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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

OR

Commission File Number 000-14993

CARMIKE CINEMAS, INC.
(Exact Name Of Registrant As Specified in Its Charter)

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

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.03 per share

     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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K      [X]

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

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).      Yes   [   ]      No   [X]

     As of March 10, 2003, 8,991,262 shares of Common Stock were outstanding. The aggregate market value of the shares of Common Stock, par value $.03 per share, held by non-affiliates (based upon the last reported sale price on the Nasdaq National Market) on June 28, 2002 was approximately $33,330,490.

Documents Incorporated by Reference

     Specified portions of Carmike Cinemas, Inc.’s Proxy Statement relating to the 2003 Annual Meeting of Stockholders are incorporated by reference into Part III.

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*Incorporated by reference from Proxy Statement relating to the 2003 Annual Meeting of Shareholders.

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PART I

ITEM 1. BUSINESS

Overview

     We are one of the largest motion picture exhibitors in the United States. As of December 31, 2002, we operated 308 theatres with 2,262 screens located in 35 states, making us the second largest exhibitor in the country by number of theatres and the fourth largest by number of screens. Of our 308 theatres, 269 theatres are theatres that show films on a first-run basis, and the remaining 39 theatres are “discount theatres”. We target small- to mid-size non-urban markets. More than 80% of our theatres are located in communities with populations of fewer than 100,000.

     The smaller size of our markets enables us to service our customers with fewer screens than would be necessary in larger markets. As a result, our theatre circuit has an average of 7.3 screens per theatre, lower than some of the other exhibitors. We believe, however, that our theatres, 65% of which have six or more screens, are sufficiently modern to provide a high quality movie going experience. Further, we believe that most of our markets are already adequately screened and that our smaller markets, in particular, cannot support significantly more screens.

     Additional benefits of operating in small- to mid-size markets include:

	•		Less competition from alternative entertainment opportunities. In our typical markets, patrons have fewer entertainment alternatives than in larger markets, where options such as professional sports teams and cultural events are more likely available.
	•		Lower likelihood of overbuilding by megaplex theatres. Our markets generally will not support new megaplex theatres, which we define as having 12 screens or more. Because most of our principal competitors are focused on building megaplexes, we believe this provides us with an additional measure of competitive protection.
	•		Lower operating costs. We believe that we benefit from lower labor costs, lower occupancy costs, lower maintenance costs and lower land and lease costs than many of our competitors. For example, as of December 31, 2002, approximately 48% of our employees work for the federal minimum wage. We also believe that our average rent per leased theatre is among the lowest in the industry. Additionally, as of December 31, 2002, we owned 76, or approximately 25%, of our theatres, one of the highest percentages in the industry, which we believe provides us with further cost benefits.

     On January 31, 2002, (the “Reorganization Date”), we emerged from bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. When we voluntarily commenced the bankruptcy proceedings in August 2000, we had not defaulted on payment of any of our debt obligations.

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All of our creditors have been or are expected to be paid in full, with interest, for all of their permitted claims.

     In the course of our reorganization, we rejected leases on 136 underperforming theatres. We also negotiated modifications to our leases on 35 additional theatres. In connection with the bankruptcy, we converted $45.7 million of debt and $55.0 million of preferred stock into equity. These actions decreased our ongoing interest obligations. We also agreed to pay, over a five-year period, the permitted claims of our general unsecured creditors, plus interest at an annual rate of 9.4%. We estimate that our aggregate liability at December 31, 2002 for general unsecured creditors is approximately $46.1 million, which includes our estimated liability for damages resulting from the rejection of executory contracts and unexpired leases. Of these claims, $36.1 million (inclusive of accrued interest) are disputed. If we are unable to resolve these claims with the unsecured creditors, the bankruptcy court will settle these claims.

     The following table sets forth geographic information regarding our theatre circuit as of December 31, 2002:

     From time to time, we convert weaker performing theatres to “discount theatres” for the exhibition of films that have previously been shown on a first-run basis. Many of these theatres are typically in smaller markets where we are the only exhibitor in the market. At December 31, 2002, we operated 39 theatres with 154 screens as discount theatres. We also operate a very small number of theatres for the exhibition of first-run films at a reduced admission price.

Theatre Development and Operations

Development

     We carefully review small- to mid-size markets to evaluate the return on capital of opportunities to build new theatres or renovate our existing theatres. The circumstances under which we believe we are best positioned to benefit from building new theatres are in markets in which:

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	•		we believe building a new theatre provides an attractive cash flow opportunity;
	•		we already operate a theatre and could best protect that theatre by expanding our presence; or
	•		a film licensing zone is currently underserved by an independent operator.

     In general, we do not believe that building theatres in film licensing zones in which competitors operate provides attractive investment opportunities for us.

     Our bankruptcy and the excessive number of screens resulting from the industry’s overbuilding of theatres in the last few years have been significant influences on our current growth strategy. We expect to open two theatres during 2003. If opportunities exist where new construction will be profitable to us, we will consider building additional theatres in future periods. From our bankruptcy through December 31, 2002, we closed approximately 29.4% of our theatres. We are analyzing the remaining theatres and evaluating approaches to optimize our portfolio.

     The following table shows information about the changes in our theatre circuit during the past five years:

Operations

     Our theatre operations are under the supervision of our Chief Operating Officer and four division managers. The division managers are responsible for implementing our operating policies and supervising our eighteen operating districts. Each operating district has a district manager who is responsible for overseeing the day-to-day operations of our theatres. Corporate policy development, strategic planning, site selection and lease negotiation, theatre design and construction, concession purchasing, film licensing, advertising, and financial and accounting activities are centralized at our corporate headquarters.

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     We have an incentive bonus program for theatre level management, which provides for bonuses based on incremental improvements in theatre profitability, including concession sales. As part of this program, we evaluate “mystery shopper” reports on the quality of service, cleanliness and film presentation at individual theatres.

     Box office admissions. The majority of our revenues comes from the sale of movie tickets. For the year ended December 31, 2002, box office admissions totaled $342.8 million, or 68% of total revenues. At December 31, 2002, of our 308 theatres, 269 showed “first-run” films, which we license from distributors owned by the major studios, as well as from independent distributors. The remaining 39 of our theatres featured pictures at a discount price.

     Most of the tickets we sell are sold at our theatre box offices immediately before the start of a picture. As of December 31, 2002, at 26 of our theatres, patrons can buy tickets in advance either over the phone or on the Internet. These alternate sales methods do not currently represent a meaningful portion of our revenues, nor are they expected to be in the near term.

     Our business is seasonal, as studios tend to release their most successful pictures during the summer months and the Thanksgiving and Christmas holiday season.

     Concessions. Concession sales are our second largest revenue source after box office admissions, constituting approximately 30% of total revenues for the year ended December 31, 2002. Our strategy emphasizes quick and efficient service built around a limited menu primarily focused on higher margin items such as popcorn, candy and soft drinks. In addition, we have a limited number of products, such as bottled water, frozen drinks, coffee, ice cream, pizza, hot dogs and pretzels, at certain theatre locations where necessary to respond to competitive conditions in the relevant market. We actively seek to promote concession sales through the design and appearance of our concession stands, the introduction of special promotions from time to time, by reducing wait times and by training our employees to up-sell products. In addition, our management incentive bonus program includes concession results as a component of determining the bonus awards.

     During 2002, we purchased substantially all of our concession supplies and janitorial supplies from Showtime Concession Supply, Inc., except for soft drink syrup, which was supplied by The Coca-Cola Company. We are by far the largest customer of Showtime Concession Supply. If this relationship were disrupted, we could be forced to negotiate a number of substitute arrangements with alternative vendors which are likely to be, in the aggregate, less favorable to us than the current arrangement.

     Other revenues. Most of our theatres include electronic video games located in or adjacent to the lobby. We also generate revenues through on-screen advertising on all of our screens. We operate two family entertainment centers under the name Hollywood Connection® which feature multiplex theatres and other forms of family entertainment. These revenue streams comprise the remaining 2% of our revenue generation.

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Film Licensing

     We obtain licenses to exhibit films by directly negotiating with film distributors. We license films through our booking office located in Columbus, Georgia. Our Senior Vice President — Film, in consultation with our President, directs our motion picture bookings.

     Prior to negotiating for a film license, our Senior Vice President — Film and film-booking personnel evaluate the prospects for upcoming films. The criteria considered for each film include cast, director, plot, performance of similar films, estimated film rental costs and expected Motion Picture Association of America, (“MPAA”), rating. Because we only license a portion of newly released first-run films (170 of 444 available in 2002), our success in licensing depends greatly upon the availability of commercially popular motion pictures, but also upon our knowledge of the tastes of residents in our markets and insight into trends in those tastes. We maintain a database that includes revenue information on films previously exhibited in our markets. We use this historical information to match new films with particular markets so as to maximize revenues. The table below depicts the industry’s top 10 films for 2002 compared to our top 10 films for 2002:

Film Rental Fees

     We typically enter into licenses that provide for rental fees based on either “firm terms” established prior to the opening of the picture or on a mutually agreed “settlement” upon the conclusion of the film run. Under a firm terms formula, we pay the distributor a specified percentage of the box office receipts, and this percentage declines over the term of the run. Firm term film rental fees are generally the greater of (i) 60 to 70% of gross box office receipts, gradually declining to as low as 30% over a period of four to seven weeks and (ii) a specified percentage (e.g., 90%) of the excess gross box office receipts over a negotiated allowance for theatre expenses (commonly known as a “90-10” arrangement). The settlement process allows for negotiation based upon how a film actually performs. A firm term agreement could result in lower than anticipated film rent if the film outperforms expectations especially with respect to the film’s run and, conversely, there is a downside risk when the film underperforms.

