-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OYDwXPBkxFQH25UBWbnE6MkbOYFexHayi1np347TtrqxrbF68BmCggCw2nFsHyCe qyBn0cCnYoiE58lN6BOGMQ== 0001315926-05-000015.txt : 20051006 0001315926-05-000015.hdr.sgml : 20051006 20051006134554 ACCESSION NUMBER: 0001315926-05-000015 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20051006 DATE AS OF CHANGE: 20051006 GROUP MEMBERS: MERIDEE A. MOORE GROUP MEMBERS: WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P. GROUP MEMBERS: WATERSHED CAPITAL PARTNERS, L.P. GROUP MEMBERS: WS PARTNERS, L.L.C. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CARMIKE CINEMAS INC CENTRAL INDEX KEY: 0000799088 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE THEATERS [7830] IRS NUMBER: 581469127 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-37737 FILM NUMBER: 051126818 BUSINESS ADDRESS: STREET 1: 1301 FIRST AVE CITY: COLUMBUS STATE: GA ZIP: 31901 BUSINESS PHONE: 7065763400 MAIL ADDRESS: STREET 1: P O BOX 391 CITY: COLUMBUS STATE: GA ZIP: 31994 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Watershed Asset Management, L.L.C. CENTRAL INDEX KEY: 0001315926 IRS NUMBER: 300012121 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: ONE MARITIME PLAZA STREET 2: SUITE 1525 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: (415) 391-8900 MAIL ADDRESS: STREET 1: ONE MARITIME PLAZA STREET 2: SUITE 1525 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 SC 13D/A 1 carmike13da1.txt --------------------------- OMB APPROVAL --------------------------- OMB Number: 3235-0145 Expires: December 31, 2005 Estimated average burden hours per response. . . 11 --------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 1)* Carmike Cinemas, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.03 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 143436400 - -------------------------------------------------------------------------------- (CUSIP Number) Susan Levine Watershed Asset Management, L.L.C. One Maritime Plaza, Suite 1525 San Francisco, California 94111 (415) 391-8900 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 6, 2005 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 13d-1(f) or 240.13d-1(g), check the following box [ ]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Section 240.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page. The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). (Continued on following pages) Page 1 of 16 Pages Exhibit Index Found on Page 19 13D =================== CUSIP No. 143436400 =================== ================================================================================ 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) Watershed Capital Partners, L.P. - -------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [ X ]** 2 ** The reporting persons making this filing hold an aggregate of 642,485 Shares, which is 5.2% of the class of securities. The reporting person on this cover page, however, is a beneficial owner only of the securities reported by it on this cover page. - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- SOURCE OF FUNDS (See Instructions) 4 WC - -------------------------------------------------------------------------------- CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT 5 TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- SOLE VOTING POWER NUMBER OF 7 -0- ----------------------------------------------------------- SHARES SHARED VOTING POWER BENEFICIALLY 8 OWNED BY 110,515 ----------------------------------------------------------- SOLE DISPOSITIVE POWER EACH 9 -0- ----------------------------------------------------------- REPORTING SHARED DISPOSITIVE POWER PERSON WITH 10 110,515 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 110,515 - -------------------------------------------------------------------------------- CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 0.9% - -------------------------------------------------------------------------------- TYPE OF REPORTING PERSON (See Instructions) 14 PN ================================================================================ Page 2 of 19 Pages 13D =================== CUSIP No. 143436400 =================== ================================================================================ 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) Watershed Capital Institutional Partners, L.P. - -------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [ X ]** 2 ** The reporting persons making this filing hold an aggregate of 642,485 Shares, which is 5.2% of the class of securities. The reporting person on this cover page, however, is a beneficial owner only of the securities reported by it on this cover page. - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- SOURCE OF FUNDS (See Instructions) 4 WC - -------------------------------------------------------------------------------- CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT 5 TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- SOLE VOTING POWER NUMBER OF 7 -0- ----------------------------------------------------------- SHARES SHARED VOTING POWER BENEFICIALLY 8 OWNED BY 354,500 ----------------------------------------------------------- SOLE DISPOSITIVE