011 and 2010

(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 June 30, 2011 and December 31, 2010, and the results of operations and cash flows for the three and six month periods ended June 30, 2011 and 2010. 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, 2010. That report includes a summary of our critical accounting policies. There have been no material changes in our accounting policies during the first six months of 2011.

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, 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; 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

Fair Value Measurements

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 consist of a term loan and a revolving credit facility, is estimated based on quoted market prices at the date of measurement.

Reclassifications

Certain reclassifications have been made to prior year amounts in the Company’s financial statements to conform to current year classifications. The Company previously reported investments in unconsolidated affiliates in other assets on the 2010 consolidated balance sheet. The 2010 amount has been reclassified from other assets to a separate line item on the consolidated balance sheets to conform to the 2011 presentation.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and IFRS.” The ASU expands the existing disclosure requirements for fair value measurements in Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” and makes other amendments to conform wording differences between U.S. GAAP and IFRS. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The amendments are not expected to have any impact on the Company’s financial position or results of operations.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income” which revises the manner in which entities present comprehensive income in their financial statements. The guidance revises ASC 220, “Comprehensive Income” and requires entities to report components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.

NOTE 2—IMPAIRMENT OF LONG-LIVED ASSETS

For the three and six months ended June 30, 2011, impairment charges aggregated to $1,164 and $1,325, respectively. The impairment charges were primarily the result of continued deterioration of previously impaired theatres and a decline in market value of a previously closed theatre. The Company recorded impairment charges during the three and six months ended June 30, 2010 of $3,237 and $3,724, respectively, which were primarily the result of deterioration in the operating results of the impaired theatres.

The estimated aggregate fair value of the long-lived assets impaired during the three and six months ended June 30, 2011 was approximately $4,007 and $4,779, respectively. These fair value estimates are considered Level 3 estimates and were derived primarily from discounting estimated future cash flows, contracts to sell certain owned properties and reference to appraised values.

NOTE 3—DEBT

Our debt consisted of the following on the dates indicated:

	June 30,			December 31,
	2011			2010
Term loan	$	211,302		$	237,463
Less discount on term loan		(1,565	)		(1,972	)
Total debt		209,737			235,491
Current maturities		(2,145	)		(2,399	)
Total long-term debt	$	207,592		$	233,092

On January 27, 2010, the Company entered into a new Credit Agreement (the “Credit Agreement”), by and among the Company, as borrower, and several banks and other financial institutions or entities from time to time parties to the Credit Agreement, as lenders, consisting of:

• a $265,000 six year term loan facility that matures on January 27, 2016; and

• a $30,000 three year revolving credit facility that matures on January 27, 2013.

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

7

balance of $111,150. The $30,000 revolving credit facility replaced the Company’s prior $50,000 revolving credit facility that was scheduled to mature in May 2010.

The $265,000 senior secured term loan facility has an interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 3.5%, or the base rate (subject to a floor of 3.0%) plus a margin of 2.5%, as the Company may elect. The Credit Agreement (as amended) provides that if the Company’s leverage ratio exceeds 4.50 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by 25 basis points (0.25%), and if the leverage ratio exceeds 5.00 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by an additional 25 basis points (0.25%).

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 Company is currently required to make principal repayments of the senior secured term loan in the amount of $536 on the last day of each calendar quarter, with a balance of $202,185 due at final maturity on January 27, 2016. During the six months ended June 30, 2011, the Company voluntarily repaid $25,000 of principal on its term loan. For the six months ended June 30, 2011 and 2010, the average interest rate on the Company’s debt was 5.50%.

The $30,000 revolving credit facility has an interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 4.0%, or base rate (subject to a 3.0% floor) plus a margin 3.0%, 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 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%. There was no outstanding balance on the revolving credit facilities at June 30, 2011 or 2010.

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, and (3) various percentages (ranging from 0% to 75% depending on our consolidated leverage ratio) of excess annual cash flow as defined in the credit agreement. In addition, the first amendment to the Credit Agreement imposes a prepayment fee of 1% of the amount prepaid in connection with certain refinancings and repricings occurring prior to March 3, 2012.

The senior secured term loan 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 fair value of the senior secured term loan is estimated based on quoted market prices as follows:

	As of June 30,		As of December 31,
	2011		2010
Carrying amount	$	209,737	$	235,491
Fair value	$	210,791	$	239,244

Interest Rate Cap Agreement

The Company is required as part of its 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. On April 15, 2010, the Company entered into a three-year interest rate cap agreement which is not being accounted for as a hedging instrument. This agreement caps the interest rate on $125,000 of aggregate principal amount of the Company’s outstanding term loan at 9.5%. As of June 30, 2011 and December 31, 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 and financing obligations;

• create liens on their assets;

8

• make certain investments;

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

• 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 Credit Agreement for the term loan and revolving credit facilities imposes an annual limit of $25,000 on capital expenditures, plus a carryforward of $5,000 of any unused capital expenditures from the prior year. In addition to the dollar limitation, the Company 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.

The Credit Agreement also contains financial covenants that require the Company to maintain a ratio of funded debt to adjusted EBITDA (“leverage ratio”) below a specified maximum ratio, a ratio of adjusted EBITDA to interest expense (“interest coverage ratio”) below a specified minimum ratio and a ratio of total adjusted debt (adjusted for certain leases and financing obligations) to adjusted EBITDA plus rental expense (“EBITDAR ratio”) below a specified maximum ratio. The financial covenants contain normal and customary periodic changes in the required ratios over the life of the senior secured term loan and revolving credit facilities.

Leverage Ratio- The maximum leverage ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 5.50 to 1.00 for any four quarter period ending March 31, 2011 through June 30, 2012; (b) 5.00 to 1.00 for any four quarter period ending September 30, 2012 through December 31, 2012; (c) 4.50 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 4.25 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 4.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

Interest Coverage Ratio- The minimum interest coverage ratio as of the last day of any four consecutive fiscal quarters may not be less than: (a) 1.50 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 1.60 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 1.75 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 1.85 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 2.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

EBITDAR Ratio- The maximum EBITDAR ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 8.00 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 7.50 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 7.00 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 6.75 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 6.50 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

As of June 30, 2011, the Company was in compliance with all of the financial covenants in the amended Credit Agreement for the term loan and revolving credit facilities. As of June 30, 2011, the Company’s leverage, interest coverage, and EBITDAR ratios were 3.60, 2.23, and 6.21, respectively. Based on the Company’s latest projections and actual results through June 30, 2011, an attendance decline in the last half of 2011 of 17% or more would result in a covenant violation.

The Company’s financial results depend to a substantial degree on the availability of suitable motion pictures for screening in its theatres and the appeal of such motion pictures to patrons in its specific theatre markets. The complete motion picture release schedule for 2012 and beyond is not yet known. Based on current projections, the Company currently believes it will remain in compliance with its financial covenants through December 31, 2011. However, it is possible that the Company may not comply with some or all of its financial covenants in the future.

The Company could seek waivers or additional amendments to the Credit Agreement if a violation did occur. However, the Company can provide no assurance that it will successfully obtain such waivers or amendments from its lenders. If the Company is unable to comply with some or all of the financial or non-financial covenants and if it fails to obtain future waivers or amendments to the Credit Agreement, the lenders may terminate the 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 facility due and payable.

NOTE 4—INCOME TAXES

For the three and six months ended June 30, 2011, the Company has utilized the discrete effective tax rate method, as allowed by 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.

9

As a result of the Company’s history of operating losses, the Company’s net deferred tax assets are fully offset by a valuation allowance at June 30, 2011 and December 31, 2010.

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.

As of June 30, 2011 and December 31, 2010, the amount of unrecognized tax benefits was $2,500, all of which would affect the Company’s annual effective tax rate, if recognized. This unrecognized tax benefit is associated with the Company’s non-forfeitable ownership interest in SV Holdco, LLC (see Note 9 - Screenvision Transaction). The Company has recognized a tax basis for these units that is lower than their carrying value for financial statement purposes. However, as this tax position may not be sustained upon examination, the Company has recorded a related liability for this uncertain tax position.

The effective tax rate from continuing operations for the three months ended June 30, 2011 was 11.9%. The effective tax rate differs from the statutory tax rate primarily due to a reduction in taxable income related to bonus depreciation on long-lived assets. The effective tax rate from continuing operations for the six months ended June 30, 2011 was (142.3%), which differs from the statutory tax rate primarily due to the current tax expense associated with the $30,000 cash payment received from Screenvision in January 2011 (see Note 9) and the inability to recognize an associated deferred tax benefit, due to the Company’s ongoing assessment that the realization of its deferred tax assets is unlikely.

The Company regularly assesses whether it is more likely than not that its deferred tax asset balance will be recovered from future taxable income, taking into account such factors as its earnings history, carryback and carryforward periods, and tax planning strategies. When evidence exists that indicates that recovery is uncertain, a valuation allowance is maintained against the deferred tax asset. At this time, the Company does not believe that realization of its deferred tax assets is more likely than not to occur.

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 June 30, 2011, there were 1,432,358 shares available for future grants under the 2004 Incentive Stock Plan. The Company’s policy is to issue new shares upon exercise of options and the issuance of stock grants.

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 June 30, 2011, the Company has also granted 99,000 shares of performance-based awards dependent on the achievement of EBITDA targets that vest over a three-year period. As of June 30, 2011, 33,000 shares of these performance-based stock awards have been earned due to the achievement of EBITDA targets. Performance-based stock awards are recognized in 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 target for the unearned awards is probable.

The Company’s total stock-based compensation expense was approximately $724 and $538 for the three months ended June 30, 2011 and 2010, respectively, and $1,188 and $1,222 for the six months ended June 30, 2011 and 2010, respectively. Included in stock-based compensation expense for the three and six months ended June 30, 2011, is $222 related to the accelerated vesting of stock-based awards to our former Senior Vice-President-General Counsel and Secretary (see Note 12). Stock-based compensation expense is included in general and administrative expenses in the consolidated statement of operations with the exception of the accelerated vested awards which are included in Severance Agreement Charges. As of June 30, 2011, the Company had approximately $2,707 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 2.0 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.

10

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 six months of 2011 and 2010:

	2011			2010
Fair value of options on grant date	$	4.94		$	6.84
Expected life (years)		6.0			6.0
Risk-free interest rate		2.3	%		2.5	%
Expected dividend yield		—	%		—	%
Expected volatility		76.2	%		71.1	%

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 June 30, 2011:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at January 1, 2011		704,500		$	13.77		7.24
Granted		157,000			7.34		9.70
Exercised		—
Forfeited		(20,000	)		35.63
Outstanding at June 30, 2011		841,500		$	12.05		7.46	$	27
Exercisable on June 30, 2011		394,832		$	15.97		5.98	$	27
Expected to vest June 30, 2011		424,335		$	8.59		8.76	$	—

Restricted Stock

The following table sets forth the summary of activity for restricted stock grants, including performance based awards, for the six months ended June 30, 2011:

	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2011		131,333		$	10.58
Granted		151,892			7.28
Vested		(31,667	)		10.82
Forfeited		(5,000	)		7.34
Nonvested at June 30, 2011		246,558			8.59

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 June 30, 2011 and 2010, the Company closed one and three theatres, respectively, and for the six months ended June 30, 2011 and 2010, the Company closed four and six theatres, respectively. With respect to these closures during the three months ended June 30, 2011 and 2010, the Company classified one theatre in each period as discontinued operations and for the six months ended June 30, 2011 and 2010, the Company classified four and one theatres, respectively, as discontinued operations. The Company reported the results of these operations, including gains and losses in disposal, as discontinued operations. The operations and cash flows of these theatres have been eliminated from the Company’s operations, and the Company will not have any continuing involvement in their operations.