Film Licensing Zones

     Film licensing zones are geographic areas established by film distributors where any given film is allocated to only one theatre within that area. In our markets, these zones generally

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encompass three to five miles. In film licensing zones where we have little or no competition, we obtain film licenses by selecting a film from among those offered and negotiating directly with the distributor. In competitive film licensing zones, a distributor will either require the exhibitors in the zone to bid for a film or will allocate its films among the exhibitors in the zone. When films are licensed under the allocation process, a distributor will choose which exhibitor is offered a movie and then that exhibitor will negotiate film rental terms directly with the distributor for the film. We currently do not bid for films in any of our film licensing zones.

Relationship With Distributors

     We depend on, among other things, the quality, quantity, availability and acceptance by movie-going customers of the motion pictures produced by the motion picture production companies and licensed for exhibition to the motion picture exhibitors by distribution companies. Disruption in the production of motion pictures by the major studios and/or independent producers or poor performance of motion pictures could have an adverse effect on our business.

     While there are numerous distributors that provide quality first-run movies to the motion picture exhibition industry, the following ten major distributors accounted for approximately 97.7% of our box office admissions during the year ended December 31, 2002: Buena Vista, DreamWorks, Fox, MGM/UA, Miramax, New Line Cinema, Paramount, Sony, Universal and Warner Brothers.

     As of the date of our bankruptcy petition, film distributors held claims against us aggregating approximately $37.2 million. After we commenced our bankruptcy, several distributors elected to cease supplying us with new film product until their claims against us for pre-petition film exhibition fees were paid in full. We negotiated an agreement with each of our principal film distributors to repay their pre-petition claims for film exhibition fees in full in 17 weekly installments. Based on those agreements, the film distributors began to supply us with new film product again. Our payments under the agreements began on September 18, 2000 and were concluded by December 26, 2000. We believe that we currently have good relationships with all of the distributors.

Management Information Systems

     We have developed a proprietary computer system, which we call IQ-Zero, that is installed in each of our theatres. IQ-Zero allows us to centralize most theatre-level administrative functions at our corporate headquarters, creating significant operating leverage. IQ-Zero allows corporate management to monitor ticket and concession sales and box office and concession staffing on a daily basis, enabling our theatre managers to focus on the day-to-day operations of the theatre. In addition, it also coordinates payroll, tracks theatre invoices and generates operating reports analyzing film performance and theatre profitability. IQ-Zero also generates information we use to quickly detect theft. IQ-2000 is an enhanced version of the IQ-Zero system and has been installed in our theatres built since 1999. IQ-2000 facilitates new services such as advanced ticket sales and Internet ticket sales. Its expanded capacity will allow for future growth and more detailed data tracking and trend analysis. There is active communication between the theatres and corporate headquarters, which allows our senior management to react to vital profit and staffing information on a daily basis and perform the majority of the theatre-level administrative functions, thereby enabling our theatre manager to focus on the day-to-day operations of the theatres.

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Competition

     The motion picture exhibition industry is fragmented and highly competitive. In markets where we are not the sole exhibitor, we compete against regional and independent operators as well as the larger theatre circuit operators.

     Our operations are subject to varying degrees of competition with respect to film licensing, attracting customers, obtaining new theatre sites or acquiring theatre circuits. In those areas where real estate is readily available, there are few barriers preventing competing companies from opening theatres near one of our existing theatres, which may have a material adverse effect on our theatres. Competitors have built or are planning to build theatres in certain areas in which we operate, which have resulted and may continue to result in excess capacity in such areas which adversely affects attendance and pricing at our theatres in such areas.

     From the mid- to late-1990s, industry screen count grew faster than attendance, resulting in declining attendance and profitability per screen. As a result of this rapid overbuilding, the total number of screens reached an all-time high of 37,396 in 2000, according to the MPAA. When the economics of many of these theatres became unsustainable, most major exhibitors, ourselves included, began closing underperforming locations. At December 31, 2002, according to the MPAA the domestic screen count had declined to 35,280. These actions have helped to reverse the trend of declining attendance per screen and increase the profitability of the industry. In the near term, we expect a further net decline in total industry screen count, with further screen closures and only modest new builds.

     The opening of large multiplexes and theatres with stadium seating by us and certain of our competitors has tended to, and is expected to continue to, draw audiences away from certain older and smaller theatres, including theatres operated by us. In addition, demographic changes and competitive pressures can lead to a theatre location becoming impaired. However, at the time we re not aware of any such situations.

     In addition to competition with other motion picture exhibitors, our theatres face competition from a number of alternative motion picture exhibition delivery systems, such as cable television, satellite and pay-per-view services and home video systems. The expansion of such delivery systems could have a material adverse effect upon our business and results of operations. We also compete for the public’s leisure time and disposable income with all forms of entertainment, including sporting events, concerts, live theatre and restaurants.

Regulatory Environment

     The distribution of motion pictures is in large part regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases. Certain consent decrees resulting from such cases bind certain major motion picture distributors and require the motion pictures of such distributors to be offered and licensed to exhibitors, including us, on a theatre-by-theatre basis. Consequently, exhibitors such as our company cannot assure themselves of a supply of

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motion pictures by entering into long-term arrangements with major distributors but must compete for licenses on a film-by-film and theatre-by-theatre basis.

     The Americans with Disabilities Act (“ADA”), which became effective in 1992, and certain state statutes and local ordinances, among other things, require that places of public accommodation, including theatres (both existing and newly constructed), be accessible to patrons with disabilities. The ADA requires that theatres be constructed to permit persons with disabilities full use of a theatre and its facilities. Also, the ADA may require certain modifications be made to existing theatres in order to make them accessible to patrons and employees who are disabled. For example, we are aware of several lawsuits that have been filed against other exhibitors by disabled moviegoers alleging that certain stadium seating designs violate the ADA.

     On June 30, 1998, we executed a settlement agreement with the U.S. Department of Justice under Title III of the ADA. Under the settlement agreement, we agreed to complete the readily achievable removal of barriers to accessibility, or alternatives to barrier removal, at two theatres in Des Moines, Iowa and to distribute to all of our theatres a questionnaire designed to assist our management in the identification of existing and potential barriers and a threshold determination of what steps might be available for removal of such existing and potential barriers. We were not required to pay any damages or fines. We continue to assess the impact of such questionnaires on our theatres. We construct new theatres to be accessible to the disabled and believe we are otherwise in substantial compliance with applicable regulations relating to accommodating the needs of the disabled. We have a Director of ADA Compliance to monitor our ADA requirements.

     Our theatre operations are also subject to federal, state and local laws governing such matters as construction, renovation and operation of our theatres as well as wages, working conditions, citizenship, and health and sanitation requirements and licensing. We believe that our theatres are in material compliance with such requirements.

     We own, manage and/or operate theatres and other properties which may be subject to certain U.S. federal, state and local laws and regulations relating to environmental protection, including those governing past or present releases of hazardous substances. Certain of these laws and regulations may impose joint and several liability on certain statutory classes of persons for the costs of investigation or remediation of such contamination, regardless of fault or the legality of original disposal. These persons include the present or former owner or operator of a contaminated property and companies that generated, disposed of or arranged for the disposal of hazardous substances found at the property. Additionally, in the course of maintaining and renovating our theatres and other properties, we periodically encounter asbestos containing materials that must be handled and disposed of in accordance with federal, state and local laws, regulations and ordinances. Such laws may impose liability for release of asbestos containing materials and may entitle third parties to seek recovery from owners or operators of real properties for personal injury associated with asbestos containing materials.

Employees

     As of December 31, 2002, we had approximately 9,310 employees, of which 43 were covered by collective bargaining agreements and 8,741 were part-time. In order to combat

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uncertainties that may have stemmed from the Chapter 11 filing, to reward key employees for shouldering any additional burdens that had been imposed by the bankruptcy and to maintain employee morale, we implemented, with the approval of the bankruptcy court, the Carmike Cinemas, Inc. Employee Retention and Severance Plan, (the “Employee Retention and Severance Plan”). The Employee Retention and Severance Plan was one component of our comprehensive program designed to provide incentives to management and other critical employees to remain in our employment and to work toward the success of our business. The other components include the continuance of the Company’s annual bonus plan in the ordinary course of business. The Employee Retention and Severance Plan terminated on January 31, 2002.

     As of December 31, 2002, approximately 48% of our employees were paid at the federal minimum wage and, accordingly, the minimum wage largely determines our labor costs for those employees. We believe we are more dependent upon minimum wage employees than most other theatre operators. Although our ability to secure employees at the minimum wage in our smaller markets is advantageous to us because it lowers our labor costs, we are also more likely than other operations to be immediately and adversely affected if the minimum wage is raised.

Our Reorganization

     On August 8, 2000, we and our subsidiaries Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc. filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. On January 4, 2002, the United States Bankruptcy Court for the District of Delaware entered an order confirming our Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated as of November 14, 2001. The plan of reorganization (the “Plan”) became effective on January 31, 2002.

