UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2004

OR

For the transition period from ________ to _________

Commission file number 000-14993

CARMIKE CINEMAS, INC.

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

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

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

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

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

Common Stock, par value $0.03 per share — 12,162,622 shares outstanding as of November 4, 2004

Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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

See accompanying notes

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See accompanying notes

3

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

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

See accompanying notes

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

CARMIKE CINEMAS, INC. and SUBSIDIARIES
(in thousands)

Non cash Transactions

In August 2004, the Company reached a settlement with a lessor/lender under which $6.2 million of proceeds received under a long-term financing obligation were offset against a corresponding amount of liabilities subject to compromise to the same lessor/lender.

See accompanying notes

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

CARMIKE CINEMAS, INC. and SUBSIDIARIES
For the Three and Nine Months Ended September 30, 2004 and 2003

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

     On August 8, 2000, Carmike Cinemas, Inc. (“Carmike”) and its subsidiaries, Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc. (collectively “the Company”) filed voluntary petitions for relief under Chapter 11 (the “Chapter 11 Cases”) of the United States Bankruptcy Code. In connection with the Chapter 11 Cases, the Company was required to report in accordance with Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, (“SOP 90-7”). SOP 90-7 requires, among other things, (1) pre-petition liabilities that are subject to compromise be segregated in the Company’s consolidated balance sheet as liabilities subject to compromise and (2) the identification of all transactions and events that are directly associated with the reorganization of the Company in the Consolidated Statements of Operations. The Company emerged from the Chapter 11 Cases pursuant to its plan of reorganization effective on January 31, 2002.

     Further, the Company’s accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and bankruptcy related items) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes included in Carmike’s Annual Report on Form 10-K for the year ended December 31, 2003.

     The Company has identified several significant accounting policies which can be reviewed in detail in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

     The Company recognizes deferred revenue from the sale of gift certificates and screen advertising. Gift certificates are recognized as revenue upon redemption. Deferred revenue related to screen advertising is recognized over the course of our contractual agreement with a third party provider that arranges on-screen advertising.

     The Company accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”). Reflected in the Consolidated Statements of Operations for the three months ended September 30, 2004 and 2003 is $1.0 million and $1.4 million, respectively, of stock-based employee compensation cost related to stock grants ($0.8 million from fixed accounting and $0.2 million and $0.6 million, respectively, from variable accounting.) Additionally, reflected in the Consolidated Statements of Operations for the nine months ended September 30, 2004 and 2003 is $4.0 million and $3.9 million, respectively, of stock-based employee compensation cost related to stock grants ($2.4 million from fixed accounting and $1.6 million and $1.5 million, respectively, from variable accounting.)

     The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition,

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option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The Company has adopted SFAS No. 148, Accounting for Stock Based Compensation-Transition and Disclosure (“SFAS No. 148”). For SFAS No. 148 purposes, the fair value of each option grant and stock based award has been estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

     The estimated fair value of the options granted during 2003 are $12.12 and $14.44 per share. The estimated fair value of the options granted during 2004 are $16.96 per share. Had compensation cost been determined consistent with SFAS No. 123 Accounting for Stock Based Compensation (“SFAS No. 123”), utilizing the assumptions detailed above, the Company’s pro forma net income (loss) and pro forma basic and diluted earnings (loss) per share would have decreased to the following amounts (in thousands, except share data):

The Company’s Board of Directors declared a quarterly dividend of $0.175 per share on September 13, 2004. The dividend was paid on November 2, 2004 to stockholders of record as of October 4, 2004. The aggregate amount of this dividend was approximately $2.1 million.

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NOTE 2 – ASSETS HELD FOR SALE

     The Company has $8.4 million in surplus long-term real estate assets held for sale as of September 30, 2004. The carrying values of these assets are reviewed periodically as to relative market conditions and are adjusted in accordance with SFAS No. 144 Accounting for the Impairment or Disposal of Long-lived Assets (“SFAS No. 144”). No impairment was deemed necessary on the assets in the third quarter of 2004. Disposition of these assets is contingent on current market conditions and we cannot be assured that they will be sold at a value equal to or greater than the current carrying value.