11

All activity during the three and six months ended June 30, 2010 included in the accompanying consolidated statements of operations has been reclassified to separately reflect the results of operations from theatres closed in 2011 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 six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,
	2011			2010
Revenue from discontinued operations	$	24		$	1,296
Operating loss before income taxes	$	(153	)	$	(73	)
Income tax benefit from discontinued operations		51			6
Gain on disposal, before income taxes		9			284
Income tax expense on disposal		(3	)		(24	)
(Loss) income from discontinued operations	$	(96	)	$	193

	Six Months Ended June 30,
	2011			2010
Revenue from discontinued operations	$	181		$	2,240
Operating loss before income taxes	$	(389	)	$	(193	)
Income tax benefit for discontinued operations		126			74
Gain on disposal, before income taxes		233			284
Income tax expense on disposal		(75	)		(109	)
(Loss) income from discontinued operations	$	(105	)	$	56

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 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—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 June 30, 2011, common stock equivalents totaling 1,004,577 were excluded from the calculation of diluted earnings per share because of a decline in the average market price of the common stock below the exercise price. As a result of the Company’s net losses, all common stock equivalents aggregating 1,063,778 for the three months ended June 30, 2010 and 1,180,908 and 1,135,917 for the six months ended June 30, 2011 and 2010, respectively, were excluded from the calculation of diluted loss per share given their anti-dilutive effect.

NOTE 9—SCREENVISION TRANSACTION

On October 14, 2010, the Company finalized the modification of its long-term exhibition agreement (the “Modified Exhibition Agreement”) with Technicolor Cinema Advertising, LLC (“Screenvision”), the Company’s exclusive provider of on-screen advertising services. 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”).

In connection with the Modified Exhibition Agreement, the Company received a cash payment of $30,000 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

12

are structured as a “profits interest” and entitle the Company to receive certain pro rata distributions (such as dividends or distributions upon a liquidation of SV Holdco). 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 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. The non-forfeitable ownership interest in SV Holdco was recorded at an estimated fair value of $6,555 using the Black Scholes Model.

Both the cash and non-forfeitable unit consideration ($36,555 in the aggregate) has been deferred and will be recognized as concessions and other revenue on a straight line basis over the remaining term of the Modified Exhibition Agreement. Included in concession and other revenues in the consolidated statements of operations are amounts related to Screenvision of approximately $2,500 and $4,300 for the three and six months ended June 30, 2011, respectively. Included in accounts receivable in the consolidated balance sheets, are amounts due from Screenvision of $1,884 and $31,901 at June 30, 2011 and December 31, 2010, respectively.

The Company has applied the equity method of accounting for the non-forfeitable units and began recording the related percentage of the earnings or losses of SV Holdco in its consolidated statement of operations since October 14, 2010. As of June 30, 2011, the carrying value of the Company’s ownership interest in Screenvision is approximately $5,800 and is included in Investments in Unconsolidated Affiliates on the Balance Sheet.

NOTE 10—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 and is required to pay an amount equal to the greater of $5 per month or 8% of the theatre’s gross revenues, during the initial term. Revenue recognized during the three and six months ended June 30, 2011 related to this agreement is not material to the condensed consolidated statements of operations.

NOTE 11—INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Our investments in affiliated companies accounted for by the equity method consist of our ownership interest in Screenvision as discussed in Note 9 – Screenvision Transaction and interests in other joint ventures.

Combined financial information of the unconsolidated affiliated companies accounted for by the equity method is as follows:

	As of June 30,
	2011
Assets:
Current assets	$	51,491
Noncurrent assets		165,770
Total assets	$	217,261
Liabilties:
Current liabilities	$	52,075
Noncurrent liabilities		84,927
Total liabilities	$	137,002

	Three Months Ended June 30, 2011		Six Months Ended June 30, 2011
Results of operations:
Revenue	$	45,934	$	68,942
Net income (loss)	$	6	$	(7,735	)

Our investments in unconsolidated affiliated companies were not material during the three and six months ended June 30, 2010.

13

NOTE 12—SEVERANCE AGREEMENT CHARGES

On July 15, 2011 (the “Retirement Date”), the Company’s Senior Vice President-General Counsel and Secretary, F. Lee Champion, ceased employment with the Company. In June 2011, the Company and Mr. Champion entered into a retirement agreement and general release (the “Retirement Agreement”) setting forth the terms of his departure from the Company. Pursuant to the Retirement Agreement, the Company will make a lump sum payment to Mr. Champion of $143 in January 2012 and monthly payments of $24 for each of the 18 consecutive calendar months beginning in February 2012. All stock options granted by the Company to Mr. Champion became fully vested and exercisable on the Retirement Date and will remain exercisable for 90 days, or if less, for the remaining term of each such option. Restricted stock held by Mr. Champion was also fully vested. Any performance shares awarded to Mr. Champion as part of the Company’s 2011 long-term incentive program did not vest and were forfeited on the Retirement Date. The consideration payable to Mr. Champion under the Retirement Agreement was based on the terms of his existing employment agreement. The Company recorded charges of $845 for the three and six months ended June 30, 2011 for the estimated future costs associated with the Retirement Agreement.

NOTE 13—GUARANTOR SUBSIDIARIES

The Company filed a registration statement which became effective in 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 June 30, 2011 and December 31, 2010 and for the three and six months ended June 30, 2011 and June 30, 2010 in accordance with SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered:

14

CONDENSED CONSOLIDATING BALANCE SHEET

	As of June 30, 2011
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Assets:
Current assets:
Cash and cash equivalents	$	13,124		$	8,110		$	—		$	21,234
Restricted cash		56			—			—			56
Accounts receivable		4,390			347			—			4,737
Inventories		713			2,465			—			3,178
Prepaid expenses and other assets		3,710			4,295			—			8,005
Total current assets		21,993			15,217			—			37,210
Property and equipment:
Land		13,438			40,863			—			54,301
Buildings and building improvements		47,970			225,062			—			273,032
Leasehold improvements		16,544			103,622			—			120,166
Assets under capital leases		8,675			39,530			—			48,205
Equipment		59,053			154,130			—			213,183
Construction in progress		985			1,757			—			2,742
Total property and equipment		146,665			564,964			—			711,629
Accumulated depreciation and amortization		(74,547	)		(278,272	)		—			(352,819	)
Property and equipment, net of accumulated depreciation		72,118			286,692			—			358,810
Intercompany receivables		119,492			—			(119,492	)		—
Investment in subsidiaries		78,892			—			(78,892	)		—
Intangible assets, net of accumulated amortization		—			580			—			580
Investment in unconsolidated affiliates		6,820									6,820
Other		11,780			7,550			—			19,330
Total assets	$	311,095		$	310,039		$	(198,384	)	$	422,750
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	23,142		$	321		$	—		$	23,463
Accrued expenses		20,170			11,676			—			31,846
Current maturities of long-term debt, capital leases and long-term financing obligations		2,440			1,518			—			3,958
Total current liabilities		45,752			13,515			—			59,267
Long-term liabilities:
Long-term debt, less current maturities		207,592			—			—			207,592
Capital leases and long-term financing obligations, less current maturities		28,367			87,035			—			115,402
Intercompany liabilities		—			119,492			(119,492	)		—
Deferred revenue		34,586			—			—			34,586
Other		6,026			11,105			—			17,131
Total long-term liabilities		276,571			217,632			(119,492	)		374,711
Stockholders’ (deficit) equity:
Preferred Stock		—			—			—			—
Common Stock		401			1			(1	)		401
Treasury stock		(11,657	)		—			—			(11,657	)
Paid-in capital		290,173			237,800			(237,800	)		290,173
Accumulated deficit		(290,145	)		(158,909	)		158,909			(290,145	)
Total stockholders’ (deficit) equity		(11,228	)		78,892			(78,892	)		(11,228	)
Total liabilities and stockholders’ (deficit) equity	$	311,095		$	310,039		$	(198,384	)	$	422,750

15

CONDENSED CONSOLIDATING BALANCE SHEET

	As of December 31, 2010
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Assets:
Current assets:
Cash and cash equivalents	$	3,418		$	9,648		$	—		$	13,066
Restricted cash		335			—			—			335
Accounts receivable		4,255			185			—			4,440
Screenvision receivable		30,000			—			—			30,000
Inventories		526			2,215			—			2,741
Prepaid expenses and other assets		2,402			4,294			—			6,696
Total current assets		40,936			16,342			—			57,278
Property and equipment:
Land		13,716			40,887			—			54,603
Buildings and building improvements		48,437			224,519			—			272,956
Leasehold improvements		16,523			103,797			—			120,320
Assets under capital leases		8,675			42,249			—			50,924
Equipment		56,788			153,541			—			210,329
Construction in progress		724			1,700			—			2,424
Total property and equipment		144,863			566,693			—			711,556
Accumulated depreciation and amortization		(72,446	)		(270,926	)		—			(343,372	)
Property and equipment, net of accumulated depreciation		72,417			295,767			—			368,184
Intercompany receivables		133,202			—			(133,202	)		—
Investment in subsidiaries		79,444			—			(79,444	)		—
Intangible assets, net of accumulated amortization		—			612			—			612
Investments in unconsolidated affiliates		8,093									8,093
Other		12,792			7,799			—			20,591
Total assets	$	346,884		$	320,520		$	(212,646	)	$	454,758
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	20,492		$	1,168		$	—		$	21,660
Accrued expenses		21,561			5,870			—			27,431
Current maturities of long-term debt, capital leases and long-term financing obligations		2,652			1,588			—			4,240
Total current liabilities		44,705			8,626			—			53,331
Long-term liabilities:
Long-term debt, less current maturities		233,092			—			—			233,092
Capital leases and long-term financing obligations, less current maturities		28,477			87,559			—			116,036
Intercompany liabilities		—			133,202			(133,202	)		—
Deferred revenue		35,150			—			—			35,150
Other		5,361			11,689			—			17,050
Total long-term liabilities		302,080			232,450			(133,202	)		401,328
Stockholders’ equity:
Preferred Stock		—			—			—			—
Common Stock		400			1			(1	)		400
Treasury stock		(11,657	)		—			—			(11,657	)
Paid-in capital		288,986			237,800			(237,800	)		288,986
Accumulated deficit		(277,630	)		(158,357	)		158,357			(277,630	)
Total stockholders’ equity		99			79,444			(79,444	)		99
Total liabilities and stockholders’ equity	$	346,884		$	320,520		$	(212,646	)	$	454,758