     In our reorganization, substantially all of our unsecured and partially secured liabilities as of August 8, 2000 were subject to compromise or other treatment until the Plan was confirmed by the bankruptcy court. Generally, actions to enforce or otherwise effect repayment of all pre-chapter 11 liabilities as well as all pending litigation against us were stayed while we continued our business operations as debtors-in-possession.

Background

     Our reorganization resulted from a sequence of events and the unforeseen effect that these events had in the aggregate on us. Weak film performance during the summer of 2000 contributed to our lower revenues for that summer, which were significantly below our internal projections. Like our competitors, we had increased our costs by expending significant funds in building megaplexes and in making improvements to existing theatres in order to attract and accommodate larger audiences. Consequently, the effect of poor summer returns was substantial on our efforts to comply with the financial covenants under our then $200 million revolving credit facility and $75 million term loan credit agreement, which we sometimes refer to as the pre-reorganization bank facilities. On June 30, 2000, we were in technical default of certain financial covenants contained in the pre-reorganization bank facilities and were unable to negotiate amendments with the lenders to resolve these compliance issues, as we had been able to do in the past. On July 28, 2000, the agents under the pre-reorganization bank facilities issued a payment blockage notice to us and the indenture trustee for our 9 3/8% senior subordinated

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notes due 2009, (the “Original Senior Subordinated Notes”), prohibiting our payment of the semi-annual interest payment in the amount of $9.4 million due to the noteholders on August 1, 2000. Faced with, among other things, significant operating shortfalls, unavailability of credit and problems dealing with our lenders, we voluntarily filed for bankruptcy in order to continue our business.

Operations During Reorganization

     We could not pay pre-petition debts without prior bankruptcy court approval during our bankruptcy case. Immediately after the commencement of our bankruptcy case, we sought and obtained several orders from the bankruptcy court which were intended to stabilize our business and enable us to continue operations as debtors-in-possession. The most significant of these orders:

	•		permitted us to operate our consolidated cash management system during our bankruptcy case in substantially the same manner as it was operated prior to the commencement of our bankruptcy case;
	•		authorized payment of pre-petition wages, vacation pay and employee benefits and reimbursement of employee business expenses;
	•		authorized payment of pre-petition sales and use taxes we owed;
	•		authorized us to pay up to $2.3 million of pre-petition obligations to critical vendors, common carriers and workers’ compensation insurance, to aid us in maintaining operation of our theatres, and $37.2 million to film distributors as set forth below; and
	•		authorized debt service payments for the loan related to Industrial Revenue Bonds issued by the Downtown Development Authority of Columbus, Georgia.

     As debtors-in-possession, we had the right during the reorganization period, subject to bankruptcy court approval and other limitations, to assume or reject executory contracts and unexpired leases on our theatres. In this context, “assumption” means that we agree to perform our obligations and cure all existing defaults under the contract or lease, and “rejection” means that we are relieved from our obligations to perform further under the contract or lease but are subject to a claim for damages for breach of the rejected contract or lease. Any damages resulting from rejection of executory contracts and unexpired leases were treated as general unsecured claims in our reorganization. During the reorganization period, we received approval from the bankruptcy court to reject theatre leases relating to 136 of our theatre locations.

     As of the date of our bankruptcy petition, film distributors held claims against us aggregating approximately $37.2 million. After we commenced our bankruptcy, several distributors elected to cease supplying us with new film product until their claims against us for pre-petition film exhibition fees were paid in full. We negotiated an agreement with each of our principal film distributors to repay their pre-petition claims for film exhibition fees in full in 17 weekly installments. Based on those agreements, the film distributors began to supply us with new film product again. Our payments under the agreements began on September 18, 2000 and were concluded by December 26, 2000.

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     In connection with our reorganization, we reached an agreement to restructure our master lease facility (“Original MoviePlex Lease”) with MoviePlex Realty Leasing, L.L.C. and entered into the Second Amended and Restated Master Lease, dated as of September 1, 2001. Under our new MoviePlex master lease, we leased six MoviePlex properties for 15 years with an option to extend the term for an additional five years. The Original MoviePlex Lease was terminated and pre-petition defaults under the Original MoviePlex Lease were cured up to a maximum amount of $493,680. The initial first twelve months base rent for the six theatres is an aggregate of $5.4 million per year ($450,000 per month), subject to periodic increases thereafter and certain additional rent obligations such as percentage rent. Percentage rent is an amount equal to 12% of all aggregate revenue we earn in the leased theatres in excess of one-half of ten times our base rent for any lease year.

Our Plan Of Reorganization

     The material features of the Plan are described below:

	•		The Plan provided for the issuance or reservation for future issuance of up to 10,000,000 shares of common stock in the aggregate (20,000,000 shares of common stock are authorized in our amended and restated certificate of incorporation), and for the cancellation of all of our then existing Class A and Class B common stock and preferred stock. As of December 31, 2002, we had 8,991,262 shares of a single class of common stock outstanding.
	•		The holders of our cancelled Class A and Class B common stock received in the aggregate 22.2% of the shares reserved for issuance under the Plan.
	•		The holders of our cancelled Series A preferred stock received in the aggregate 41.2% of the shares reserved for issuance under the Plan. These holders are affiliates of Carmike and have board representation.
	•		Certain holders of $45.7 million in aggregate principal amount of the cancelled 9 3/8% senior subordinated notes we issued prior to our reorganization received in the aggregate 26.6% of the shares reserved for issuance under the Plan. These holders are affiliates of Carmike and have board representation.
	•		We reserved 1,000,000 shares of our common stock for issuance under a new management incentive plan, (the “2002 Stock Plan”). Under the 2002 Stock Plan, 780,000 shares were authorized for issuance to Michael W. Patrick pursuant to his new employment agreement as our Chief Executive Officer and 220,000 shares have been authorized for issuance to seven other members of our senior management.
	•		Certain banks holding claims in our reorganization received replacement debt and cash in the amount of $35.6 million, representing accrued and unpaid post-petition interest on their prior claims from August 8, 2000 to January 31, 2002. The prior bank claims arose

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			under (i) the Amended and Restated Credit Agreement among the banks party thereto and Wachovia Bank, N.A., as agent, and us, dated as of January 29, 1999, and amended as of March 31, 2000 and (ii) the term loan credit agreement among the banks party thereto, Wachovia Bank, N.A., as administrative agent, Goldman Sachs Credit Partners, L.P., as syndication agent, and First Union National Bank, as documentation agent, and us, dated as of February 25, 1999, as amended as of July 13, 1999, and further amended as of March 31, 2000. The replacement debt was approximately $254.5 million (the “New Bank Debt”) and bears interest at the greater of: (a) at our option, (i) a specified base rate plus 3.5% or (ii) an adjusted LIBOR plus 4.5%; and (b) 7.75% per annum.
	•		We issued $154.3 million of our new 10 3/8% senior subordinated notes due 2009 in exchange for $154.3 million aggregate principal amount of the claims in our reorganization concerning the 9 3/8% senior subordinated notes.
	•		Leases covering 136 of our underperforming theatres were rejected. Lease terminations and settlement agreements are being negotiated for the resolution of lease termination claims, and the restructuring or other disposition of lease obligations.
	•		General unsecured creditors are receiving or will receive payments in the aggregate of up to $53.8 million with annual interest of 9.4% in resolution of their allowed claims in our reorganization, including claims for damages resulting from the rejection of executory contracts and unexpired leases. Of these claims, $36.1 million are disputed. As such, our ultimate liability for these claims is uncertain and is subject to bankruptcy court resolution.

     On the Reorganization Date, we entered into a new $254.5 million term loan credit agreement, which governs the terms of the banks’ replacement debt. On the same date we closed on a revolving credit agreement totaling $50.0 million. The proceeds of advances under the revolving credit agreement will be used to provide working capital financing to us and our subsidiaries and for funds for other general corporate purposes. We borrowed $20.0 million of the revolving credit agreement in partial repayment of our obligations owing to the banks under the term loan credit agreement, and we have since repaid all outstanding amounts under our revolving credit agreement.

Risk Factors

     The following are risk factors for Carmike.

Our business will be adversely affected if there is a decline in the number of motion pictures available for screening or in their appeal to our patrons.

     Our business depends to a substantial degree on the availability of suitable motion pictures for screening in our theatres and the appeal of such motion pictures in our specific theatre markets. Our results of operations will vary from period to period based upon the number and popularity of the motion pictures we show in our theatres. A disruption in the production of motion pictures by, or a reduction in the marketing efforts of, the major studios and/or independent producers, a lack of motion pictures, the poor performance of motion pictures in

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general 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 substantial lease and debt obligations could impair our financial flexibility and our competitive position.

     We now have, and will continue to have, significant debt obligations. Our current long-term debt obligations are as follows:

	•		Our term loan credit agreement provides for borrowings of up to $254.5 million, of which $209.7 million was outstanding as of December 31, 2002.
	•		Our revolving credit agreement provides for borrowings of up to $50.0 million. There were no amounts outstanding as of December 31, 2002.
	•		Our new 10 3/8% senior subordinated notes, issued as of January 31, 2002, total $154.3 million.
	•		Amounts owed on our industrial revenue bonds total $1.1 million at December 31, 2002.
	•		As of December 31, 2002, we estimate that our general unsecured creditors will receive an aggregate of $46.1 million plus interest at an annual rate of 9.4% in resolution of their allowed claims, with a final maturity date of January 31, 2007.

     We also have, and will continue to have, significant lease obligations. As of December 31, 2002, our total capital and operating lease obligations for leases with terms over one year totaled $534.2 million.