POWER EACH 9 -0- ----------------------------------------------------------- REPORTING SHARED DISPOSITIVE POWER PERSON WITH 10 354,500 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 354,500 - -------------------------------------------------------------------------------- CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 2.9% - -------------------------------------------------------------------------------- TYPE OF REPORTING PERSON (See Instructions) 14 PN ================================================================================ Page 3 of 19 Pages 13D =================== CUSIP No. 143436400 =================== ================================================================================ 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) Watershed Asset Management L.L.C. - -------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [ X ]** 2 ** The reporting persons making this filing hold an aggregate of 642,485 Shares, which is 5.2% of the class of securities. The reporting person on this cover page, however, may be deemed a beneficial owner only of the securities reported by it on this cover page. - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- SOURCE OF FUNDS (See Instructions) 4 AF - -------------------------------------------------------------------------------- CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT 5 TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- SOLE VOTING POWER NUMBER OF 7 -0- ----------------------------------------------------------- SHARES SHARED VOTING POWER BENEFICIALLY 8 OWNED BY 642,485 ----------------------------------------------------------- SOLE DISPOSITIVE POWER EACH 9 -0- ----------------------------------------------------------- REPORTING SHARED DISPOSITIVE POWER PERSON WITH 10 642,485 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 642,485 - -------------------------------------------------------------------------------- CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 5.2% - -------------------------------------------------------------------------------- TYPE OF REPORTING PERSON (See Instructions) 14 OO ================================================================================ Page 4 of 19 Pages 13D =================== CUSIP No. 143436400 =================== ================================================================================ 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) WS Partners, L.L.C. - -------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [ X ]** 2 ** The reporting persons making this filing hold an aggregate of 642,485 Shares, which is 5.2% of the class of securities. The reporting person on this cover page, however, may be deemed a beneficial owner only of the securities reported by it on this cover page. - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- SOURCE OF FUNDS (See Instructions) 4 AF - -------------------------------------------------------------------------------- CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT 5 TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - -------------------------------------------------------------------------------- SOLE VOTING POWER NUMBER OF 7 -0- ----------------------------------------------------------- SHARES SHARED VOTING POWER BENEFICIALLY 8 OWNED BY 465,015 ----------------------------------------------------------- SOLE DISPOSITIVE POWER EACH 9 -0- ----------------------------------------------------------- REPORTING SHARED DISPOSITIVE POWER PERSON WITH 10 465,015 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 465,015 - -------------------------------------------------------------------------------- CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 3.8% - -------------------------------------------------------------------------------- TYPE OF REPORTING PERSON (See Instructions) 14 OO ================================================================================ Page 5 of 19 Pages 13D =================== CUSIP No. 143436400 =================== ================================================================================ 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) Meridee A. Moore - -------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [ X ]** 2 ** The reporting persons making this filing hold an aggregate of 642,485 Shares, which is 5.2% of the class of securities. The reporting person on this cover page, however, may be deemed a beneficial owner only of the securities reported by it on this cover page. - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- SOURCE OF FUNDS (See Instructions) 4 AF - -------------------------------------------------------------------------------- CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT 5 TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 United States - -------------------------------------------------------------------------------- SOLE VOTING POWER NUMBER OF 7 -0- ----------------------------------------------------------- SHARES SHARED VOTING POWER BENEFICIALLY 8 OWNED BY 642,485 ----------------------------------------------------------- SOLE DISPOSITIVE POWER EACH 9 -0- ----------------------------------------------------------- REPORTING