16

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Three Months Ended June 30, 2011
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	14,278		$	70,756		$	—		$	85,034
Concessions and other		14,738			38,756			(6,363	)		47,131
Total operating revenues		29,016			109,512			(6,363	)		132,165
Operating costs and expenses:
Film exhibition costs		7,921			38,889			—			46,810
Concession costs		986			4,378			—			5,364
Other theatre operating costs		10,466			45,730			(6,363	)		49,833
General and administrative expenses		3,984			512			—			4,496
Severance agreement charges		845			—			—			845
Depreciation and amortization		1,694			6,201			—			7,895
Loss on sale of property and equipment		68			12			—			80
Write-off of note receivable		750			—			—			750
Impairment of long-lived assets		786			378			—			1,164
Total operating costs and expenses		27,500			96,100			(6,363	)		117,237
Operating income		1,516			13,412			—			14,928
Interest expense		2,738			5,893			—			8,631
Equity in earnings of subsidiaries		(7,513	)		—			7,513			—
Income before income tax, income from unconsolidated subsidiaries and discontinued operations		6,291			7,519			(7,513	)		6,297
Income tax expense		815			—			—			815
Income from unconsolidated affiliates		(407	)		(90	)		—			(497	)
Income from continuing operations		5,883			7,609			(7,513	)		5,979
Loss from discontinued operations		—			96			—			96
Net income	$	5,883		$	7,513		$	(7,513	)	$	5,883

17

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Three Months Ended June 30, 2010
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	14,293		$	69,685		$	—		$	83,978
Concessions and other		13,693			34,744			(6,155	)		42,282
Total operating revenues		27,986			104,429			(6,155	)		126,260
Operating costs and expenses:
Film exhibition costs		8,249			39,461			—			47,710
Concession costs		878			4,015			—			4,893
Other theatre operating costs		10,202			48,849			(6,155	)		52,896
General and administrative expenses		3,845			649			—			4,494
Depreciation and amortization		1,631			6,317			—			7,948
(Gain) loss on sale of property and equipment		1			(20	)		—			(19	)
Impairment of long-lived assets		171			2,954			—			3,125
Total operating costs and expenses		24,977			102,225			(6,155	)		121,047
Operating income		3,009			2,204			—			5,213
Interest expense		2,818			6,959			—			9,777
Equity in loss of subsidiaries		4,954			—			(4,954	)		—
Loss on extinguishment of debt		7			—			—			7
Loss before income tax and discontinued operations		(4,770	)		(4,755	)		4,954			(4,571	)
Income tax expense		1,732			402			—			2,134
Loss from continuing operations		(6,502	)		(5,157	)		4,954			(6,705	)
(Income) loss from discontinued operations		10			(203	)		—			(193	)
Net loss	$	(6,512	)	$	(4,954	)	$	4,954		$	(6,512	)

18

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Six Months Ended June 30, 2011
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	25,353		$	120,938		$	—		$	146,291
Concessions and other		26,485			66,831			(11,265	)		82,051
Total operating revenues		51,838			187,769			(11,265	)		228,342
Operating costs and expenses:
Film exhibition costs		13,783			65,204			—			78,987
Concession costs		1,739			7,517			—			9,256
Other theatre operating costs		20,565			89,920			(11,265	)		99,220
General and administrative expenses		8,169			1,060			—			9,229
Severance agreement charges		845			—			—			845
Depreciation and amortization		3,299			12,406			—			15,705
Loss (gain) on sale of property and equipment		67			(7	)		—			60
Write-off of note receivable		750			—			—			750
Impairment of long-lived assets		909			416			—			1,325
Total operating costs and expenses		50,126			176,516			(11,265	)		215,377
Operating income		1,712			11,253			—			12,965
Interest expense		5,976			11,808			—			17,784
Equity in loss of subsidiaries		520			—			(520	)		—
Loss before income tax, loss (income) from unconsolidated subsidiaries and discontinued operations		(4,784	)		(555	)		520			(4,819	)
Income tax expense		7,287			—			—			7,287
Loss (income) from unconsolidated affiliates		444			(140	)		—			304
Loss from continuing operations		(12,515	)		(415	)		520			(12,410	)
Loss from discontinued operations		—			(105	)		—			(105	)
Net loss	$	(12,515	)	$	(520	)	$	520		$	(12,515	)

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Six Months Ended June 30, 2010
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	29,349		$	136,267		$	—		$	165,616
Concessions and other		27,641			68,270			(12,029	)		83,882
Total operating revenues		56,990			204,537			(12,029	)		249,498
Operating costs and expenses:
Film exhibition costs		16,848			76,820			—			93,668
Concession costs		1,686			7,339			—			9,025
Other theatre operating costs		21,130			97,129			(12,029	)		106,230
General and administrative expenses		8,026			1,278			—			9,304
Depreciation and amortization		3,248			12,669			—			15,917
Loss (gain) on sale of property and equipment		16			(8	)		—			8
Impairment of long-lived assets		171			3,441			—			3,612
Total operating costs and expenses		51,125			198,668			(12,029	)		237,764
Operating income		5,865			5,869			—			11,734
Interest expense		5,541			13,124			—			18,665
Equity in loss of subsidiaries		7,573			—			(7,573	)		—
Loss on extinguishment of debt		2,568			—			—			2,568
Loss before income tax and discontinued operations		(9,817	)		(7,255	)		7,573			(9,499	)
Income tax expense		132			387			—			519
Loss from continuing operations		(9,949	)		(7,642	)		7,573			(10,018	)
(Income) loss from discontinued op erations		13			(69	)		—			(56	)
Net loss	$	(9,962	)	$	(7,573	)	$	7,573		$	(9,962	)

20

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

	For the Six Months Ended June 30, 2011
	Carmike Cinemas, Inc.			Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by operating activities	$	24,870		$	16,534		$	—	$	41,404
Cash flows from investing activities:
Purchases of property and equipment		(2,293	)		(3,955	)				(6,248	)
Proceeds from sale of property and equipment		6			438					444
Other investing activities		279			—					279
Net cash used in investing activities		(2,008	)		(3,517	)				(5,525	)
Cash flows from financing activities:
Issuance of long-term debt		—			—					—
Repayments of long-term debt		(26,279	)		(844	)				(27,123	)
Intercompany Receivable/Payable		13,711			(13,711	)				—
Other financing activies		(588	)		0					(588	)
Net cash used in financing activities		(13,156	)		(14,555	)		—		(27,711	)
Increase / (decrease) in cash and cash equivalents		9,706			(1,538	)		—		8,168
Cash and cash equivalents at beginning of period		3,418			9,648					13,066
Cash and cash equivalents at end of period	$	13,124		$	8,110		$	—	$	21,234

21

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

	For the Six Months Ended June 30, 2010
	Carmike Cinemas, Inc.			Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by operating activities	$	5,165		$	12,290		$	—	$	17,455
Cash flows from investing activities:
Purchases of property and equipment		(1,142	)		(4,471	)				(5,613	)
Proceeds from sale of property and equipment		3			771					774
Other investing activities		307			—					307
Net cash used in investing activities		(832	)		(3,700	)				(4,532	)
Cash flows from financing activities:
Short-term borrowings		5,000			—					5,000
Repayments of short-term borrowings		(5,000	)		—					(5,000	)
Issuance of long-term debt		262,350			—					262,350
Repayments of long-term debt		(272,100	)		—					(272,100	)
Repayments of capital leases and long-term financing obligations		(75	)		(709	)				(784	)
Intercompany receivable/payable		(1,028	)		1,028					—
Other financing activities		(9,712	)		—					(9,712	)
Net cash (used in) provided by financing activities		(20,565	)		319			—		(20,246	)
Increase / (decrease) in cash and cash equivalents		(16,232	)		8,909			—		(7,323	)
Cash and cash equivalents at beginning of period		16,232			9,464					25,696
Cash and cash equivalents at end of period	$	—		$	18,373		$	—	$	18,373

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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 June 30, 2011 we owned, operated or had an interest in 235 theatres with 2,215 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 June 30, 2011, we had 217 theatres with 2,083 screens on a digital-based platform, including 207 theatres with 724 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 allows us to provide a quality presentation to our patron.

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, 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 substantially all of our non-beverage concession supplies from one supplier and substantially all of our 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 are substantially fixed.

The ultimate performance of our film product any time during the calendar year will have a dramatic impact on our operating results and cash needs. In addition, the seasonal nature of the exhibition industry and positioning of film product makes our need 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.

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, reducing our overall leverage and for potential acquisitions. To this end, during the three and six months ended June 30, 2011, we made voluntary pre-payments of $10 million and $25 million, respectively, to reduce long-term 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, 2010.

Results of Operations

Comparison of Three and Six Months Ended June 30, 2011 and June 30, 2010

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 June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Average theatres		235		241		236		242
Average screens		2,215		2,260		2,223		2,266
Average attendance per screen (1)		5,890		5,444		10,096		10,732
Average admission per patron (1)	$	6.52	$	6.89	$	6.52	$	6.87
Average concessions and other sales per patron (1)	$	3.61	$	3.47	$	3.66	$	3.48
Total attendance (in thousands) (1)		13,045		12,304		22,444		24,321
Total revenues (in thousands)	$	132,165	$	126,260	$	228,342	$	249,498

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

Total revenue increased approximately 4.7% to $132.2 million for the three months ended June 30, 2011 compared to $126.3 million for the three months ended June 30, 2010, due to an increase in total attendance from 12.3 million in the second quarter of 2010 to 13.0 million for the second quarter of 2011 and an increase in average concessions and other sales per patron from $3.47 in the second quarter of 2010 to $3.61 for the second quarter of 2011, partially offset by a decrease in average admissions per patron from $6.89 in the second quarter of 2010 to $6.52 for the second quarter of 2011. Attendance was up period over period due principally to a more favorable movie slate. Average admissions per patron decreased primarily due to less attendance at premium 3-D shows compared to 2-D shows. Average concessions and other sales per patron increased, primarily due to concession promotions.

Total revenue decreased approximately 8.5% to $228.3 million for the six months ended June 30, 2011 compared to $249.5 million for the six months ended June 30, 2010, due to a decrease in total attendance from 24.3 million for the 2010 period to 22.4 million for the 2011 period and a decrease in average admissions per patron from $6.87 for the 2010 period to $6.52 for the 2011 period, partially offset by an increase in average concessions and other sales per patron from $3.48 in the 2010 period to $3.66 in the 2011 period.

Admissions revenue increased approximately 1.3% to $85.0 million for the three months ended June 30, 2011 from $84.0 million for the same period in 2010, due to an increase in total attendance from 12.3 million in the second quarter of 2010 to 13.0 million for the second quarter of 2011, partially offset by a decrease in average admissions per patron from $6.89 in the second quarter of 2010 to $6.52 for the second quarter of 2011.