     These obligations could have important consequences for us. For example, they could:

	•		Limit our ability to obtain necessary financing in the future and make it more difficult for us to satisfy our lease and debt obligations;
	•		Require us to dedicate a substantial portion of our cash flow to payments on our lease and debt obligations, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements;
	•		Make us more vulnerable to a downturn in our business and limit our flexibility to plan for, or react to, changes in our business; and
	•		Place us at a competitive disadvantage compared to competitors that might have stronger balance sheets or better access to capital.

     If we are unable to meet our lease and debt obligations, we could be forced to restructure or refinance our obligations, to seek additional equity financing or to sell assets, which we may not be able to do on satisfactory terms or at all. As a result, we could default on those obligations.

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We may not generate sufficient cash flow to meet our needs.

     Our ability to service our indebtedness or to fund potential capital expenditures for theatre construction, expansion or renovation will require a significant amount of cash, which depends on many factors beyond our control. Our ability to make scheduled payments of principal, to pay the interest on or to refinance our indebtedness is subject to general industry economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations to meet our needs.

Our business is subject to significant competitive pressures.

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

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

     Our theatres also compete with a number of other motion picture delivery systems including cable television, pay-per-view, video disks and cassettes, satellite and home video systems. New technologies for movie delivery (such as video on demand) could also have a material adverse effect on our business and results of operations. While the impact of these alternative types of motion picture delivery systems on the motion picture exhibition industry is difficult to determine precisely, there is a risk that they could adversely affect attendance at motion pictures shown in theatres.

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

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

     Our business is generally seasonal, with higher revenues generated during the summer months and year-end holiday season. While motion picture distributors have begun to release major motion pictures more evenly throughout the year, the most marketable motion pictures 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. Additionally, the unexpected emergence of a “hit” film may occur in these or other periods. As a result, the timing of motion picture releases affects our results of operations, which may vary significantly from quarter to quarter and year to year.

The oversupply of screens in the motion picture exhibition industry and other factors may affect the performance of some of our theatres.

     In the past few years, the motion picture exhibition industry has faced significant challenges, largely due to the effects of an oversupply of screens resulting from the industry strategy of aggressively building multiplexes. Many older multiplex theatres have been rendered obsolete more rapidly than expected. Many of these theatres are under long-term lease commitments that make closing them financially burdensome, and some companies have elected to continue operating them notwithstanding their lack of profitability. In other instances, because theatres are typically limited-use design facilities, or for other reasons, landlords have been willing to make rent concessions to keep them open. As a result, many believe that there continues to be an oversupply of screens in the North American motion picture exhibition industry. This oversupply of screens has affected our theatres in the past and may affect the performance of some of our theatres in the future.

If we do not comply with the covenants in our credit agreements or otherwise default under them, we may not have the funds necessary to pay all our amounts that could become due.

     Our term loan credit agreement, our revolving credit agreement, and our indenture for the 10 3/8% senior subordinated notes require us to comply with certain covenants that, among other things, limit our ability to make capital expenditures, restrict our ability to amend our primary supply contracts and Mr. Patrick’s employment agreement, and limit our ability to incur additional debt. Under our term loan credit agreement, our capital expenditures may not exceed $20.0 million in 2002, $15.0 million in 2003, $10.0 million in 2004 and $15.0 million in 2005 and 2006. However, beginning in 2003, these limits will increase each year by the amount of the unused capital expenditure allowance from the previous year, up to $5.0 million for any given year. Additionally, our revolving credit agreement limits our capital expenditures to $20.0 million in 2002 and $15.0 million in each year thereafter until 2006, provided that, beginning in 2003, such limits may increase up to $5.0 million per year. A violation of any of these covenants could cause an event of default under those agreements. If we default under those agreements because of a covenant breach or otherwise, all outstanding amounts could become immediately due and payable. We cannot assure you that we would have sufficient funds to repay all the outstanding amounts, and any acceleration of amounts due under those credit agreements likely would have a material adverse effect on us.

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We may be unable to fund our additional capital needs.

     Our access to capital may be limited because of our current leverage. In addition, because of our bankruptcy, we may have difficulty obtaining financing for new development on terms that we find attractive. Traditional sources of financing new theatres through landlords may be unavailable for a number of years.

     The opening of large multiplexes by our competitors and the opening of newer theatres with stadium seating in certain of our markets have led us to reassess a number of our theatre locations to determine whether to renovate or to dispose of underperforming locations. Further advances in theatre design may also require us to make substantial capital expenditures in the future or to close older theatres that cannot be economically renovated in order to compete with new developments in theatre design.

     We are subject to restrictions imposed by our lenders that will limit the amount of our capital expenditures. As a result, we may be unable to make the capital expenditures that we would otherwise believe necessary. In addition, we cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated revenue growth will be realized or that future capital will be available to us to enable us to fund our capital expenditure needs.

Deterioration in our relationships with any of the major film distributors could adversely affect our access to commercially successful films and could adversely affect our business and results of operations.

     Our business depends to a significant degree on maintaining good relationships with the major film distributors that license films to our theatres. A deterioration in our relationships with any of the major film distributors could adversely affect our access to commercially successful films and adversely affect our business and results of operations. We suffered such a deterioration for a period of time while we were in bankruptcy. When we commenced our bankruptcy, several film distributors ceased supplying us with new film product in light of their claims against us for exhibition fees aggregating approximately $37.2 million. Those film distributors recommenced supplying us with new film product upon our agreeing to pay their claims in full, which we did in 17 weekly installments ending on December 26, 2000.

     Because the distribution of motion pictures is in large part regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases, we cannot ensure a supply of motion pictures by entering into long-term arrangements with major distributors. Rather, we must compete for licenses on a film-by-film and theatre-by-theatre basis and are required to negotiate licenses for each film and for each theatre individually.

Our success depends on our ability to retain key personnel.

     We believe that our success is due to our experienced management team. We depend in large part on the continued contribution of our senior management and, in particular, Michael W. Patrick, our President and Chief Executive Officer. Losing the services of one or more members of our senior management could adversely affect our business and results of operations. We entered into a five-year employment agreement with Michael W. Patrick as Chief Executive Officer on January 31, 2002. The term of which extends for one year each December 31,

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provided that neither we nor Mr. Patrick chooses not to so extend the agreement. We maintain no key man life insurance policies for any senior officers or managers except for a $1.8 million policy covering Mr. Patrick. We do not have any employment agreements with our senior officers or managers other than Mr. Patrick.

We face uncertainties related to digital cinema.

     If a digital cinema roll-out progresses rapidly, we may not have adequate resources to finance the conversion costs. Digital cinema is in an experimental stage in the motion picture exhibition industry. There are multiple parties competing to be the leading manufacturer of digital cinema technology. However, there are significant obstacles to the acceptance of digital cinema, including quality of image and costs. Electronic projectors will require substantial investment in re-equipping theatres. If the conversion process rapidly accelerates, we may have to raise additional capital to finance the conversion costs associated with it. The additional capital necessary may not, however, be available to us on terms we deem acceptable.

A prolonged economic downturn could materially affect our business by reducing amounts consumers spend on attending movies.

     Our business depends on consumers voluntarily spending discretionary funds on leisure activities. Movie theatre attendance may be affected by prolonged negative trends in the general economy that adversely affect consumer spending. Any reduction in consumer confidence or disposable income in general may affect the demand for movies or severely impact the motion picture production industry such that our business and operations could be adversely affected.

Compliance with the Americans with Disabilities Act could require us to incur significant capital expenditures and litigation costs in the future.

     The Americans with Disabilities Act of 1990, or the ADA, and certain state statutes and local ordinances, among other things, require that places of public accommodation, including both existing and newly constructed theatres, be accessible to customers with disabilities. The ADA requires that theatres be constructed to permit persons with disabilities full use of a theatre and its facilities. The ADA may also require that certain modifications be made to existing theatres in order to make them accessible to patrons and employees who are disabled. We are subject to a settlement agreement arising from a complaint filed with the U.S. Department of Justice concerning theatres operated by us in Des Moines, Iowa. As a result of the settlement agreement, we removed barriers to accessibility at two Des Moines theatres and distributed to all of our theatre managers a questionnaire designed to assist our central management in identifying existing and potential barriers and determining what steps might be available for removal of such existing and potential barriers.

     We are aware of several lawsuits that have been filed against other motion picture exhibitors by disabled moviegoers alleging that certain stadium seating designs violated the ADA. If we fail to comply with the ADA, remedies could include imposition of injunctive relief, fines, awards for damages to private litigants and additional capital expenditures to remedy non-compliance. Imposition of significant fines, damage awards or capital expenditures to cure non-compliance could adversely affect our business and operating results.

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We are subject to other federal, state and local laws which limit the manner in which we may conduct our business.

     Our theatre operations are subject to federal, state and local laws governing matters such as construction, renovation and operation of our theatres as well as wages, working conditions, citizenship and health and sanitation requirements and licensing. While we believe that our theatres are in material compliance with these requirements, we cannot predict the extent to which any future laws or regulations that regulate employment matters will impact our operations. At December 31, 2002, approximately 48% of our employees were paid at the federal minimum wage and, accordingly, the minimum wage largely determines our labor costs for those employees. Increases in the minimum wage will increase our labor costs.

Disruption of our relationship with our primary concession supplier could harm our margins on concessions.