SHARED DISPOSITIVE POWER PERSON WITH 10 642,485 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 642,485 - -------------------------------------------------------------------------------- CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES 12 CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 5.2% - -------------------------------------------------------------------------------- TYPE OF REPORTING PERSON (See Instructions) 14 IN ================================================================================ Page 6 of 19 Pages This Amendment No. 1 to Schedule 13D amends the Schedule 13D initially filed on August 8, 2005 (collectively, with all amendments thereto, the "Schedule 13D"). Item 3. Source And Amount Of Funds And Other Consideration - ------ -------------------------------------------------- Item 3 of the Schedule 13D is amended and supplemented by the following: The net investment cost (including commissions) for the Shares acquired by each of the Partnerships and Watershed Offshore since the filing of the prior Schedule 13D is set forth below: Approximate Net Entity Shares Acquired Investment Cost ------ --------------- --------------- WCP 2,100 $48,231 WCIP 6,100 $138,926 Watershed Offshore 3,800 $86,378 Each of WCP, WCIP and Watershed Offshore obtained the consideration for its acquisition reported above from its working capital. Item 4. Purpose Of The Transaction - ------- -------------------------- Item 4 of the Schedule 13D is amended and updated as follows: On October 6, 2005, the Reporting Persons sent the letter attached hereto as Exhibit 2 (the "Proposal Letter") to the Company, which is incorporated herein by reference. The Reporting Persons intend to review their holdings in the Company on a continuing basis. As part of their ongoing review, the Reporting Persons have sought and may continue to seek the advice of legal and financial advisors to assist them in such review and in evaluating alternatives that are or may become available with respect to the Company or their holdings in the Company. The Reporting Persons have had and may continue to have discussions with the Company's management and/or stockholders regarding alternatives for enhancing stockholder value. While no specific plan or proposal has been made beyond the suggestions contained in the Proposal Letter, the Reporting Persons intend to consider a number of possible strategies for Page 7 of 19 Pages enhancing the value of their investment in the Company, or other extraordinary matters relating to the Company, including, among other things, the matters contemplated in the Proposal Letter or any or all of the items contemplated by paragraphs (a) through (j), inclusive, of the instructions to Item 4 of Schedule 13D. In that connection, and depending upon, among other things, current and anticipated future trading prices for the Company's common stock, the financial condition, results of operations and prospects of the Company and its businesses, general economic, market and industry conditions, and the Reporting Persons' overall investment portfolio, strategic objectives and financial condition, the Reporting Persons may from time to time purchase additional shares or sell the Shares. The review and the considerations noted above may lead to the taking of any of the actions set forth above or may lead the Reporting Persons to consider other alternatives. However, there can be no assurance that the Reporting Persons will develop or suggest any additional plans or proposals with respect to any of the foregoing matters or take any particular action or actions with respect to some or all of their holdings in the Company, or as to the timing of any such matters should they be so pursued by the Reporting Persons. The Reporting Persons reserve the right, at any time and in their respective sole discretion, to take any of the actions set forth above. Except to the extent the foregoing may be deemed a plan or proposal, none of the Reporting Persons has any plans or proposals which relate to, or could result in, any of the matters referred to in paragraphs (a) through (j), inclusive, of the instructions to Item 4 of Schedule 13D. The Reporting Persons may, at any time and from time to time, review or reconsider their position and/or change their purpose and/or formulate plans or proposals with respect thereto. Page 8 of 19 Pages Item 5. Interest In Securities Of The Issuer - ------- ------------------------------------ Item 5 of the Schedule 13D is amended and restated in its entirety as follows: (a) The Partnerships ---------------- (a),(b) The information set forth in Rows 7 through 13 of the cover page hereto for each Partnership is incorporated herein by reference for each such Partnership. The percentage amount set forth in Row 13 for all cover pages filed herewith is calculated based upon the 12,309,002 Shares outstanding as of June 30, 2005 as reported by the Company in its Quarterly Report on Form 10-Q for the period ended June 30, 2005 filed with the Securities and Exchange Commission on August 9, 2005. (c) The trade dates, number of Shares purchased or sold and the price per Share (including commissions) for all purchases and sales of the