Admissions revenue decreased approximately 12.4% to $146.3 million for the six months ended June 30, 2011 from $165.6 million for the same period in 2010, due to a decrease in total attendance from 24.3 million for the six months ended June 30, 2010 to 22.4 million for the six months ended June 30, 2011, and a decrease in average admissions per patron from $6.87 in the 2010 period to $6.52 for the 2011 period.

Concessions and other revenue increased approximately 11.5% to $47.1 million for the three months ended June 30, 2011 compared to $42.3 million for the same period in 2010, due to an increase in total attendance from 12.3 million in the second quarter of 2010 to 13.0 million for the second quarter of 2011 and an increase in average concessions and other sales per patron from $3.47 in the second quarter of 2010 to $3.61 for the second quarter of 2011.

Concessions and other revenue decreased approximately 2.2% to $82.1 million for the six months ended June 30, 2011 compared to $83.9 million for the same period in 2010, due to a decrease in total attendance from 24.3 million for the six months ended June 30, 2010 to 22.4 million for the six months ended June 30, 2011, partially offset by an increase in average concessions and other sales per patron from $3.48 in the 2010 period to $3.66 for the 2011 period.

We operated 235 theatres with 2,215 screens at June 30, 2011 compared to 240 theatres with 2,250 screens at June 30, 2010.

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Operating costs and expenses. The table below summarizes operating expense data for the periods presented.

	Three Months Ended June 30,								Six Months Ended June 30,
($’s in thousands)	2011		2010			% Change			2011		2010		% Change
Film exhibition costs	$	46,810	$	47,710			(2	)	$	78,987	$	93,668		(16	)
Concession costs	$	5,364	$	4,893			10		$	9,256	$	9,025		3
Other theatre operating costs	$	49,833	$	52,896			(6	)	$	99,220	$	106,230		(7	)
General and administrative expenses	$	4,496	$	4,494			0		$	9,229	$	9,304		(1	)
Depreciation and amortization	$	7,895	$	7,948			(1	)	$	15,705	$	15,917		(1	)
Loss (gain) on sale of property and equipment	$	80	$	(19	)		n/m		$	60	$	8		n/m
Write-off of note receivable	$	750	$	—			n/m		$	750	$	—		n/m
Impairment of long-lived assets	$	1,164	$	3,125			(63	)	$	1,325	$	3,612		(63	)

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 June 30, 2011 decreased to $46.8 million as compared to $47.7 million for the three months ended June 30, 2010 primarily resulting from a reduction in advertising expenses. As a percentage of admissions revenue, film exhibition costs for the three months ended June 30, 2011 decreased to 55.0% as compared to 56.8% for the three months ended June 30, 2010 primarily as a result of lower film rent on 3-D and top-tier films and a reduction in advertising expenses. Film exhibition costs for the six months ended June 30, 2011 decreased to $79.0 million as compared to $93.7 million for the six months ended June 30, 2010. As a percentage of admissions revenue, film exhibition costs for the six months ended June 30, 2011 were 54.0% as compared to 56.6% for the six months ended June 30, 2010, primarily as a result of higher film rent on 3-D and top-tier films in 2010 partially offset by a reduction in advertising expense in the first six months of 2011.

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 $5.4 million for the three months ended June 30, 2011 from $4.9 million for the three months ended June 30, 2010 due primarily to increased attendance and higher average concessions and other revenues per patron. As a percentage of concessions and other revenues, concession costs for the three months ended June 30, 2011 were 11.4% as compared to 11.6% for the three months ended June 30, 2010. Concession costs increased to approximately $9.3 million for the six months ended June 30, 2011, compared to $9.0 million for the six months ended June 30, 2010 due to higher average concessions and other revenues per patron. As a percentage of concessions and other revenues, concession costs were 11.3% for the six months ended June 30, 2011 and 10.8% for the six months ended June 30, 2010 due to an increase in the cost of concession supplies and lower concession rebates.

Other theatre operating costs. Other theatre operating costs for the three months ended June 30, 2011 decreased to $49.8 million as compared to $52.9 million for the three months ended June 30, 2010. The decrease in our other theatre operating costs was primarily the result of decreases in taxes and licenses, salaries and wages expense, repairs and maintenance costs, and insurance costs. Taxes and licenses were negatively impacted in the three months ended June 30, 2010 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 in 2005 and 2006. Other theatre operating costs for the six months ended June 30, 2011 decreased to $99.2 million as compared to $106.2 million for the six months ended June 30, 2010. The decrease in other theatre operating costs was primarily the result of decreases in 3-D equipment service charges, taxes and licenses, salaries and wages expense and theatre occupancy costs resulting from lower percentage rent obligations.

General and administrative expenses. General and administrative expenses remained consistent for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010. General and administrative expenses for the three months ended June 30, 2011 and 2010 were $4.5 million. General and administrative expenses for the six months ended June 30, 2011 and 2010 were $9.2 million and $9.3 million, respectively.

Severance agreement charges. During the three and six months ended June 30, 2011, we recorded severance agreement charges of $0.8 million. These charges were related to the departure of our former Senior Vice President, General Counsel and Secretary, F. Lee Champion (see Note 12 to the Interim Financial Statements).

Depreciation and amortization. Depreciation and amortization expenses remained consistent for the three and six months ended June 30, 2011 as compared to the three and six months ended June 30, 2010. Depreciation and amortization expenses were $7.9 million for each of the three months ended June 30, 2011 and 2010 and $15.7 million and $15.9 million for the six months ended June 30, 2011 and 2010, respectively.

25

Net gain (loss) on sales of property and equipment. We recognized a loss of $80,000 on the sales of property and equipment for the three months ended June 30, 2011, as compared to a gain of $19,000 for the three months ended June 30, 2010. We recognized a loss of $60,000 on the sales of property and equipment for the six months ended June 30, 2011, as compared to a loss of $8,000 for the six months ended June 30, 2010.

Write-off of note receivable. For the three and six months ended June 30, 2011, we wrote off a note receivable of $750,000. The loss is the result of an uncollectible note receivable on a theatre sold in August 2008. We did not write off any note receivables for the three and six months ended June 30, 2010.

Impairment of long-lived assets. Impairment of long-lived assets for the three and six months ended June 30, 2010 decreased from $3.1 million and $3.6 million, respectively, to $1.2 million and $1.3 million for the three and six months ended June 30, 2011, respectively. The impairment charges for the three and six months ended June 30, 2011 were primarily the result of continued deterioration in operating results of previously impaired theatres and a decline in market value of a previously closed theatre.

Operating income (loss). Operating income for the three months ended June 30, 2011 increased 186.4% to $14.9 million as compared to operating income of $5.2 million for the three months ended June 30, 2010. As a percentage of revenues, operating income for the three months ended June 30, 2011 was 11.8% as compared to 4.1% for the three months ended June 30, 2010. This fluctuation is primarily a result of an increase in total revenue resulting from increased attendance as described above, a reduction in impairment charges and a reduction in other theatre operating expenses. Operating income for the six months ended June 30, 2011 increased 10.5% to $13.0 million as compared to $11.7 million for the six months ended June 30, 2010. As a percentage of revenues, operating income for the six months ended June 30, 2011 was 5.7% as compared to 4.7% for the six months ended June 30, 2010. These fluctuations are primarily a result of the factors described above.

Interest expense, net. Interest expense, net for the three months ended June 30, 2011 decreased 11.7% to $8.6 million from $9.8 million for the three months ended June 30, 2010. Interest expenses, net for the six months ended June 30, 2011 decreased 4.7% to $17.8 million as compared to $18.7 million for the six months ended June 30, 2010. The decrease for the three and six months ended June 30, 2011 was primarily related to interest costs of approximately $0.7 million incurred during the three months ended June 30, 2010 associated with the underpayment of sales and use taxes as well as a decrease in the average debt outstanding.

Income tax. During the three and six months ended June 30, 2011, we recorded income tax expense of $0.8 million and $7.3 million, respectively, as compared to $2.1 million and $0.5 million during the three and six months ended June 30, 2010, respectively. The increase in our income tax provision for the six months ended June 30, 2011 is due primarily to the current tax expense associated with the $30 million Screenvision payment received in January 2011 (as discussed in Note 9 - Screenvision Transaction in the Interim Financial Statements) and the inability to recognize an associated deferred tax benefit, due to our ongoing assessment that the realization of our deferred tax assets is unlikely. At June 30, 2011 and December 31, 2010, our consolidated deferred tax assets were $75.9 million, before the effects of any valuation allowance. We regularly assess 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 evidence exists that indicates that recovery is uncertain, a valuation allowance is established against the deferred tax asset, increasing our income tax expense in the period that such determination is made.

The effective tax rate from continuing operations for the three months ended June 30, 2011 was 11.9%. The effective tax rate differs from the statutory tax rate primarily due to a reduction in taxable income related to bonus depreciation on long-lived assets. The effective tax rate from continuing operations for the six months ended June 30, 2011 was (142.3%), which differs from the statutory tax rate primarily due to the current tax expense associated with the $30,000 cash payment received from Screenvision in January 2011 (see Note 9) and the inability to recognize an associated deferred tax benefit, due to our ongoing assessment that the realization of our deferred tax assets is unlikely.

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 June 30, 2011 and 2010, we closed one and three theatres, respectively, and for the six months ended June 30, 2011 and 2010, we closed four and six theatres, respectively. With respect to these closures during the three months ended June 30, 2011 and 2010, we classified one theatre in each period as discontinued operations, and for the six months ended June 30, 2011 and 2010 we classified four and one theatre, 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.

26

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 $22.1 million as of June 30, 2011 compared to a working capital surplus of $4.0 million at December 31, 2010. The working capital surplus at December 31, 2010 resulted from a $30.0 million receivable from Screenvision related to the October 2010 modification of our existing theatre exhibition agreement. We received these funds in January 2011 and used $15.0 million of the funds to prepay debt outstanding under our term loan.

At June 30, 2011, we had available borrowing capacity of $30 million under our revolving credit facility and approximately $21.2 million in cash and cash equivalents on hand as compared to $13.1 million in cash and cash equivalents at December 31, 2010. The material terms of our 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.”

Net cash provided by operating activities was $41.4 million for the six months ended June 30, 2011 compared to net cash provided by operating activities of $17.5 million for the six months ended June 30, 2010. This increase in our cash provided by operating activities was due primarily to the collection of the $30.0 million receivable from Screenvision. Net cash used in investing activities was $5.5 million for the six months ended June 30, 2011 compared to $4.5 million for the six months ended June 30, 2010. The increase in our net cash used in investing activities is primarily due to an increase in cash used for the purchases of property and equipment partially offset by a decrease in proceeds from sales of property and equipment. Capital expenditures were $6.2 million and $5.6 million for the six months ended June 30, 2011 and 2010, respectively. Capital expenditures for the 2011 period were primarily due to additional 3-D rollouts, Big D renovations (as described below), theatre renovations and upgrades to computer equipment. Capital expenditures for the 2010 period related primarily to capital improvement activities on our existing theatres. Net cash used in financing activities was $27.7 million for the six months ended June 30, 2011 compared to $20.2 million for the six months ended June 30, 2010. The increase in our net cash used in financing activities is primarily due to the repayment of $25.0 million on our term loan during the six months ended June 30, 2011, partially offset by the incurrence of $9.0 million of debt issuance costs in the first six 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 six months of 2011, we closed four of our underperforming theatres and estimate closing up to nine theatres for the full year 2011.