     We purchase substantially all of our concession supplies, except for soft drink syrup, as well as janitorial supplies from Showtime Concession Supply, Inc. and are by far its largest customer. In return for our concession supplies, we pay Showtime Concession at set prices that are based on the type of concession supplied. Our current three-year term agreement with Showtime Concession expires on May 1, 2003. If Showtime Concession or we commit a material default under the agreement and fail to cure the default within 30 days after notice of the default, then the other party may terminate the agreement. If this relationship were disrupted, we could be forced to negotiate a number of substitute arrangements with alternative vendors which are likely to be, in the aggregate, less favorable to us than the current arrangement.

Our development of new theatres poses a number of risks.

     We plan to continue to expand our operations through the development of new theatres and the expansion of existing theatres, although at greatly reduced rates compared with our past practice. Developing new theatres poses a number of risks. Construction of new theatres may result in cost overruns, delays or unanticipated expenses related to zoning or tax laws. Desirable sites for new theatres may be unavailable or expensive, and the markets in which new theatres are located may deteriorate over time. Additionally, the market potential of new theatre sites cannot be precisely determined, and our theatres may face competition in new markets from unexpected sources. Newly constructed theatres may not perform up to our expectations.

     We face significant competition for potential theatre locations and for opportunities to acquire existing theatres and theatre circuits. Because of this competition, we may be unable to add to our theatre circuit on terms we consider acceptable.

If we determine that assets are impaired, we will be required to recognize a charge to earnings.

     The opening of large multiplexes and theatres with stadium seating by us and certain of our competitors has tended to, and is expected to continue to, draw audiences away from certain older theatres, including some of our theatres. In addition, demographic changes and competitive pressures can lead to the impairment of a theatre. Whenever events or changes in circumstances indicate that the carrying amount of an asset or a group of assets may not be recoverable, we review those assets to be held and used in the business for impairment of long-

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lived assets and goodwill. We also periodically review and monitor our internal management reports and the competition in our markets for indicators of impairment of individual theatres. If we determine that assets are impaired, we are required to recognize a charge to earnings.

     We had impairment charges in each of fiscal 1999, 2000 and 2001, totaling $186.4 million. Our impairment charge recognized for 2001 was significantly larger than in prior years due to the write-off of leasehold improvements on rejected theatres, the impact of closing owned theatres, the diminished value of our entertainment centers and the write-down of surplus equipment removed from closed theatres. Additionally, in 2001 we included equipment in the theatre valuation calculations based on the reduced capital building program in the future as well as the excess supply of equipment in inventory. Through 2002, we believe we have properly tested for impairments to the Company. There can be no assurance that we will not take additional charges in the future related to the impairment of our assets.

Our recent bankruptcy reorganization could harm our business, financial condition and results of operations.

     Certain claims from our bankruptcy reorganization remain unsettled and are subject to ongoing negotiation and possible litigation. We estimate the amount of these claims at December 31, 2002 to be $46.1 million; however, the final amounts we pay in satisfaction of the claims depend on the bankruptcy court’s determination. In addition, new claims could be asserted that could exceed our estimate. The final amounts paid in connection with these claims could materially exceed our current estimates, which could reduce our profitability or cause us to incur losses that would affect the trading price of our common stock.

     In addition, our past inability to meet our obligations that resulted in our filing for bankruptcy protection, or the perception that we may not be able to meet our obligations in the future, could adversely affect our ability to obtain adequate financing, to enter into new leases for theatres or to retain or attract high-quality employees. It could also adversely affect our relationships with our suppliers.

Our business makes us vulnerable to future fears of terrorism.

     If future terrorist incidents or threats cause our customers to avoid crowded settings such as theatres, our attendance would be adversely affected.

Our larger stockholders control the composition of the board of directors and most matters submitted to a vote of our stockholders.

     Some of our larger stockholders have agreed until February 29, 2004 to vote their shares in favor of the election to the board of directors of certain individuals that have been previously designated by those holders. The signatory holders own approximately 83% of the shares of our common stock and are able to determine the composition of the board of directors. In addition, if the holders that signed the stockholders’ agreement choose to vote in the same manner, they will be able to determine the disposition of most matters submitted to a vote of our stockholders. The interests of our controlling stockholders may differ from yours. In addition, even after the agreement expires, the stockholders may choose to extend it or to enter into other formal or informal arrangements with respect to voting.

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We have significant stockholders with the ability to influence our actions.

     Entities affiliated with Goldman, Sachs & Co. beneficially owned approximately 47% of the shares of our common stock as of December 31, 2002. This ownership interest and the Goldman entities’ board representation allows them to have significant input on major corporate decisions. The Goldman entities may exert their influence in a manner that is not consistent with the interests of other stockholders and, in their capacity as stockholders, will be able to block certain stockholder actions, including stockholder approval of amendments to our certificate of incorporation or bylaws.

Our certificate of incorporation and bylaws contain provisions that make it more difficult to effect a change in control of the company.

     Certain provisions of our certificate of incorporation and bylaws and the Delaware General Corporation Law could have the effect of delaying, deterring or preventing a change in control of the company not approved by the board of directors, even if the change in control were in the stockholders’ interests. Under our certificate of incorporation, our board of directors has the authority to issue up to one million shares of preferred stock and to determine the price, rights, preferences and privileges of those shares without any further vote or action by our stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. While we have no present intention to issue shares of preferred stock, an issuance of preferred stock in the future could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of the company. In addition, our bylaws provide that a special meeting of the stockholders of the company may only be called by the Chairman, President or Secretary, at the request in writing of a majority of our board of directors or at the request in writing of stockholders owning at least 66 2/3% of our capital stock then issued and outstanding and entitled to vote.

     Further, we are subject to the anti-takeover provisions of section 203 of the Delaware General Corporation Law, which prohibits us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The application of section 203 could have the effect of delaying or preventing a change of control that could be advantageous to the stockholders.

We may be unable to use our net operating loss carry-forwards.

     As of December 31, 2002, we had approximately $116.0 million of federal and state operating loss carryovers with which to offset our future taxable income. While the issue is complicated and subject to many variables based on future events and information not currently available to us, the issuance of shares of common stock under the Plan may have resulted in an “ownership change” for purposes of section 382 of the Internal Revenue Code of 1986, as amended. Furthermore, even if the offering does not result in an ownership change, future changes in the ownership of our common stock (some of which will be beyond our control) could result in significant limitations on our ability to use these net operating losses to offset taxable income in any single year.

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ITEM 2. PROPERTIES

     As of December 31, 2002, we owned 76 of our theatres and leased 228 of our theatres. We operated an additional four theatres under shared ownership.

     We typically enter into long-term leases that provide for the payment of fixed monthly rentals, contingent rentals based on a percentage of revenue over a specified amount and the payment of property taxes, common area maintenance, insurance and repairs. We, at our option, can renew a substantial portion of our theatre leases at the then fair rental rate for various periods with renewal periods of up to 20 years.

     We own our headquarters building, which has approximately 48,500 square feet, in Columbus, Georgia. Pursuant to the terms of industrial revenue bonds which were issued in connection with the construction of the corporate office, our interest in the building is encumbered by a lien in favor of the Downtown Development Authority of Columbus, Georgia.

ITEM 3. LEGAL PROCEEDINGS

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

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

     There were no matters submitted to a vote of security holders during the last quarter of the year ended December 31, 2002.

EXECUTIVE OFFICERS OF THE REGISTRANT

     The following sets forth certain information as of March 10, 2003 regarding the executive officers of Carmike. For purposes of this section, references to Carmike include Carmike’s predecessor, Martin Theatres, Inc.

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     Michael W. Patrick has served as Carmike’s President since October 1981, director since April 1982, Chief Executive Officer since March 1989 and Chairman of the Board of Directors since January 2002. He joined Carmike in 1970 and served in a number of operational and film booking and buying capacities prior to becoming President. Mr. Patrick serves as a director of the Will Rogers Institute, and he is a member of the Board of Trustees of Columbus State University Foundation, Inc. Mr. Patrick also serves as President of Carmike’s subsidiaries Eastwynn Theatres, Inc. and Wooden Nickel Pub, Inc.

     Fred W. Van Noy joined Carmike in 1975. He served as a District Manager from 1984 to 1985 and as Western Division Manager from 1985 to 1988, when he became Vice President — General Manager. In December 1997, he was elected to the position of Senior Vice President — Operations. In November 2000, he became Senior Vice President — Chief Operating Officer. Mr. Van Noy also serves as Senior Vice President — Chief Operating Officer of Carmike’s subsidiary Eastwynn Theatres, Inc.

     Martin A. Durant joined Carmike in July 1999 as Senior Vice President — Finance, Treasurer and Chief Financial Officer. Prior to joining Carmike, Mr. Durant was Senior Vice President — Corporate Services for AFLAC Incorporated, a Columbus, Georgia based international holding company, for a period of ten years. Prior to his position with AFLAC he was President of a venture capital firm located in Florida. Mr. Durant began his career with KPMG Peat Marwick and is a licensed Certified Public Accountant. Mr. Durant also serves as Senior Vice President — Finance, Treasurer and Chief Financial Officer of Carmike’s subsidiaries Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc.