Shares by the Partnerships in the past 60 days are set forth on Schedules A-B hereto and are incorporated herein by reference. All of such transactions were open-market transactions. (d) The General Partner has the power to direct the receipt of dividends relating to, or the disposition of the proceeds of the sale of, all of the Shares held by the Partnerships as reported herein. The Management Company, as an investment adviser, has the power to direct the receipt of dividends relating to, or the disposition of the proceeds of the sale of, all of the Shares held by the Partnerships as reported herein. The Individual Reporting Person is the Senior Managing Member of the General Partner and the Management Company. (e) Not applicable. (b) The Management Company ---------------------- (a),(b) The information set forth in Rows 7 through 13 of the cover page hereto for the Management Company is incorporated herein by reference. (c) The trade dates, number of Shares purchased or sold and the price per Share (including commissions) for all purchases and sales of the Shares by the Management Company on behalf of Watershed Offshore in the past 60 days are set forth on Schedule C hereto and are incorporated herein by reference. All of such transactions were open-market transactions. For information regarding transactions by the Management Company on behalf of the Partnerships, see Item 5(a) above. Page 9 of 19 Pages (d) The Management Company, as an investment adviser, has the power to direct the receipt of dividends relating to, or the disposition of the proceeds of the sale of, all of the Shares held by Watershed Offshore and the Partnerships as reported herein. The General Partner has the power to direct the receipt of dividends relating to, or the disposition of the proceeds of the sale of, all of the Shares held by the Partnerships as reported herein. The Individual Reporting Person is the Senior Managing Member of the Management Company. (e) Not applicable. (c) The General Partner ------------------- (a),(b) The information set forth in Rows 7 through 13 of the cover page hereto for the General Partner is incorporated herein by reference. (c) None. (d) The General Partner has the power to direct the receipt of dividends relating to, or the disposition of the proceeds of the sale of, all of the Shares held by the Partnerships as reported herein. The Management Company, as an investment adviser, has the power to direct the receipt of dividends relating to, or the disposition of the proceeds of the sale of, all of the Shares held by the Partnerships as reported herein. The Individual Reporting Person is the Senior Managing Member of the General Partner and the Management Company. (e) Not applicable. (d) The Individual Reporting Person ------------------------------- (a),(b) The information set forth in Rows 7 through 13 of the cover page hereto for the Individual Reporting Person is incorporated herein by reference for the Individual Reporting Person. (c) None. (d) The General Partner has the power to direct the receipt of dividends relating to, or the disposition of the proceeds of the sale of, all of the Shares held by the Partnerships as reported herein. The Management Company, as an investment adviser, has the power to direct the receipt of dividends relating to, or the disposition of the proceeds of the sale of, all the Shares held by Watershed Offshore and the Partnerships as reported herein. The Individual Reporting Person is the Senior Managing Member of the General Partner and the Management Company. Page 10 of 19 Pages (e) Not applicable. The Shares reported hereby for the Partnerships are owned directly by the Partnerships and those reported by the Management Company on behalf of Watershed Offshore are owned directly by Watershed Offshore. The General Partner, as general partner to the Partnerships, may be deemed to be the beneficial owner of all such Shares owned by the Partnerships. The Management Company, as investment adviser to Watershed Offshore and each of the Partnerships, may be deemed to be the beneficial owner of all such Shares owned by Watershed Offshore and the Partnerships, respectively. The Individual Reporting Person, as the Senior Managing Member of both the General Partner and the Management Company, may be deemed to be the beneficial owner of all such Shares owned by the Partnerships and Watershed Offshore. Each of the Management Company, the General Partner and the Individual Reporting Person hereby disclaims any beneficial ownership of any such Shares. Item 7. Materials To Be Filed As Exhibits - ------- --------------------------------- There is filed herewith as Exhibit 2 a copy of the Proposal Letter described in Item 4 above. Page 11 of 19 Pages SIGNATURES ---------- After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: October 6, 2005 /s/ Meridee A. Moore ---------------------------------------- WS PARTNERS, L.L.C., On its own behalf and As the General Partner of WATERSHED CAPITAL PARTNERS, L.P. and WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P. By Meridee A. Moore, Senior Managing Member /s/ Meridee A. Moore ---------------------------------------- WATERSHED ASSET MANAGEMENT, L.L.C. By Meridee