We plan to make up to $25 million in capital expenditures for calendar year 2011. 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 $25 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. In 2010, we began installing our own large digital format screen in select theatres. The Big D-Large Format Digital Experience includes a larger screen, enhanced sound and premium seating accommodations. We intend to roll out additional Big D-Large Format Digital Experience auditoriums during the remainder of 2011.

Credit Agreement and Covenant Compliance

On January 27, 2010, we entered into a 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 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.

27

The proceeds were used to repay our $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 $30,000 revolving credit facility replaced our prior $50,000 revolving credit facility that was scheduled to mature in May 2010.

The interest rate for borrowings under the 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 Credit Agreement (as amended) provides that if our leverage ratio exceeds 4.50 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by 25 basis points (0.25%), and if our leverage ratio exceeds 5.00 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by an additional 25 basis points (0.25%).

The interest rate for borrowings under the revolving credit facility was initially 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 might elect. 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. In addition, we are required to pay commitment fees on the unused portion of the revolving credit facility. The commitment fee rate was initially 0.75% per annum, and is also subject to adjustment based on our ratio of total debt to EBITDA, with the rates ranging from 0.50% to 0.75%.

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, and (3) various percentages (ranging from 0% to 75% depending on our consolidated leverage ratio) of excess annual cash flow as defined in the Credit Agreement. In addition, the first amendment to the Credit Agreement imposes a prepayment fee of 1% of the amount prepaid in connection with certain refinancings and repricings occurring prior to March 3, 2012.

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 Credit Agreement contains 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 $25.0 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 2011 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 twelve months.

We are required to make principal repayments of our term loan borrowings in consecutive quarterly installments, each in the amount of $536,000, with the balance of $202,185,000 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.

28

Debt Covenant Compliance

The Credit Agreement contains financial covenants that require us to maintain a ratio of funded debt to adjusted EBITDA (“leverage ratio”) below a specified maximum ratio, a ratio of adjusted EBITDA to interest expense (“interest coverage ratio”) above a specified minimum ratio and a ratio of total adjusted debt (adjusted for certain leases and financing obligations) to adjusted EBITDA plus rental expense (“EBITDAR ratio”) below a specified maximum ratio.

Leverage Ratio- The maximum leverage ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 5.50 to 1.00 for any four quarter period ending March 31, 2011 through June 30, 2012; (b) 5.00 to 1.00 for any four quarter period ending September 30, 2012 through December 31, 2012; (c) 4.50 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 4.25 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 4.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

Interest Coverage Ratio- The minimum interest coverage ratio as of the last day of any four consecutive fiscal quarters may not be less than: (a) 1.50 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 1.60 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 1.75 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 1.85 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 2.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

EBITDAR Ratio- The maximum EBITDAR ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 8.00 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 7.50 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 7.00 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 6.75 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 6.50 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

As of June 30, 2011, we were in compliance with all of the financial covenants in the amended Credit Agreement. As of June 30, 2011, our leverage, interest coverage, and EBITDAR ratios were 3.60, 2.23, and 6.21, respectively. Based on our latest projections and actual results through June 30, 2011, an attendance decline in the last half of 2011of 17% or more would result in a covenant violation.

Our financial results depend 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. The complete motion picture release schedule for 2012 and beyond is not yet known. Based on current projections, we currently believe that we will remain in compliance with our financial covenants through December 31, 2011. However, it is possible that we may not comply with some or all of our financial covenants in the future.

We could seek waivers or additional amendments to the Credit Agreement if a violation did occur. 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 or non-financial covenants and if we fail to obtain future waivers or amendments to the Credit Agreement, the lenders may terminate the 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 facility due and payable.

Other events of default under the Credit Agreement 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, 2010.

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,”

29

“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;

• 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, 2010, 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

There have been no material changes in market risk from the information provided under “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2010.

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

30

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 June 30, 2011, 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 June 30, 2011 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

31

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, 2010. See also “Forward-Looking Statements,” included in Part I, Item 2 of this Quarterly Report on Form 10-Q. 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, 2010.

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
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).
10.1	Retirement Agreement and General Release, dated June 1, 2011, by and between Forrest Lee Champion and Carmike Cinemas, Inc. (filed as Exhibit 10.1 to Carmike’s Current Report on Form 8-K filed on June 1, 2011 and incorporated herein by reference).
10.2	Carmike Cinemas, Inc. 2004 Incentive Stock Plan, as amended and restated, approved by the stockholders on May 20, 2011 (filed as Appendix A to Carmike’s proxy statement filed on April 20, 2011, and incorporated herein by reference).
11	Computation of per share earnings (provided in Note 8 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.
101	The following financial information for Carmike, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.

33

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: August 8, 2011	By:	/s/ S. David Passman III
		S. David Passman III
		President, Chief Executive Officer and Director
		(Principal Executive Officer)
Date: August 8, 2011	By:	/s/ Richard B. Hare
		Richard B. Hare
		Senior Vice President—Finance, Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

34

EX-31.1

Exhibit 31.1

CERTIFICATE OF CHIEF EXECUTIVE OFFICER

I, S. David Passman III, certify that:

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

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

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

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

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2011

/s/ S. David Passman III

S. David Passman III

President, Chief Executive Officer and

Director

EX-31.2

Exhibit 31.2

CERTIFICATE OF CHIEF FINANCIAL OFFICER

I, Richard B. Hare, certify that:

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

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

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

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

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2011

/s/ Richard B. Hare

Richard B. Hare

Senior Vice President-Finance, Treasurer and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Carmike Cinemas, Inc. on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, S. David Passman III, the Chief Executive Officer of the registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

Date: August 8, 2011

/s/ S. David Passman III

S. David Passman III

President, Chief Executive Officer and Director

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Carmike Cinemas, Inc. on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard B. Hare, Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

Date: August 8, 2011

/s/ Richard B. Hare

Richard B. Hare

Senior Vice President-Finance, Treasurer and Chief Financial Officer

XML



Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2011	Dec. 31, 2010
Condensed Consolidated Balance Sheets
Preferred stock, par value	$ 1	$ 1
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.03	$ 0.03
Common stock, shares authorized	35,000,000	35,000,000
Common stock, shares issued	13,414,872	13,331,872
Common stock, shares outstanding	12,965,673	12,882,673
Treasury stock, shares	449,199	449,199

XML



Condensed Consolidated Statements Of Operations (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Revenues:
Admissions	$ 85,034	$ 83,978	$ 146,291	$ 165,616
Concessions and other	47,131	42,282	82,051	83,882
Total operating revenues	132,165	126,260	228,342	249,498
Operating costs and expenses:
Film exhibition costs	46,810	47,710	78,987	93,668
Concession costs	5,364	4,893	9,256	9,025
Other theatre operating costs	49,833	52,896	99,220	106,230
General and administrative expenses	4,496	4,494	9,229	9,304
Severance agreement charges (Note 12)	845		845
Depreciation and amortization	7,895	7,948	15,705	15,917
Loss (gain) on sale of property and equipment	80	(19)	60	8
Write-off of note receivable	750		750
Impairment of long-lived assets	1,164	3,125	1,325	3,612
Total operating costs and expenses	117,237	121,047	215,377	237,764
Operating income	14,928	5,213	12,965	11,734
Interest expense	8,631	9,777	17,784	18,665
Loss on extinguishment of debt		7		2,568
Income (loss) before income tax and income (loss) from unconsolidated affiliates	6,297	(4,571)	(4,819)	(9,499)
Income tax expense (Note 4)	815	2,134	7,287	519
Income (loss) from unconsolidated affiliates (Note 11)	497		(304)
Income (loss) from continuing operations	5,979	(6,705)	(12,410)	(10,018)
(Loss) income from discontinued operations (Note 6)	(96)	193	(105)	56
Net income (loss)	$ 5,883	$ (6,512)	$ (12,515)	$ (9,962)
Weighted average shares outstanding:
Basic	12,796	12,756	12,790	12,720
Diluted	12,827	12,756	12,790	12,720
Net loss per common share (Basic and Diluted):
Income (loss) from continuing operations	$ 0.47	$ (0.53)	$ (0.97)	$ (0.79)
(Loss) income from discontinued operations, net of tax	$ (0.01)	$ 0.02	$ (0.01)	$ 0.01
Net income (loss)	$ 0.46	$ (0.51)	$ (0.98)	$ (0.78)

XML



Document And Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 25, 2011
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Entity Registrant Name	CARMIKE CINEMAS INC
Entity Central Index Key	0000799088
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		12,965,673

XML



Commitments And Contingencies

6 Months Ended

Jun. 30, 2011

Commitments And Contingencies

Commitments And Contingencies

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 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.

XML



Severance Agreement Charges

6 Months Ended

Jun. 30, 2011

Severance Agreement Charges

Severance Agreement Charges

NOTE 12—SEVERANCE AGREEMENT CHARGES

On July 15, 2011 (the "Retirement Date"), the Company's Senior Vice President-General Counsel and Secretary, F. Lee Champion, ceased employment with the Company. In June 2011, the Company and Mr. Champion entered into a retirement agreement and general release (the "Retirement Agreement") setting forth the terms of his departure from the Company. Pursuant to the Retirement Agreement, the Company will make a lump sum payment to Mr. Champion of $143 in January 2012 and monthly payments of $24 for each of the 18 consecutive calendar months beginning in February 2012. All stock options granted by the Company to Mr. Champion became fully vested and exercisable on the Retirement Date and will remain exercisable for 90 days, or if less, for the remaining term of each such option. Restricted stock held by Mr. Champion was also fully vested. Any performance shares awarded to Mr. Champion as part of the Company's 2011 long-term incentive program did not vest and were forfeited on the Retirement Date. The consideration payable to Mr. Champion under the Retirement Agreement was based on the terms of his existing employment agreement. The Company recorded charges of $845 for the three and six months ended June 30, 2011 for the estimated future costs associated with the Retirement Agreement.

XML



Debt

6 Months Ended

Jun. 30, 2011

Debt

Debt

NOTE 3—DEBT

Our debt consisted of the following on the dates indicated:

	June 30,			December 31,
	2011			2010
Term loan	$	211,302		$	237,463
Less discount on term loan		(1,565	)		(1,972	)
Total debt		209,737			235,491
Current maturities		(2,145	)		(2,399	)
Total long-term debt	$	207,592		$	233,092

On January 27, 2010, the Company entered into a new Credit Agreement (the "Credit Agreement"), by and among the Company, as borrower, and several banks and other financial institutions or entities from time to time parties to the Credit Agreement, as lenders, consisting of:

• a $265,000 six year term loan facility that matures on January 27, 2016; and

• a $30,000 three year revolving credit facility that matures on January 27, 2013.