     Anthony J. Rhead joined Carmike in June 1981 as manager of the booking office in Charlotte, North Carolina. In July 1983, Mr. Rhead became Vice President — Film and in December 1997 was elected Senior Vice President — Film. Prior to joining Carmike, he worked as a film booker for Plitt Theatres, Inc. from 1973 to 1981. Mr. Rhead also serves as Senior Vice President — Film and Secretary of Carmike’s subsidiary Eastwynn Theatres, Inc. and as Senior Vice President and Secretary of Carmike’s subsidiary Wooden Nickel Pub, Inc.

     P. Lamar Fields joined Carmike in January 1983 as Director of Real Estate. He served in this position until 1985 when he became Vice President — Development. In December 1997 he was elected to the position of Senior Vice President — Real Estate. In January 2002, he became Senior Vice President — Development. Mr. Fields also serves as Senior Vice President — Real Estate of Carmike’s subsidiary Eastwynn Theatres, Inc. and as Vice President of Carmike’s subsidiary Military Services, Inc.

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     H. Madison Shirley joined Carmike in 1976 as a theatre manager. He served as a District Manager from 1983 to 1987 and as Director of Concessions from 1987 until 1990. He became Vice President — Concessions in 1990 and Senior Vice President — Concessions and Assistant Secretary in December 1997. Mr. Shirley also serves as Senior Vice President — Concessions and Assistant Secretary of Carmike’s subsidiary Eastwynn Theatres, Inc.

     Marilyn B. Grant joined Carmike in 1975 as a bookkeeper. She served as Advertising Coordinator from 1984 to 1985 and became the Director of Advertising in 1985. In August 1990, she was elected to her present position as Vice President — Advertising. Ms. Grant also serves as Vice President of Carmike’s subsidiary Eastwynn Theatres, Inc.

     Philip A. Smitley joined Carmike in April 1997 as Controller. In January 1998, he was elected to his present position of Assistant Vice President and Controller. In March 1999, he assumed the duties of interim Chief Financial Officer pending the appointment of Martin A. Durant in July 1999. Prior to joining Carmike, Mr. Smitley was Divisional Controller — Transportation of Burnham Service Corporation, a trucking company. Mr. Smitley also serves as Assistant Vice President and Controller of Carmike’s subsidiary Eastwynn Theatres, Inc.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Our common stock is currently traded on the Nasdaq National Market under the symbol “CKEC”, but it has traded on the NASD’s over-the-counter Bulletin Board (the “OTCBB”) and the New York Stock Exchange at different times in the last three years. From January 31, 2002 until May 22, 2002, our new common stock was traded on the OTCBB under the symbol “CMKC”. Prior to that time, our pre-reorganization Class A common stock traded on the OTCBB under the symbol “CKECQ” from January 17, 2001 until January 30, 2002. The Class A common stock previously traded on the New York Stock Exchange under the symbol “CKE” until trading in our stock on the New York Stock Exchange was suspended prior to trading on January 12, 2001 because we had fallen below certain New York Stock Exchange criteria for continued listing.

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     The following table sets forth the high and low sales prices of our common stock as reported by Nasdaq for the periods indicated in 2002 (beginning May 23, 2002) and by the OTCBB for the periods indicated in 2002 (beginning January 31, 2002). The table also provides information for our pre-reorganization Class A Common Stock as reported by the OTCBB for the periods indicated in 2001 (beginning January 17, 2001) and by the New York Stock Exchange for the periods indicated in 2001.

     As of March 10, 2003, there were approximately 713 record holders of our common stock and there were no shares of any other class of stock issued and outstanding.

     During fiscal year 2002, we did not make any sales of unregistered equity securities.

     We have never declared or paid a cash dividend on our common stock. It is the present policy of our board of directors to retain all earnings to support operations and to finance expansion of the business; therefore, we do not anticipate declaring or paying cash dividends on the common stock in the foreseeable future. The declaration and payment of dividends in the future is within the discretion of the board of directors and is subject to many considerations, including covenants in debt instruments, operating results, business and capital requirements and other factors. Pursuant to our credit agreements, we are subject to certain restrictive provisions which, among other things, limit the payment of dividends and other defined restricted payments.

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ITEM 6. SELECTED FINANCIAL AND OPERATING DATA.

     The selected consolidated Statements of Operations and Balance Sheet data set forth below were derived from our consolidated financial statements. This information should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     The following discussion of our financial condition and operating results should be read in conjunction with “Item 6. Selected Financial Data” and our consolidated financial statements and accompanying notes.

Critical Accounting Policies

     The preparation of our financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. On an on-going basis, we evaluate our estimates and judgments, including those related to leasing transactions, depreciation of property and equipment, income taxes, litigation and other contingencies and, in particular, those related to impairment of long-lived assets including goodwill. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. All critical accounting estimates have been discussed with the Company’s Audit Committee.

     We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States.

Bankruptcy Matters

     As debtors-in-possession, we had the right, subject to bankruptcy court approval and certain other limitations, to assume or reject executory contracts and unexpired leases during our reorganization. Any damages resulting from rejection of executory contracts or unexpired leases were treated as general unsecured claims in our reorganization. During our reorganization, we received approval from the bankruptcy court to reject theatre leases on 136 of our theatre locations. We estimate that our aggregate liability at December 31, 2002 for general unsecured creditors is approximately $46.1 million, which includes our estimated liability for damages resulting from the rejection of executory contracts and unexpired leases. Of these claims, $36.1 million are disputed. As such, we cannot presently determine with certainty the ultimate liability that may result; however, the bankruptcy court still maintains jurisdiction over certain matters related to the implementation of the Plan, including, the unresolved disputed claims. We have made our best estimate on such liability given the facts available at this time. If we are unable to resolve these claims with the unsecured creditors, the bankruptcy court will settle these claims.

Property and Equipment

     Property and equipment are carried at cost, net of accumulated depreciation, or cost adjusted for recognized impairments. Assets held for disposal are reported at the lower of the asset’s carrying amount or its fair value less costs to sell. Amortization of assets recorded under capital

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leases is included with depreciation expense in the accompanying consolidated statements of operations. Although we use accelerated methods of depreciation for income tax purposes, for financial reporting purposes, we compute depreciation on a straight-line basis as follows:

*     Number of years is based on the terms of the applicable lease

Impairment of Long Lived Assets, Including Goodwill

     Effective January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). In general, SFAS No. 142 requires that during 2002 we assess the fair value of the net assets underlying our acquisition related goodwill on a business by business basis. Where that fair value is less than the related carrying value, we will be required to reduce the amount of the goodwill. These reductions were made retroactive to January 1, 2002. SFAS No. 142 also requires that we discontinue the amortization of our acquisition related goodwill. As of December 31, 2002, our financial statements included acquisition related goodwill of $23.4 million, net of previous amortization. See “Impact of Recently Issued Accounting Standards” below for additional information.

     We account for our long-lived assets in accordance with the Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”). We review our long-lived assets, including goodwill related to those assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company periodically reviews and monitors its internal management reports and the competition in its markets for indicators of impairment of individual theatres. We consider a trend of operating results that are not in line with management’s expectations to be the primary indicator of potential impairment. An additional impairment indicator used by management is the existence of competition in a market, either from third parties or from our own expansion. For purposes of SFAS No. 144, assets are evaluated for impairment at the theatre level, which management believes is the lowest level for which there are identifiable cash flows. We deem a theatre to be impaired if a forecast of undiscounted future operating cash flows directly related to the theatre, including estimated disposal value if any, is less than its carrying amount. If a theatre is determined to be impaired, the loss is measured as the amount by which the carrying amount of the theatre exceeds its fair value. Fair value is based on management’s estimates which are based on using the best information available, including prices for similar theatres or the results of valuation techniques such as discounting estimated future cash flows. Considerable judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.

     See “Asset Impairments and Restructuring Charge — Assets Impairments” following for additional information regarding the effects on the 2001 and 2000 consolidated financial statement. See also “Impact of Recently Issued Accounting Standards” below.

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Leases

     We operate most of our theatres under non-cancelable operating lease agreements. These leases generally provide for the payment of fixed monthly rentals, property taxes, common area maintenance, insurance and repairs. Certain of these leases provide for escalating lease payments over the terms of the leases. Moreover, certain leases also include contingent rental fee based on a percentage of sales. At our option, we can renew a substantial portion of our theatre leases, at the then fair rental rate, for various periods with the maximum renewal period generally totaling 10-20 years. For financial statement purposes, the total amount of base rentals over the terms of the leases is charged to expense on the straight-line method over the initial lease terms. Rental expense in excess of lease payments is recorded as a deferred rental liability and is amortized to rental expense over the remaining term of the lease.

Percentage Rent

     Several leases have a contingent component called percentage rent. Percentage rent is based on a percentage of defined revenue factors over a fixed breakpoint for the lease year as described within the lease. The Company accrues for this contingent liability monthly based on the trailing twelve months activity of the effected theatre. Payment of this liability is defined within the lease and the accrual is reconciled at the end of the lease year.

Income Taxes

     We use the liability method of accounting for income taxes, which requires recognition of temporary differences between financial statement and income tax basis of assets and liabilities, measured by enacted tax rates.

     In 2000 we established a valuation allowance in accordance with the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. We continually review the adequacy of the valuation allowance and recognize the benefits of deferred tax assets only as reassessment indicates that it is more likely than not that the deferred tax assets will be realized.

Results of Operations

Financial Reporting During Reorganization

     In connection with our bankruptcy proceedings, we were required to report in accordance with Statement of Position 90-7 Financial Reporting by Entities in Reorganization under the Bankruptcy Code (“SOP 90-7”). SOP 90-7 requires, among other things, (i) that pre-petition liabilities that are subject to compromise be segregated in our consolidated balance sheet as liabilities subject to compromise and (ii) the identification of all transactions and events that are directly associated with our reorganization in the consolidated statement of operations.