A. Moore, Senior Managing Member /s/ Meridee A. Moore ---------------------------------------- Meridee A. Moore Page 12 of 19 Pages SCHEDULE A ---------- WATERSHED CAPITAL PARTNERS, L.P. -------------------------------- NO. OF SHARES PRICE TRADE DATE PURCHASED PER SHARE ($) ---------- ----------- ------------- 8/26/2005 400 28.83 9/29/2005 1,700 21.59 Page 13 of 19 Pages SCHEDULE B ---------- WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P. ---------------------------------------------- NO. OF SHARES PRICE TRADE DATE PURCHASED PER SHARE ($) ---------- ----------- ------------- 8/26/2005 1,000 28.83 9/29/2005 5,100 21.59 Page 14 of 19 Pages SCHEDULE C ---------- WATERSHED ASSET MANAGEMENT, L.L.C. ---------------------------------- The transactions listed below were effected solely on behalf of Watershed Offshore. For transactions on behalf of Watershed Capital Partners, L.P. and Watershed Capital Institutional Partners, L.P., see Schedules A and B, respectively. NO. OF SHARES PRICE TRADE DATE PURCHASED PER SHARE ($) ---------- ----------- ------------- 8/26/2005 600 28.83 9/29/2005 3,200 21.59 Page 15 of 19 Pages EXHIBIT INDEX EXHIBIT 2 Proposal Letter Page 16 of 19 Pages EXHIBIT 2 to SCHEDULE 13D October 6, 2005 VIA FACSIMILE AND FEDEX - ----------------------- Mr. Michael Patrick Chief Executive Officer Mr. Martin Durant Chief Financial Officer Carmike Cinemas, Inc. Carmike Plaza 1301 First Avenue Columbus, Georgia 31901-2109 Dear Michael and Martin, Thank you for taking the time to speak with us regarding opportunities to enhance value for Carmike's shareholders. We believe that, as management, you have been receptive to listening to shareholders' concerns, and we continue to be hopeful that proactive measures to address those concerns are forthcoming. In the spirit of productivity and open communication, this letter is meant to suggest the concrete near-term steps that Carmike should seriously consider. We believe that Carmike's shares are undervalued today, well beyond the impact of poor box office performance over the last year. While the industry has generally suffered in the first three quarters of 2005, due largely to poor film product, the company's stock performance has been worse than its peers. Stated most broadly, we believe that if Carmike had focused on generating free cash flow for shareholders and redeploying cash in ways that shareholders understand and value, the company's equity value would be significantly greater. Mature businesses are best managed for cash flow - ------------------------------------------------ Our logic is based on a simple free cash flow approach to valuing Carmike's business. We start with LTM EBITDA (adjusted for the company's acquisition of GKC in May of this year) of more than $80 million - a level significantly lower than Carmike's 2003 or 2004 results due to poor 2005 film product. From this $80 million, we deduct $27 million for interest expense and $7 million for maintenance capital expenses. We further deduct another $8 million of additional defensive capital expenses and replacement of obsolete screens, for a total of $15 million of capital expense under our scenario. Because Carmike would pay minimal taxes, the company would be left with $38 million of free cash flow. Carmike currently has an equity market value of approximately $280 million. Therefore, Carmike could generate a substantial free cash flow yield - at only $80 million Page 17 of 19 Pages of EBITDA - of approximately 14%. Carmike did not generate this cash flow over the last year, and the stock has been punished. Instead of creating significant free cash flow over the last 12 months - even with poor film product - Carmike has spent significantly on theater construction projects, with expected total capital expenses of more than $50 million in 2005. As long-term investors we are deeply skeptical of these growth-oriented capital expenditures. We note that the difference between $15 million of capital expenses (our number) and $50 million of capital expenses amounts to $3 per share in annual free cash flow. We believe that Carmike's share price would be significantly higher if this cash flow had found its way back to shareholders in some manner. Options to enhance shareholder value for your consideration - ----------------------------------------------------------- There are a number of concrete steps the company can take to enhance shareholder value: 1. Eliminate growth capital expenditures. ---------------------------------------- Investors see Carmike as a mature company in a mature industry. Investors in mature businesses focus on free cash flow generation and cash flow returned to shareholders in any number of forms including debt repayment, dividends, and stock repurchases. As a result, growth-oriented capital expenditures are ascribed little value. We suspect that, including some required annual theater replacement and upgrading, the company could operate with a $15 million annual capital expenditure budget - or nearly $3 per share less than your expected 2005 spending level. 