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 $30,000 revolving credit facility replaced the Company's prior $50,000 revolving credit facility that was scheduled to mature in May 2010.

The $265,000 senior secured term loan facility has an interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 3.5%, or the base rate (subject to a floor of 3.0%) plus a margin of 2.5%, as the Company may elect. The Credit Agreement (as amended) provides that if the Company's leverage ratio exceeds 4.50 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by 25 basis points (0.25%), and if the leverage ratio exceeds 5.00 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by an additional 25 basis points (0.25%).

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 Company is currently required to make principal repayments of the senior secured term loan in the amount of $536 on the last day of each calendar quarter, with a balance of $202,185 due at final maturity on January 27, 2016. During the six months ended June 30, 2011, the Company voluntarily repaid $25,000 of principal on its term loan. For the six months ended June 30, 2011 and 2010, the average interest rate on the Company's debt was 5.50%.

The $30,000 revolving credit facility has an interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 4.0%, or base rate (subject to a 3.0% floor) plus a margin 3.0%, 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 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%. There was no outstanding balance on the revolving credit facilities at June 30, 2011 or 2010.

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, and (3) various percentages (ranging from 0% to 75% depending on our consolidated leverage ratio) of excess annual cash flow as defined in the credit agreement. In addition, the first amendment to the Credit Agreement imposes a prepayment fee of 1% of the amount prepaid in connection with certain refinancings and repricings occurring prior to March 3, 2012.

The senior secured term loan 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 fair value of the senior secured term loan is estimated based on quoted market prices as follows:

	As of June 30,		As of December 31,
	2011		2010
Carrying amount	$	209,737	$	235,491
Fair value	$	210,791	$	239,244

Interest Rate Cap Agreement

The Company is required as part of its 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. On April 15, 2010, the Company entered into a three-year interest rate cap agreement which is not being accounted for as a hedging instrument. This agreement caps the interest rate on $125,000 of aggregate principal amount of the Company's outstanding term loan at 9.5%. As of June 30, 2011 and December 31, 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 and financing obligations;

• create liens on their assets;

• make certain investments;

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

• 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 Credit Agreement for the term loan and revolving credit facilities imposes an annual limit of $25,000 on capital expenditures, plus a carryforward of $5,000 of any unused capital expenditures from the prior year. In addition to the dollar limitation, the Company 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.

The Credit Agreement also contains financial covenants that require the Company to maintain a ratio of funded debt to adjusted EBITDA ("leverage ratio") below a specified maximum ratio, a ratio of adjusted EBITDA to interest expense ("interest coverage ratio") below a specified minimum ratio and a ratio of total adjusted debt (adjusted for certain leases and financing obligations) to adjusted EBITDA plus rental expense ("EBITDAR ratio") below a specified maximum ratio. The financial covenants contain normal and customary periodic changes in the required ratios over the life of the senior secured term loan and revolving credit facilities.

Leverage Ratio- The maximum leverage ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 5.50 to 1.00 for any four quarter period ending March 31, 2011 through June 30, 2012; (b) 5.00 to 1.00 for any four quarter period ending September 30, 2012 through December 31, 2012; (c) 4.50 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 4.25 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 4.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

Interest Coverage Ratio- The minimum interest coverage ratio as of the last day of any four consecutive fiscal quarters may not be less than: (a) 1.50 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 1.60 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 1.75 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 1.85 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 2.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

EBITDAR Ratio- The maximum EBITDAR ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 8.00 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 7.50 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 7.00 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 6.75 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 6.50 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

As of June 30, 2011, the Company was in compliance with all of the financial covenants in the amended Credit Agreement for the term loan and revolving credit facilities. As of June 30, 2011, the Company's leverage, interest coverage, and EBITDAR ratios were 3.60, 2.23, and 6.21, respectively. Based on the Company's latest projections and actual results through June 30, 2011, an attendance decline in the last half of 2011 of 17% or more would result in a covenant violation.

The Company's financial results depend to a substantial degree on the availability of suitable motion pictures for screening in its theatres and the appeal of such motion pictures to patrons in its specific theatre markets. The complete motion picture release schedule for 2012 and beyond is not yet known. Based on current projections, the Company currently believes it will remain in compliance with its financial covenants through December 31, 2011. However, it is possible that the Company may not comply with some or all of its financial covenants in the future.

The Company could seek waivers or additional amendments to the Credit Agreement if a violation did occur. However, the Company can provide no assurance that it will successfully obtain such waivers or amendments from its lenders. If the Company is unable to comply with some or all of the financial or non-financial covenants and if it fails to obtain future waivers or amendments to the Credit Agreement, the lenders may terminate the 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 facility due and payable.

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Screenvision Transaction

6 Months Ended

Jun. 30, 2011

Screenvision Transaction

Screenvision Transaction

NOTE 9—SCREENVISION TRANSACTION

On October 14, 2010, the Company finalized the modification of its long-term exhibition agreement (the "Modified Exhibition Agreement") with Technicolor Cinema Advertising, LLC ("Screenvision"), the Company's exclusive provider of on-screen advertising services. 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").

In connection with the Modified Exhibition Agreement, the Company received a cash payment of $30,000 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 certain pro rata distributions (such as dividends or distributions upon a liquidation of SV Holdco). 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 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. The non-forfeitable ownership interest in SV Holdco was recorded at an estimated fair value of $6,555 using the Black Scholes Model.

Both the cash and non-forfeitable unit consideration ($36,555 in the aggregate) has been deferred and will be recognized as concessions and other revenue on a straight line basis over the remaining term of the Modified Exhibition Agreement. Included in concession and other revenues in the consolidated statements of operations are amounts related to Screenvision of approximately $2,500 and $4,300 for the three and six months ended June 30, 2011, respectively. Included in accounts receivable in the consolidated balance sheets, are amounts due from Screenvision of $1,884 and $31,901 at June 30, 2011 and December 31, 2010, respectively.

The Company has applied the equity method of accounting for the non-forfeitable units and began recording the related percentage of the earnings or losses of SV Holdco in its consolidated statement of operations since October 14, 2010. As of June 30, 2011, the carrying value of the Company's ownership interest in Screenvision is approximately $5,800 and is included in Investments in Unconsolidated Affiliates on the Balance Sheet.

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Related Party Transaction

6 Months Ended

Jun. 30, 2011

Related Party Transaction

Related Party Transaction

NOTE 10—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 and is required to pay an amount equal to the greater of $5 per month or 8% of the theatre's gross revenues, during the initial term. Revenue recognized during the three and six months ended June 30, 2011 related to this agreement is not material to the condensed consolidated statements of operations.

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Net Income (Loss) Per Share

6 Months Ended

Jun. 30, 2011

Net Income (Loss) Per Share

Net Income (Loss) Per Share

NOTE 8—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 June 30, 2011, common stock equivalents totaling 1,004,577 were excluded from the calculation of diluted earnings per share because of a decline in the average market price of the common stock below the exercise price. As a result of the Company's net losses, all common stock equivalents aggregating 1,063,778 for the three months ended June 30, 2010 and 1,180,908 and 1,135,917 for the six months ended June 30, 2011 and 2010, respectively, were excluded from the calculation of diluted loss per share given their anti-dilutive effect.

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Basis Of Presentation And Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Basis Of Presentation And Significant Accounting Policies

Basis Of Presentation And Significant Accounting Policies

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 June 30, 2011 and December 31, 2010, and the results of operations and cash flows for the three and six month periods ended June 30, 2011 and 2010. 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, 2010. That report includes a summary of our critical accounting policies. There have been no material changes in our accounting policies during the first six months of 2011.

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, 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; 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.

Fair Value Measurements

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 consist of a term loan and a revolving credit facility, is estimated based on quoted market prices at the date of measurement.

Reclassifications

Certain reclassifications have been made to prior year amounts in the Company's financial statements to conform to current year classifications. The Company previously reported investments in unconsolidated affiliates in other assets on the 2010 consolidated balance sheet. The 2010 amount has been reclassified from other assets to a separate line item on the consolidated balance sheets to conform to the 2011 presentation.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and IFRS." The ASU expands the existing disclosure requirements for fair value measurements in Accounting Standards Codification ("ASC") 820, "Fair Value Measurements" and makes other amendments to conform wording differences between U.S. GAAP and IFRS. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The amendments are not expected to have any impact on the Company's financial position or results of operations.

In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income" which revises the manner in which entities present comprehensive income in their financial statements. The guidance revises ASC 220, "Comprehensive Income" and requires entities to report components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.

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Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

NOTE 4—INCOME TAXES

For the three and six months ended June 30, 2011, the Company has utilized the discrete effective tax rate method, as allowed by 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.

As a result of the Company's history of operating losses, the Company's net deferred tax assets are fully offset by a valuation allowance at June 30, 2011 and December 31, 2010.

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.

As of June 30, 2011 and December 31, 2010, the amount of unrecognized tax benefits was $2,500, all of which would affect the Company's annual effective tax rate, if recognized. This unrecognized tax benefit is associated with the Company's non-forfeitable ownership interest in SV Holdco, LLC (see Note 9 - Screenvision Transaction). The Company has recognized a tax basis for these units that is lower than their carrying value for financial statement purposes. However, as this tax position may not be sustained upon examination, the Company has recorded a related liability for this uncertain tax position.

The effective tax rate from continuing operations for the three months ended June 30, 2011 was 11.9%. The effective tax rate differs from the statutory tax rate primarily due to a reduction in taxable income related to bonus depreciation on long-lived assets. The effective tax rate from continuing operations for the six months ended June 30, 2011 was (142.3%), which differs from the statutory tax rate primarily due to the current tax expense associated with the $30,000 cash payment received from Screenvision in January 2011 (see Note 9) and the inability to recognize an associated deferred tax benefit, due to the Company's ongoing assessment that the realization of its deferred tax assets is unlikely.

The Company regularly assesses whether it is more likely than not that its deferred tax asset balance will be recovered from future taxable income, taking into account such factors as its earnings history, carryback and carryforward periods, and tax planning strategies. When evidence exists that indicates that recovery is uncertain, a valuation allowance is maintained against the deferred tax asset. At this time, the Company does not believe that realization of its deferred tax assets is more likely than not to occur.

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Equity Based Compensation

6 Months Ended

Jun. 30, 2011

Equity Based Compensation

Equity Based Compensation

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 June 30, 2011, there were 1,432,358 shares available for future grants under the 2004 Incentive Stock Plan. The Company's policy is to issue new shares upon exercise of options and the issuance of stock grants.

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 June 30, 2011, the Company has also granted 99,000 shares of performance-based awards dependent on the achievement of EBITDA targets that vest over a three-year period. As of June 30, 2011, 33,000 shares of these performance-based stock awards have been earned due to the achievement of EBITDA targets. Performance-based stock awards are recognized in 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 target for the unearned awards is probable.