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Seasonality

     Typically, movie studios release films with the highest expected revenues during the summer and the holiday period between Thanksgiving and Christmas, causing seasonal fluctuations in revenues.

Revenues

     We derive almost all of our revenues from box office admissions and concession sales. We recognize admissions revenues when movie tickets are sold at the box office, and concession sales revenues when the products are sold in the theatre. Admissions and concession sales revenues depend primarily upon attendance, ticket price and the price and volume of concession sales. Our attendance is affected by the quality and timing of movie releases and our ability to obtain films that appeal to patrons in our markets.

Expenses

     Film exhibition costs vary according to box office admissions and are accrued based on the specified splits of receipts in firm term agreements with movie distributors. The agreements usually provide for a decreasing percentage of box office admissions to be paid to the movie studio over the first few weeks of the movie’s run, subject to a floor for later weeks. Where firm terms do not apply, film exhibition costs are accrued based on estimates of the final settlement that is agreed between us and the movie studio after the completion of the movie’s run.

     Concession cost of sales are incurred as products are sold. We purchase substantially all of our concession supplies from a single vendor of which we are the principal customer.

     Other theatre operating costs include labor, utilities and maintenance, and facility lease expenses. Labor costs have both a variable and fixed cost component. During non-peak periods, a minimum number of staff is required to operate a theatre facility. However, to handle attendance volume increases, theatre staffing and thus salaries and wages vary in relation to revenues. Utilities, repairs and maintenance services also have variable and fixed costs components. Our facility lease expenses and property taxes are primarily fixed costs, as we are generally required to pay applicable taxes, insurance and fixed minimum rent.

     Our general and administrative expenses include costs not specific to theatre operations, and are composed primarily of corporate overhead.

Net Operating Losses

     As of December 31, 2002, we had approximately $116.0 million of federal and state operating loss carryovers with which to offset our future taxable income. Net operating losses may be carried back and then forward for specified periods. If they are not used to offset taxable income by the end of the carryforward period, they expire. Under section 382 of the Internal Revenue Code of 1986, as amended, a corporation may generally be restricted in utilizing its net operating losses to offset prospective taxable income if it experiences an “ownership change,” as defined in section 382(g). The determination as to whether a corporation has experienced an

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ownership change on a given date is a complex analysis of the beneficial stock ownership of the corporation over a time period of not more than three years. An ownership change under section 382(g) occurs when on a testing date, the beneficial ownership of the corporation by one or more “5-percent shareholders” has increased, in the aggregate, by more than 50 percentage points over the respective lowest ownership percentages of such 5-percent shareholders during the testing period preceding such date. It should be noted that the rules for determining whether an ownership change under section 382 has occurred are different from those applied to evaluate whether a “change in ownership” as defined by Statement of Position 90-7 has occurred.

     In the event of an ownership change, certain tax attributes of the corporation, including net operating losses, that pre-date the ownership change are generally subject to limitation in offsetting taxable income arising after the ownership change. The resulting limitation, which indicates how much of the limited tax attributes may be used in each subsequent tax year, is based on the stock value of the corporation immediately before the ownership change, subject to adjustment, and multiplied by a published applicable federal rate. Because this annual limitation is computed without reference to a corporation’s net operating loss carryforward periods, it is possible that losses will expire unused, regardless of whether the corporation has sufficient taxable income to absorb such losses. There are certain exceptions to the general rules under section 382 for corporations that are debtors in a title 11 case and that experience an ownership change pursuant to a court-approved plan.

     While the issue is complicated and subject to many variables based on future events and possible favorable elections, the issuance of shares of Common Stock on January 31, 2002 pursuant to the Plan appears to have resulted in an ownership change under section 382. Furthermore, future activity in the ownership of our common stock (some of which is beyond our control) could trigger an ownership change and limit our ability to use these net operating losses to offset taxable income in a subsequent tax year. However, we believe that these net operating losses could become available under section 382 before the end of their respective carryforward lives. Accordingly, we believe that in the event of an ownership change as a result of past activity in our stock, as well as future elections and trading activity (some of which is beyond our control), the availability of our net operating losses would be deferred, but not lost, specifically as a result of any current or past limitation under section 382. Such losses could still expire unused if we have insufficient taxable income to absorb such losses within their carryforward period.

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Operating Statement Information

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

Year Ended December 31, 2001 Compared to Year Ended December 31, 2002

     Revenues. Total revenues increased 11.0% from $456.9 million to $507.2 million for the year ended December 31, 2002 as a result of increased attendance driving up admissions and concessions revenues, partially offset by the reduced number of screens. Admissions increased 10% from $311.8 million in 2001 to $342.8 million in 2002 due to an 8.3% increase in overall attendance and a 1.5% increase in average ticket price. Concessions and other revenue increased 13.3% from $145.1 million in 2001 to $164.4 million in 2002 due to (i) the attendance increase, (ii) a 3.2% increase in concession sales per patron and (iii) a $3.3 million increase in other revenues.

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     For the year ended December 31, 2001, our attendance per average screen was 27,083, our average admission price was $4.83 and our average concession sale per patron was $2.10. For the year ended December 31, 2002, our attendance per average screen was 30,876, our average admission price was $4.90, and our average concession sale per patron was $2.17. As a result of these increases, our revenues per average screen increased 16.8% from $191,513 to $223,727.

     We operated 323 theatres with 2,333 screens at December 31, 2001 and 308 theatres with 2,262 screens at December 31, 2002.

     Cost of operations. Total theatre operating costs, including film exhibition costs, concession costs and other theatre operating costs, increased 4.8% from $373.4 million to $391.3 million. As a percentage of total revenues, cost of operations decreased from 81.7% to 77.2%. This was the result of improved cost of sales ratios in conjunction with an increase in other revenues of approximately $3.3 million over 2001. Film exhibition costs increased 10.6% from $171.2 to $189.3 due to an increase in admission sales.

     General and administrative expenses. General and administrative expenses increased 70.4% from $8.8 million to $15 million. This increase resulted primarily from non-cash deferred compensation charges of $3.6 million as described in Notes 1 and 12 of the Notes to Consolidated Financial Statements and the write-off of $552 thousand of professional fees relating to our proposed equity offering that was suspended due to the decline in general market conditions. As a percentage of total revenues, general and administrative costs increased from 1.9% to 3%.

     Depreciation and amortization expenses. Depreciation and amortization expenses decreased 23.9% from $42.2 million to $32.1 million as a result of our having fewer screens in operation. Impairment charges of $21.2 million in 2000 resulted in depreciation and amortization expenses for 2001 being approximately $9.8 million lower than they otherwise would have been. The impairment charge of $132.2 million in 2001 resulted in depreciation and amortization expenses for 2002 being approximately $13.6 million lower than they otherwise would have been. Additionally, the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, halted the amortization of goodwill, which was approximately $1.5 million in 2001.

     Interest expense. Total interest for the year 2002 increased to $102.8 million from $6.1 million in 2001. We ceased recording interest expense relating to substantially all of our debt facilities effective August 8, 2000 in accordance with the requirements of SOP 90-7. At emergence from Chapter 11 on January 31, 2002, all past interest was required to be recorded. Excluding bankruptcy related items, interest for 2002 would have been approximately $46 million.

     Income tax expense. We recognized no income tax expense or benefit in 2001. The income tax benefit recorded in 2002 is the result of the Job Creation and Worker Assistance Act of 2002, which allowed for additional carryback of net operating losses resulting in a cash refund of approximately $14.7 million.

     Reorganization costs. Reorganization costs of $19.5 million were incurred during 2001 and include $8.2 million of professional fees and $16.4 million of asset impairments directly related

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to actions taken under the reorganization including, among other things, lease rejections. These costs have been offset by $3.0 million of interest income and gains on asset sales subsequent to the Petition Date. Reorganization costs of $20.6 million were incurred during 2002, of which, $8.0 million of professional fees and $8.5 million in non-cash transactions related to the extinguishment of pre-emergence debt, as well as other items totaling $4.1 million.

Year Ended December 31, 2000 Compared to Year Ended December 31, 2001

     Revenues. Total revenues decreased 1.2% from $462.3 million to $456.9 million for the year ended December 31, 2001 as a result of the reduction of screens in our theatre circuit, partially offset by an increase in average revenues per patron. The reduction in screen count came as a result of our rejection and closure of underperforming leased theatres as part of our reorganization. The result of these reductions forced admissions down 1.1% from $315.4 million in 2000 to $311.8 million in 2001. The reduction in screens and continued uncertainty of the industry reduced attendance 4.7%, but was partially offset by an increase in average ticket price of 3.9%. Concessions and other revenue was likewise effected by the reduction in attendance but was offset by an increase in concession sales per patron of 6.1%, thus these revenues only decreased 1.2% from $146.9 million in 2000 to $145.1 million in 2001.

     For the year ended December 31, 2000, our attendance per average screen was 25,654, our average admission price was $4.65 and our average concession sale per patron was $1.98. For the year ended December 31, 2001, our attendance per average screen was 27,083, our average admission price was $4.83, and our average concession sale per patron was $2.10. As a result of these increases, our revenues per average screen increased 9.5% from $174,914 to $191,513.