NOTE 3 — OTHER ASSETS

Other assets are as follows:

NOTE 4 — DEBT

Debt consisted of the following (in thousands):

2004 Financing Transactions

     On February 4, 2004, we completed a public offering of 4,850,000 shares of our common stock (3,000,000 of which were issued and sold by us and 1,850,000 of which were sold by selling stockholders), priced at $32.00 per share. An additional 675,000 shares were sold by certain selling stockholders on February 11, 2004 pursuant to an underwriters’ over-allotment option. Net proceeds to us, after discounts and expenses, were $89.3 million. In addition, we completed an offering of $150.0 million in aggregate principal amount of 7.500% senior subordinated notes due 2014 to institutional investors and entered into new senior secured credit facilities consisting of a $50.0 million 54-month revolving credit facility and a $100.0 million five-year term loan. We used the proceeds from the common stock offering, the 7.500% senior

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subordinated notes offering and the new term loan credit facility, as well as excess cash, to repay the outstanding balance of $168.7 million under our post-bankruptcy term loan, tender for or redeem $154.3 million of our 10.375% senior subordinated notes, repay $7.3 million of our long-term trade payables and pay related transaction fees and expenses.

NOTE 5 — PROCEEDINGS UNDER CHAPTER 11

     On January 31, 2002, the Company emerged from bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. A description of the proceedings under the Chapter 11 Cases is contained in Note 2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

     Reorganization costs for the three and nine month periods ended September 30, 2004 and 2003 are as follows (in thousands):

NOTE 6 — LIABILITIES SUBJECT TO COMPROMISE

The principal categories of obligations classified as Liabilities Subject to Compromise under the Chapter 11 Cases are identified below. The amounts in total may vary significantly from the stated amounts of proofs of claims filed with the bankruptcy court, and may be subject to future adjustments depending on bankruptcy court action, further developments with respect to potential disputed claims, and determination as to the value of any collateral securing claims or other events. During the three months ended September 30, 2004, certain claims and long-term trade payables were resolved for amounts different from their original claims; these changes resulted in a net change in estimate of liability of $11.3 million.

A summary of the principal categories of claims classified as Liabilities Subject to Compromise at September 30, 2004 and December 31, 2003 are as follows (in thousands):

The change in outstanding Liabilities Subject to Compromise results from a change in estimate of $14.6 million and settlements of $2.1 million.

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NOTE 7 — INCOME TAXES

     As of December 31, 2003 the Company reversed the valuation allowance related to its deferred tax assets as it was determined to be more likely than not that net deferred tax assets would be realized in future periods. At September 30, 2004 the Company had deferred tax assets of approximately $60.7 million remaining. The income tax expense of $4.6 million and $12.0 million for the three and nine months ended September 30, 2004, respectively, reflects a combined federal and state tax rate of 37.5%.

     For tax purposes, any discharge of the liabilities pursuant to the Chapter 11 filing may result in cancellation of debt income which is excluded from the Company’s taxable income. However, the Company’s available tax attributes, including net operating loss carryforwards, must be reduced by the amount of any excluded cancellation of debt income. To the extent the amount excluded exceeds these tax attributes, the tax basis in the Company’s property must be reduced by such excess.

     The sale of shares in the offering of August, 2004, caused the Company to undergo an “ownership change” within the meaning of section 382 (g) of the Internal Revenue Code of 1986, as amended. The ownership change will subject our net operating loss carryforwards to an annual limitation on their use, which will restrict our ability to use them to offset our taxable income in periods following the ownership change. In general, the annual use limitation equals the aggregate value of the Company’s stock at the time of the ownership change multiplied by a specified tax-exempt interest rate, and is further increased by certain “built-in gains” recognized during the five-year period following the ownership change. Based on the trading value of $33.00 per share at the time of the change and certain assumptions regarding the Company’s recognized built-in gains, such limitation is projected to be $26.9 million per year for the first five years and will decrease to approximately $15 million per year thereafter. The annual use limitation will be pro rated for the post-change period ending on December 31, 2004.

     The Company has federal and state net operating loss carryforwards of approximately $84.9 million which will begin to expire in the year 2020.

NOTE 8 — STOCK PLANS

     Upon emergence from Chapter 11, the Company’s Board of Directors approved a new management incentive plan, the Carmike Cinemas, Inc. 2002 Stock Plan (the “2002 Stock Plan”). The Board of Directors has approved the grant of 780,000 shares under the 2002 Stock Plan to Michael W. Patrick, the Company’s Chief Executive Officer. Pursuant to the terms of Mr. Patrick’s employment agreement dated January 31, 2002 these shares will be delivered in three equal installments on January 31, 2005, 2006 and 2007 unless, prior to the delivery of any such installment, Mr. Patrick’s employment is terminated for Cause (as defined in his employment agreement) or he has violated certain covenants set forth in such employment agreement. In May 2002, the Company’s Stock Option Committee (which administered the 2002 Stock Plan prior to August 2002) approved grants of the remaining 220,000 shares to a group of seven other members of senior management. These shares are to be earned over a three year period, commencing with the year ended December 31, 2002, with the shares being earned as the executive achieves specific performance goals set for the executive to be achieved during each of these years. In some instances the executive may earn partial amounts of his or her stock grant based on graded levels of performance. Shares earned each year will vest and be receivable approximately two years after the calendar year in which they were earned, provided, with certain

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exceptions, the executive remains an employee of the Company. One of the seven grants to senior executives includes a grant of 35,000 shares to a former employee of the Company.