The Company's total stock-based compensation expense was approximately $724 and $538 for the three months ended June 30, 2011 and 2010, respectively, and $1,188 and $1,222 for the six months ended June 30, 2011 and 2010, respectively. Included in stock-based compensation expense for the three and six months ended June 30, 2011, is $222 related to the accelerated vesting of stock-based awards to our former Senior Vice-President-General Counsel and Secretary (see Note 12). Stock-based compensation expense is included in general and administrative expenses in the consolidated statement of operations with the exception of the accelerated vested awards which are included in Severance Agreement Charges. As of June 30, 2011, the Company had approximately $2,707 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 2.0 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 six months of 2011 and 2010:

	2011			2010
Fair value of options on grant date	$	4.94		$	6.84
Expected life (years)		6.0			6.0
Risk-free interest rate		2.3	%		2.5	%
Expected dividend yield		—	%		—	%
Expected volatility		76.2	%		71.1	%

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 June 30, 2011:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at January 1, 2011		704,500		$	13.77		7.24
Granted		157,000			7.34		9.70
Exercised		—
Forfeited		(20,000	)		35.63
Outstanding at June 30, 2011		841,500		$	12.05		7.46	$	27
Exercisable on June 30, 2011		394,832		$	15.97		5.98	$	27
Expected to vest June 30, 2011		424,335		$	8.59		8.76	$	—

Restricted Stock

The following table sets forth the summary of activity for restricted stock grants, including performance based awards, for the six months ended June 30, 2011:

	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2011		131,333		$	10.58
Granted		151,892			7.28
Vested		(31,667	)		10.82
Forfeited		(5,000	)		7.34
Nonvested at June 30, 2011		246,558			8.59

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Guarantor Subsidiaries

6 Months Ended

Jun. 30, 2011

Guarantor Subsidiaries

Guarantor Subsidiaries

NOTE 13—GUARANTOR SUBSIDIARIES

The Company filed a registration statement which became effective in 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 June 30, 2011 and December 31, 2010 and for the three and six months ended June 30, 2011 and June 30, 2010 in accordance with SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered:

CONDENSED CONSOLIDATING BALANCE SHEET

	As of June 30, 2011
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Assets:
Current assets:
Cash and cash equivalents	$	13,124		$	8,110		$	—		$	21,234
Restricted cash		56			—			—			56
Accounts receivable		4,390			347			—			4,737
Inventories		713			2,465			—			3,178
Prepaid expenses and other assets		3,710			4,295			—			8,005
Total current assets		21,993			15,217			—			37,210
Property and equipment:
Land		13,438			40,863			—			54,301
Buildings and building improvements		47,970			225,062			—			273,032
Leasehold improvements		16,544			103,622			—			120,166
Assets under capital leases		8,675			39,530			—			48,205
Equipment		59,053			154,130			—			213,183
Construction in progress		985			1,757			—			2,742
Total property and equipment		146,665			564,964			—			711,629
Accumulated depreciation and amortization		(74,547	)		(278,272	)		—			(352,819	)
Property and equipment, net of accumulated depreciation		72,118			286,692			—			358,810
Intercompany receivables		119,492			—			(119,492	)		—
Investment in subsidiaries		78,892			—			(78,892	)		—
Intangible assets, net of accumulated amortization		—			580			—			580
Investment in unconsolidated affiliates		6,820									6,820
Other		11,780			7,550			—			19,330
Total assets	$	311,095		$	310,039		$	(198,384	)	$	422,750
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	23,142		$	321		$	—		$	23,463
Accrued expenses		20,170			11,676			—			31,846
Current maturities of long-term debt, capital leases and long-term financing obligations		2,440			1,518			—			3,958
Total current liabilities		45,752			13,515			—			59,267
Long-term liabilities:
Long-term debt, less current maturities		207,592			—			—			207,592
Capital leases and long-term financing obligations, less current maturities		28,367			87,035			—			115,402
Intercompany liabilities		—			119,492			(119,492	)		—
Deferred revenue		34,586			—			—			34,586
Other		6,026			11,105			—			17,131
Total long-term liabilities		276,571			217,632			(119,492	)		374,711
Stockholders' (deficit) equity:
Preferred Stock		—			—			—			—
Common Stock		401			1			(1	)		401
Treasury stock		(11,657	)		—			—			(11,657	)
Paid-in capital		290,173			237,800			(237,800	)		290,173
Accumulated deficit		(290,145	)		(158,909	)		158,909			(290,145	)
Total stockholders' (deficit) equity		(11,228	)		78,892			(78,892	)		(11,228	)
Total liabilities and stockholders' (deficit) equity	$	311,095		$	310,039		$	(198,384	)	$	422,750

CONDENSED CONSOLIDATING BALANCE SHEET

	As of December 31, 2010
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Assets:
Current assets:
Cash and cash equivalents	$	3,418		$	9,648		$	—		$	13,066
Restricted cash		335			—			—			335
Accounts receivable		4,255			185			—			4,440
Screenvision receivable		30,000			—			—			30,000
Inventories		526			2,215			—			2,741
Prepaid expenses and other assets		2,402			4,294			—			6,696
Total current assets		40,936			16,342			—			57,278
Property and equipment:
Land		13,716			40,887			—			54,603
Buildings and building improvements		48,437			224,519			—			272,956
Leasehold improvements		16,523			103,797			—			120,320
Assets under capital leases		8,675			42,249			—			50,924
Equipment		56,788			153,541			—			210,329
Construction in progress		724			1,700			—			2,424
Total property and equipment		144,863			566,693			—			711,556
Accumulated depreciation and amortization		(72,446	)		(270,926	)		—			(343,372	)
Property and equipment, net of accumulated depreciation		72,417			295,767			—			368,184
Intercompany receivables		133,202			—			(133,202	)		—
Investment in subsidiaries		79,444			—			(79,444	)		—
Intangible assets, net of accumulated amortization		—			612			—			612
Investments in unconsolidated affiliates		8,093									8,093
Other		12,792			7,799			—			20,591
Total assets	$	346,884		$	320,520		$	(212,646	)	$	454,758
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	20,492		$	1,168		$	—		$	21,660
Accrued expenses		21,561			5,870			—			27,431
Current maturities of long-term debt, capital leases and long-term financing obligations		2,652			1,588			—			4,240
Total current liabilities		44,705			8,626			—			53,331
Long-term liabilities:
Long-term debt, less current maturities		233,092			—			—			233,092
Capital leases and long-term financing obligations, less current maturities		28,477			87,559			—			116,036
Intercompany liabilities		—			133,202			(133,202	)		—
Deferred revenue		35,150			—			—			35,150
Other		5,361			11,689			—			17,050
Total long-term liabilities		302,080			232,450			(133,202	)		401,328
Stockholders' equity:
Preferred Stock		—			—			—			—
Common Stock		400			1			(1	)		400
Treasury stock		(11,657	)		—			—			(11,657	)
Paid-in capital		288,986			237,800			(237,800	)		288,986
Accumulated deficit		(277,630	)		(158,357	)		158,357			(277,630	)
Total stockholders' equity		99			79,444			(79,444	)		99
Total liabilities and stockholders' equity	$	346,884		$	320,520		$	(212,646	)	$	454,758

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Three Months Ended June 30, 2011
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	14,278		$	70,756		$	—		$	85,034
Concessions and other		14,738			38,756			(6,363	)		47,131
Total operating revenues		29,016			109,512			(6,363	)		132,165
Operating costs and expenses:
Film exhibition costs		7,921			38,889			—			46,810
Concession costs		986			4,378			—			5,364
Other theatre operating costs		10,466			45,730			(6,363	)		49,833
General and administrative expenses		3,984			512			—			4,496
Severance agreement charges		845			—			—			845
Depreciation and amortization		1,694			6,201			—			7,895
Loss on sale of property and equipment		68			12			—			80
Write-off of note receivable		750			—			—			750
Impairment of long-lived assets		786			378			—			1,164
Total operating costs and expenses		27,500			96,100			(6,363	)		117,237
Operating income		1,516			13,412			—			14,928
Interest expense		2,738			5,893			—			8,631
Equity in earnings of subsidiaries		(7,513	)		—			7,513			—
Income before income tax, income from unconsolidated subsidiaries and discontinued operations		6,291			7,519			(7,513	)		6,297
Income tax expense		815			—			—			815
Income from unconsolidated affiliates		(407	)		(90	)		—			(497	)
Income from continuing operations		5,883			7,609			(7,513	)		5,979
Loss from discontinued operations		—			96			—			96
Net income	$	5,883		$	7,513		$	(7,513	)	$	5,883

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Three Months Ended June 30, 2010
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	14,293		$	69,685		$	—		$	83,978
Concessions and other		13,693			34,744			(6,155	)		42,282
Total operating revenues		27,986			104,429			(6,155	)		126,260
Operating costs and expenses:
Film exhibition costs		8,249			39,461			—			47,710
Concession costs		878			4,015			—			4,893
Other theatre operating costs		10,202			48,849			(6,155	)		52,896
General and administrative expenses		3,845			649			—			4,494
Depreciation and amortization		1,631			6,317			—			7,948
(Gain) loss on sale of property and equipment		1			(20	)		—			(19	)
Impairment of long-lived assets		171			2,954			—			3,125
Total operating costs and expenses		24,977			102,225			(6,155	)		121,047
Operating income		3,009			2,204			—			5,213
Interest expense		2,818			6,959			—			9,777
Equity in loss of subsidiaries		4,954			—			(4,954	)		—
Loss on extinguishment of debt		7			—			—			7
Loss before income tax and discontinued operations		(4,770	)		(4,755	)		4,954			(4,571	)
Income tax expense		1,732			402			—			2,134
Loss from continuing operations		(6,502	)		(5,157	)		4,954			(6,705	)
(Income) loss from discontinued operations		10			(203	)		—			(193	)
Net loss	$	(6,512	)	$	(4,954	)	$	4,954		$	(6,512	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Six Months Ended June 30, 2011
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	25,353		$	120,938		$	—		$	146,291
Concessions and other		26,485			66,831			(11,265	)		82,051
Total operating revenues		51,838			187,769			(11,265	)		228,342
Operating costs and expenses:
Film exhibition costs		13,783			65,204			—			78,987
Concession costs		1,739			7,517			—			9,256
Other theatre operating costs		20,565			89,920			(11,265	)		99,220
General and administrative expenses		8,169			1,060			—			9,229
Severance agreement charges		845			—			—			845
Depreciation and amortization		3,299			12,406			—			15,705
Loss (gain) on sale of property and equipment		67			(7	)		—			60
Write-off of note receivable		750			—			—			750
Impairment of long-lived assets		909			416			—			1,325
Total operating costs and expenses		50,126			176,516			(11,265	)		215,377
Operating income		1,712			11,253			—			12,965
Interest expense		5,976			11,808			—			17,784
Equity in loss of subsidiaries		520			—			(520	)		—
Loss before income tax, loss (income) from unconsolidated subsidiaries and discontinued operations		(4,784	)		(555	)		520			(4,819	)
Income tax expense		7,287			—			—			7,287
Loss (income) from unconsolidated affiliates		444			(140	)		—			304
Loss from continuing operations		(12,515	)		(415	)		520			(12,410	)
Loss from discontinued operations		—			(105	)		—			(105	)
Net loss	$	(12,515	)	$	(520	)	$	520		$	(12,515	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Six Months Ended June 30, 2010
	Carmike Cinemas, Inc			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Admissions	$	29,349		$	136,267		$	—		$	165,616
Concessions and other		27,641			68,270			(12,029	)		83,882
Total operating revenues		56,990			204,537			(12,029	)		249,498
Operating costs and expenses:
Film exhibition costs		16,848			76,820			—			93,668
Concession costs		1,686			7,339			—			9,025
Other theatre operating costs		21,130			97,129			(12,029	)		106,230
General and administrative expenses		8,026			1,278			—			9,304
Depreciation and amortization		3,248			12,669			—			15,917
Loss (gain) on sale of property and equipment		16			(8	)		—			8
Impairment of long-lived assets		171			3,441			—			3,612
Total operating costs and expenses		51,125			198,668			(12,029	)		237,764
Operating income		5,865			5,869			—			11,734
Interest expense		5,541			13,124			—			18,665
Equity in loss of subsidiaries		7,573			—			(7,573	)		—
Loss on extinguishment of debt		2,568			—			—			2,568
Loss before income tax and discontinued operations		(9,817	)		(7,255	)		7,573			(9,499	)
Income tax expense		132			387			—			519
Loss from continuing operations		(9,949	)		(7,642	)		7,573			(10,018	)
(Income) loss from discontinued op erations		13			(69	)		—			(56	)
Net loss	$	(9,962	)	$	(7,573	)	$	7,573		$	(9,962	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