     We operated 352 theatres with 2,438 screens at December 31, 2000 and 323 theatres with 2,333 screens at December 31, 2001.

     Cost of operations. Total theatre operating costs, including film exhibition costs, concession costs and other theatre operating costs, decreased 6.9% from $400.9 million to $373.4 million. As a percentage of total revenues, cost of operations decreased from 86.7% to 81.7%. This was the result of lower exhibition costs, the elimination of lease and other operating costs at theatres we closed and a greater number of films that played for extended runs. Also in 2001, we incurred higher costs as a result of our reorganization as distributors tightened the terms on their film licensing agreements, newspapers charged the full contract rates for advertising and we at times purchased concession supplies in local markets at retail prices.

     General and administrative expenses. General and administrative expenses increased from $6.9 million to $8.8 million. This increase resulted primarily from the payment of retention bonuses under the Employee Retention and Severance Plan. As a percentage of total revenues, general and administrative costs increased from 1.5% to 1.9%.

     Depreciation and amortization expenses. Depreciation and amortization expenses decreased 2.4% from $43.2 million to $42.2 million as a result of our having fewer screens in operation and an impairment charge taken in 2000. The impairment charge of $21.2 million in 2000 resulted in depreciation and amortization expenses for 2001 being approximately $1.2 million lower than they otherwise would have been.

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     Interest expense. Total interest for the year decreased from $31.0 million to $6.1 million. We ceased recording interest expense relating to substantially all of our debt facilities effective August 8, 2000 in accordance with the requirements of SOP 90-7.

     Income tax expense. We recognized tax expense of approximately $25.6 million in 2000 as a result of establishing a valuation allowance for deferred tax assets and no income tax expense or benefit in 2001 as a result of our loss carryforward position.

     Reorganization costs. Reorganization costs increased from $7.0 million in 2000 to $19.6 million in 2001. Professional fees were $3.9 million in 2000 and $8.2 million in 2001; asset impairments directly related to actions taken in connection with our reorganization were $4.9 million in 2000 and $16.4 million in 2001. These costs were offset by interest income and gains on asset sales of $2.2 million in 2000 and $3.1 million in 2001 and certain other items.

Liquidity and Capital Resources

General

     Our revenues are collected in cash and credit card payments. Because we receive our revenues in cash prior to the payment of related expenses, we have an operating “float” which partially finances our operations. We had working capital of $54.7 million as of December 31, 2001, compared to a working capital deficit of $28.5 million at December 31, 2002. The decreased working capital recorded as of December 31, 2002 reflects cash settlements required at emergence from Chapter 11, as well as, mandatory payments defined in the Plan. The working capital deficit will be funded through anticipated operational profits as well as the ability to draw from our Revolving Credit Agreement. At February 28, 2003, we had approximately $49 million in cash and cash equivalents on hand.

     Our capital expenditures arise principally in connection with the development of new theatres, renovation and expansion of existing theatres and theatre acquisitions. During 2002, these capital expenditures totaled $18.0 million. Under our credit agreements, we were limited to capital expenditures, as defined, of $20.0 million in 2002, and will be limited to capital expenditures, as defined, of: $15.0 million in 2003, $10.0 million in 2004, $15.0 million in 2005 and $15.0 million in 2006. In addition, in certain circumstances the limits for 2003 and each later year are increased by an amount, up to $5.0 million, depending upon our capital expenditures in the prior year. Our total budgeted capital expenditures for 2003 are $15 million. We plan to fund the development of new theatres and expansion of existing theatres by using, subject to any limitations in our debt instruments, operating cash flow, available cash from our revolving line of credit and landlord-funded new construction and theatre remodeling, when available.

     Cash provided by operating activities was $49.4 million for the twelve months ended December 31, 2001, compared to cash provided by operating activities of $15.6 million for the twelve months ended December 31, 2002. The decrease in cash flow from operating activities was primarily due to cash requirements, primarily interest, payable at emergence from bankruptcy and changes in certain operating assets and liabilities. Net cash used in investing activities was $1.0 million for the year ended December 31, 2001 as compared to $14.5 million in 2002. This increase in cash used in investing activities was primarily due to emergence from

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Chapter 11 allowing increased capital spending. For the year ended December 31, 2001 cash used in financing activities was $6.8 million compared to $41.7 million in 2002. The increase in cash used in financing activities was primarily due to scheduled and mandatory payment requirements of our long-term debt agreements.

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

     Our ability to service our indebtedness will require a significant amount of cash. Our ability to generate this cash will depend largely on future operations. Based upon our current level of operations, we believe that cash flow from operations, available cash, sales of surplus assets and borrowings under our credit agreements will be adequate to meet our liquidity needs. However, the possibility exists that, if our liquidity needs are not met and we are unable to service our indebtedness, we could come into technical default under any of our debt instruments, causing the agents or trustees for those instruments to declare all payments due immediately or, in the case of the senior debt, to issue a payment blockage to the more junior debt. A similar situation contributed to the circumstances that led us to file our voluntary petition for relief under Chapter 11 in 2000, as described in “Business — Our Reorganization”.

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

Risk Management and Market Sensitive Instruments

     We are exposed to various market risks. Prior to August 8, 2000, these exposures primarily related to changes in interest rates. Substantially all of our interest was suspended during the bankruptcy. Since we emerged from bankruptcy, we have begun to pay interest and are again subject to the market risk related to changes in interest rates. Interest payable under our new credit agreements is based on a spread over LIBOR or another index. A substantial number of our theatre leases are off-balance sheet as required by generally accepted accounting principles for operating leases. The cash commitments required for these leases have been included in the contractual obligations schedule included below.

Asset Impairments

     In the fourth quarters of 2000 and 2001, we identified impairments of asset values for certain theatres and a joint venture investment in three movie theatre-entertainment complexes which we reflected as operating expenses in our consolidated financial statements. Based on our analysis, no such charges were required in 2002. The table below sets out certain information concerning these impairments:

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     The impairment charge recognized in 2001 was significantly larger than in prior years due to the write-off of leasehold improvements on theatres for which we rejected leases, the impact of closing owned theatres, the diminished value of our entertainment centers and the write-down of surplus equipment removed from closed or rejected theatres. Additionally, in 2001 we included impairment charges related to equipment of $34.1 million, based on our reduced capital building program for the future as well as the excess supply of equipment in inventory.

     The impairment charge in 2000 was primarily caused by reductions in estimated theatre cash flows due to the impact of new or increased competition on certain older, auditorium-style theatres, negative evaluation of the operating results produced from theatres previously converted to discount theatres, or our inability to improve a marginal theatre or entertainment center’s operating results to a level that would support the carrying value of the long-lived assets. Some of our theatres that incurred impairment charges in 1999 incurred additional impairment charges in subsequent years.

     We had approximately $23.4 million of goodwill recorded at December 31, 2002. The goodwill values arose from our acquisitions during the period from 1982 through 1997. We evaluate goodwill based on cash flows for theatres with associated goodwill that operate within a particular market. Where more than one such theatre operates within a market, we evaluate the cash flows of all such theatres within that market. See Note 4 of Notes to Consolidated Financial Statements.

Impact of Recently Issued Accounting Standards

     In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). SFAS No. 142 requires goodwill and indefinite lived intangible assets to be reviewed periodically for impairment and no longer amortized. The Company adopted SFAS No. 142 on January 1, 2002. SFAS No. 142 required companies with goodwill and indefinite lived intangible assets to complete an initial impairment test by June 30, 2002. The Company completed the impairment test of its goodwill and did not identify an asset impairment as a result of the impairment test. Additionally, the Company completed its periodic review of its goodwill for impairment as of December 31, 2002, and did not identify an asset impairment as a result of the review. The Company will continue to review its goodwill annually for impairment as of December 31 of each year.

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     In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”). SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (“SFAS No. 121”). SFAS No. 144 requires that long-lived assets to be disposed of by sale, including those of discontinued operations, be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet been incurred. SFAS No. 144 also broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. The Company adopted the standard on January 1, 2002. There has been no asset impairment in 2002 as a result of adoption.

     In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (“SFAS No. 145”). SFAS No. 145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that statement, SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. In addition, SFAS No. 145 rescinds SFAS No. 44, Accounting for Intangible Assets of Motor Carriers. SFAS No. 145 amends SFAS No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects similar to sale-leaseback transactions. SFAS No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. SFAS No. 145 is effective for financial statements issued on or after May 15, 2002. The Company adopted SFAS No. 145 effective May 15, 2002, however, SFAS No. 145 did not affect the Company’s Consolidated Statements of Operations.

     In July 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS No. 146”). SFAS No. 146 addresses the financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The effective date of SFAS No. 146 is December 31, 2002. The Company adopted SFAS No. 146 on December 31, 2002, however, SFAS No. 146 did not have an effect on the Company’s Consolidated Statements of Operations.

     In November 2002, the FASB issued FASB Interpretation Number 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, (“FIN 45”). FIN 45 requires an entity to disclose in its interim and annual financial statements information with respect to its obligations under certain guarantees that it has issued. It also requires an entity to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and annual reports after December 15, 2002. These disclosures are presented in Note 15 of Notes to Consolidated Financial Statements. The initial recognition and initial measurement requirements of FIN 45 are effective prospectively for guarantees issued or modified after December 15, 2002. The Company is currently assessing the

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initial measurement requirements of FIN 45. However, management does not believe that the recognition requirements will have a material impact on the Company’s financial position, cash flows or results of operations.