2. Seek amendments to your bank documents and bond indentures to increase ---------------------------------------------------------------------- restricted payments flexibility. --------------------------------- Even with depressed LTM EBITDA levels, securing these amendments should be achievable in the current lending environment. Carmike's bank term loan currently trades above par, even with the company's relatively weak financial performance; given the high demand for bank loan assets, it is not clear that Carmike's bank lenders would want to be repaid with excess cash. We suspect that it may be possible to amend the company's restricted payments covenant in exchange for a limitation on capital expenses - allowing an increased dividend or the repurchase of bonds or common stock. Similar flexibility may be available from the company's bondholders. While Carmike's bond indenture has significant restricted payments limitations, it allows the incurrence of significant additional debt. Through an amendment or exchange the company may be able to gain restricted payment flexibility in exchange for tighter debt incurrence tests. These types of changes are commonplace in the market, and could be efficiently analyzed by a financial advisor retained by the company for that purpose. 3. Buy back stock with excess cash; if consent from bondholders can not ---------------------------------------------------------------------- be secured, buy back bonds at a discount. ----------------------------------------- Because of the substantial free cash flow yield to shareholders under the scenario described above, repurchasing stock at current levels is highly positive for shareholders. If consent from the bondholders to make additional restricted payments can not be secured, then buying bonds is a good second choice. The bonds currently trade in the high 80s, so any purchases are immediately accretive to equity. 4. Increase your dividend. ---------------------- Carmike currently pays $9 million per year in dividends. We think that this amount could be tripled to $27 million per year in conjunction with the reduction of capital expenses described above. Even at a depressed EBITDA level of $75 Page 18 of 19 Pages million, a $27 million annual dividend would represent about 35% of EBITDA - the same percentage of EBITDA that the Regal Entertainment Group has distributed to shareholders over the last year. At the current share price, Carmike would have almost a 10% dividend yield. Carmike's stock price would almost certainly move higher. Regal currently trades with a 6% dividend yield, so if the stocks traded with identical dividend yields, Carmike's stock price would increase by 60%. 5. Begin evaluating options to extract value from your real estate ---------------------------------------------------------------------- portfolio. --------- We think that a detailed property level assessment may yield opportunities to create value through selling properties where the real estate value exceeds the present value of expected theater contribution. Moreover, in conjunction with an overall capital structure review at some point in the future, opportunities may exist to enter into a sale-leaseback transaction with Carmike's property portfolio. 6. Communicate your new free cash flow strategy. -------------------------------------------- First, investors want to know that the company has adopted a disciplined management approach with respect to generating free cash flow and deploying that free cash flow to enhance shareholder value. Even if Carmike can not take all of these proposed actions today, management needs to lay out the company's plan so that investors can understand management's direction. Second, we suggest increasing the frequency and depth of your communication with investors, potential investors, and analysts. Despite poor recent performance, Carmike is a very compelling investment opportunity. However, the combination of excess capital expenditures, a relatively low dividend yield, and the lack of a clearly communicated management plan, naturally raises serious questions as to whether the company will be in a position to recapture and appropriately deploy cash flows as box office receipts rebound. If potential investors and analysts do not have sufficient access to management, they will assume the worst and have difficulty buying or recommending the stock. Poor financial performance increases the need to communicate with the investor community. In summary, we believe that, despite the troubles that Carmike has experienced over the last three quarters, the company has a number of practical opportunities to improve its return to investors. Moreover, with a rebound in box office performance to 2003 or 2004 levels, Carmike's EBITDA, adjusted for the GKC acquisition, could be $115 million or more. Free cash flow available for shareholders could exceed $60 million. With discipline on capital expenses and a commitment to deploy cash with a view to enhancing shareholder value, Carmike's shares would trade dramatically higher. We would be happy to clarify or further discuss any of these comments. We appreciate the dialogue that we have had thus far and hope to continue to productively engage with you. Regards, /s/ Kevin Katari Kevin Katari Page 19 of 19 Pages -----END PRIVACY-ENHANCED MESSAGE-----