	For the Six Months Ended June 30, 2011
	Carmike Cinemas, Inc.			Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by operating activities	$	24,870		$	16,534		$	—	$	41,404
Cash flows from investing activities:
Purchases of property and equipment		(2,293	)		(3,955	)				(6,248	)
Proceeds from sale of property and equipment		6			438					444
Other investing activities		279			—					279
Net cash used in investing activities		(2,008	)		(3,517	)				(5,525	)
Cash flows from financing activities:
Issuance of long-term debt		—			—					—
Repayments of long-term debt		(26,279	)		(844	)				(27,123	)
Intercompany Receivable/Payable		13,711			(13,711	)				—
Other financing activies		(588	)		0					(588	)
Net cash used in financing activities		(13,156	)		(14,555	)		—		(27,711	)
Increase / (decrease) in cash and cash equivalents		9,706			(1,538	)		—		8,168
Cash and cash equivalents at beginning of period		3,418			9,648					13,066
Cash and cash equivalents at end of period	$	13,124		$	8,110		$	—	$	21,234

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

	For the Six Months Ended June 30, 2010
	Carmike Cinemas, Inc.			Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by operating activities	$	5,165		$	12,290		$	—	$	17,455
Cash flows from investing activities:
Purchases of property and equipment		(1,142	)		(4,471	)				(5,613	)
Proceeds from sale of property and equipment		3			771					774
Other investing activities		307			—					307
Net cash used in investing activities		(832	)		(3,700	)				(4,532	)
Cash flows from financing activities:
Short-term borrowings		5,000			—					5,000
Repayments of short-term borrowings		(5,000	)		—					(5,000	)
Issuance of long-term debt		262,350			—					262,350
Repayments of long-term debt		(272,100	)		—					(272,100	)
Repayments of capital leases and long-term financing obligations		(75	)		(709	)				(784	)
Intercompany receivable/payable		(1,028	)		1,028					—
Other financing activities		(9,712	)		—					(9,712	)
Net cash (used in) provided by financing activities		(20,565	)		319			—		(20,246	)
Increase / (decrease) in cash and cash equivalents		(16,232	)		8,909			—		(7,323	)
Cash and cash equivalents at beginning of period		16,232			9,464					25,696
Cash and cash equivalents at end of period	$	—		$	18,373		$	—	$	18,373

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Discontinued Operations

6 Months Ended

Jun. 30, 2011

Discontinued Operations

Discontinued Operations

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 June 30, 2011 and 2010, the Company closed one and three theatres, respectively, and for the six months ended June 30, 2011 and 2010, the Company closed four and six theatres, respectively. With respect to these closures during the three months ended June 30, 2011 and 2010, the Company classified one theatre in each period as discontinued operations and for the six months ended June 30, 2011 and 2010, the Company classified four and one theatres, respectively, as discontinued operations. The Company reported the results of these operations, including gains and losses in disposal, as discontinued operations. The operations and cash flows of these theatres have been eliminated from the Company's operations, and the Company will not have any continuing involvement in their operations. All activity during the three and six months ended June 30, 2010 included in the accompanying consolidated statements of operations has been reclassified to separately reflect the results of operations from theatres closed in 2011 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 six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,
	2011			2010
Revenue from discontinued operations	$	24		$	1,296
Operating loss before income taxes	$	(153	)	$	(73	)
Income tax benefit from discontinued operations		51			6
Gain on disposal, before income taxes		9			284
Income tax expense on disposal		(3	)		(24	)
(Loss) income from discontinued operations	$	(96	)	$	193

	Six Months Ended June 30,
	2011			2010
Revenue from discontinued operations	$	181		$	2,240
Operating loss before income taxes	$	(389	)	$	(193	)
Income tax benefit for discontinued operations		126			74
Gain on disposal, before income taxes		233			284
Income tax expense on disposal		(75	)		(109	)
(Loss) income from discontinued operations	$	(105	)	$	56

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Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities:
Net loss	$ (12,515)	$ (9,962)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	15,768	16,123
Amortization of debt issuance costs	1,959	1,864
Impairment of long-lived assets	1,325	3,724
Loss on extinguishment of debt		2,568
Stock-based compensation	1,188	1,222
Loss from unconsolidated subsidiaries	304
Other	318	885
Write-off of note receivable	750
Gain on sale of property and equipment	(173)	(274)
Changes in operating assets and liabilities:
Accounts receivable and inventories	(1,530)	63
Screenvision receivable	30,000
Prepaid expenses and other assets	(246)	1,052
Accounts payable	759	1,843
Accrued expenses and other liabilities	3,292	(1,653)
Distribution from unconsolidated affiliates	205
Net cash provided by operating activities	41,404	17,455
Cash flows from investing activities:
Purchases of property and equipment	(6,248)	(5,613)
Release of restricted cash	279	307
Proceeds from sale of property and equipment	444	774
Net cash used in investing activities	(5,525)	(4,532)
Cash flows from financing activities:
Short-term borrowings		5,000
Repayment of short term borrowings		(5,000)
Issuance of long-term debt		262,350
Repayments of long-term debt	(26,161)	(272,100)
Debt issuance costs	(588)	(9,000)
Repayments of capital lease and long-term financing obligations	(962)	(784)
Purchase of treasury stock		(712)
Net cash used in financing activities	(27,711)	(20,246)
Increase (decrease) in cash and cash equivalents	8,168	(7,323)
Cash and cash equivalents at beginning of period	13,066	25,696
Cash and cash equivalents at end of period	21,234	18,373
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest	16,631	19,769
Income taxes	6,122	3,721
Non-cash investing and financing activities:
Non-cash purchase of property and equipment	$ 2,865	$ 598

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Impairment Of Long-Lived Assets

6 Months Ended

Jun. 30, 2011

Impairment Of Long-Lived Assets

Impairment Of Long-Lived Assets

NOTE 2—IMPAIRMENT OF LONG-LIVED ASSETS

For the three and six months ended June 30, 2011, impairment charges aggregated to $1,164 and $1,325, respectively. The impairment charges were primarily the result of continued deterioration of previously impaired theatres and a decline in market value of a previously closed theatre. The Company recorded impairment charges during the three and six months ended June 30, 2010 of $3,237 and $3,724, respectively, which were primarily the result of deterioration in the operating results of the impaired theatres.

The estimated aggregate fair value of the long-lived assets impaired during the three and six months ended June 30, 2011 was approximately $4,007 and $4,779, respectively. These fair value estimates are considered Level 3 estimates and were derived primarily from discounting estimated future cash flows, contracts to sell certain owned properties and reference to appraised values.

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Investments In Unconsolidated Affiliates

6 Months Ended

Jun. 30, 2011

Investments In Unconsolidated Affiliates

Investments In Unconsolidated Affiliates

NOTE 11—INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Our investments in affiliated companies accounted for by the equity method consist of our ownership interest in Screenvision as discussed in Note 9 – Screenvision Transaction and interests in other joint ventures.

Combined financial information of the unconsolidated affiliated companies accounted for by the equity method is as follows:

	As of June 30,
	2011
Assets:
Current assets	$	51,491
Noncurrent assets		165,770
Total assets	$	217,261
Liabilties:
Current liabilities	$	52,075
Noncurrent liabilities		84,927
Total liabilities	$	137,002

	Three Months Ended June 30, 2011		Six Months Ended June 30, 2011
Results of operations:
Revenue	$	45,934	$	68,942
Net income (loss)	$	6	$	(7,735	)

Our investments in unconsolidated affiliated companies were not material during the three and six months ended June 30, 2010.

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Condensed Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Assets:
Cash and cash equivalents	$ 21,234	$ 13,066
Restricted cash	56	335
Accounts receivable	4,737	4,440
Screenvision receivable (Note 9)		30,000
Inventories	3,178	2,741
Prepaid expenses and other assets	8,005	6,696
Total current assets	37,210	57,278
Property and equipment:
Land	54,301	54,603
Buildings and building improvements	273,032	272,956
Leasehold improvements	120,166	120,320
Assets under capital leases	48,205	50,924
Equipment	213,183	210,329
Construction in progress	2,742	2,424
Total property and equipment	711,629	711,556
Accumulated depreciation and amortization	(352,819)	(343,372)
Property and equipment, net of accumulated depreciation	358,810	368,184
Intangible assets, net of accumulated amortization	580	612
Investments in unconsolidated affiliates (Note 11)	6,820	8,093
Other assets	19,330	20,591
Total assets	422,750	454,758
Liabilities and stockholders' equity:
Accounts payable	23,463	21,660
Accrued expenses	31,846	27,431
Current maturities of long-term debt, capital leases and long-term financing obligations	3,958	4,240
Total current liabilities	59,267	53,331
Long-term liabilities:
Long-term debt, less current maturities	207,592	233,092
Capital leases and long-term financing obligations, less current maturities	115,402	116,036
Deferred revenue	34,586	35,150
Other	17,131	17,050
Total long-term liabilities	374,711	401,328
Commitments and contingencies (Note 7)
Stockholders' (deficit) 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: 35,000,000 shares authorized, 13,414,872 shares issued and 12,965,673 shares outstanding at June 30, 2011, and 13,331,872 shares issued and 12,882,673 shares outstanding at December 31, 2010	401	400
Treasury stock, 449,199 shares at cost	(11,657)	(11,657)
Paid-in capital	290,173	288,986
Accumulated deficit	(290,145)	(277,630)
Total stockholders' (deficit) equity	(11,228)	99
Total liabilities and stockholders' (deficit) equity	$ 422,750	$ 454,758