     Pursuant to an agreement with the former employee, the Company will deliver to the former employee the 17,000 shares earned in connection with his performance in 2002. These 17,000 shares shall vest on January 31, 2005. Of the 220,000 shares granted to members of senior management, 69,250 shares were earned on December 31, 2002 and 14,250 shares were forfeited. However, the Compensation Committee (renamed the Compensation, Nominating and Corporate Governance Committee subsequent to December 31, 2003) approved two additional grants of 5,500 shares to two members of senior management on March 7, 2003, which shares are deemed to be earned and subject only to vesting requirements. For the year ended December 31, 2003, 62,980 shares were earned and 15,520 shares were forfeited. On May 21, 2004, the Compensation, Nominating and Corporate Governance Committee approved one additional grant of 1,130 shares to one member of senior management. Therefore, of the original 220,000 shares granted to members of senior management, 161,360 shares are deemed to have been earned, subject only to vesting requirements, 23,640 shares have been forfeited and 35,000 shares may be earned over the next year. The Company has included in stockholders’ equity $13.7 million and $9.6 million at September 30, 2004 and December 31, 2003, respectively, related to the 2002 Stock Plan.

     On May 31, 2002, the Board of Directors adopted the Carmike Cinemas, Inc. Non-Employee Directors Long-Term Stock Incentive Plan (the “Directors Incentive Plan”), which was approved by the stockholders on August 14, 2002. The purpose of the Directors Incentive Plan is to provide incentives that will attract, retain and motivate qualified and experienced persons for service as non-employee directors of Carmike. There are a total of 75,000 shares reserved under the Directors Incentive Plan. The Board of Directors approved a grant of 5,000 shares each to two independent directors on August 14, 2002. Additionally, the Board of Directors approved stock option grants of 5,000 shares in September 2003 and 5,000 shares in April 2004 for new directors. The option grant price was based on the fair market value of the stock on the date of the grant. These grants of 20,000 shares in the aggregate during 2002, 2003 and 2004 represent the only stock options outstanding under the Directors Incentive Plan at September 30, 2004.

     On July 19, 2002, the Board of Directors adopted the Carmike Cinemas, Inc. Employee and Consultant Long-Term Stock Incentive Plan (the “Employee Incentive Plan”), which was approved by the stockholders on August 14, 2002. The purpose of the Employee Incentive Plan is to provide incentives, competitive with those of similar companies, which will attract, retain and motivate qualified and experienced persons to serve as employees and consultants of the Company and to further align such employees’ and consultants’ interest with those of the Company’s Stockholders. There are a total of 500,000 shares reserved under the Employee Incentive Plan. The Company granted an aggregate of 150,000 options pursuant to this plan on March 7, 2003 to three members of senior management. The exercise price for the 150,000 stock options is $21.79 per share, and 75,000 options vest on December 31, 2005 and 75,000 options vest on December 31, 2006. On December 18, 2003, the Company granted an aggregate of 180,000 options to six members of management. The exercise price for the 180,000 options is $35.63 and they vest ratably over three years beginning December 31, 2005 through December 31, 2007.

     On March 31, 2004, the Board of Directors adopted the Carmike Cinemas, Inc. 2004 Incentive Stock Plan, which was approved by the stockholders on May 21, 2004. The Compensation, Nominating and Corporate Governance Committee may grant stock options, stock

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grants, stock units, and stock appreciation rights under the 2004 Incentive Stock Plan to certain eligible employees and to outside directors. There are 830,000 shares of Common Stock reserved for issuance pursuant to grants made under the 2004 Incentive Stock Plan in addition to the 225,000 unissued shares that were previously authorized for issuance under the Employee Incentive Plan and the Directors Incentive Plan which may be forfeited after the effective date of the 2004 Incentive Stock Plan. No further grants may be made under the Employee Incentive Plan or Directors Incentive Plan.

NOTE 9 — EARNINGS PER SHARE

     Earnings per share calculations contain dilutive adjustments for shares under the various stock plans discussed in Note 7. The following table reflects the effects of those plans on the earnings.

     per share data (in thousands, except for share data),

NOTE 10 — CONDENSED FINANCIAL DATA

     The Company and its wholly owned subsidiaries have fully, unconditionally, and jointly and severally guaranteed the Company’s obligations under the Company’s 7.500% senior subordinated notes. The Company has several unconsolidated affiliates that are not gua