Cinemark Usa 10-Q 2010 Q2 Quarterly report

CINEMARK USA, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION (H)(1)(A) AND (B) OF FORM 10-Q AND THEREFORE IS FILING THIS FORM
WITH THE REDUCED DISCLOSURE FORMAT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2010

Commission File Number: 033-47040

CINEMARK USA, INC.

(Exact name of registrant as specified in its charter)

Texas (State or other jurisdiction of incorporation or organization)	75-2206284 (I.R.S. Employer Identification No.)
3900 Dallas Parkway Suite 500 Plano, Texas (Address of principal executive offices)	75093 (Zip Code)

Registrant’s telephone number, including area code: (972) 665-1000

     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.

Yesþ Noo

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yeso Noo

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

Large accelerated filero	Accelerated filero	Non-accelerated filerþ	Smaller reporting companyo
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso Noþ

     As of July 31, 2010, 1,500 shares of Class A common stock and 182,648 shares of Class B common stock were outstanding.

CINEMARK USA, INC. AND SUBSIDIARIES
TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009 (unaudited)		4
Condensed Consolidated Statements of Income for the three and six months ended June 30, 2010 and 2009 (unaudited)		5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (unaudited)		6
Notes to Condensed Consolidated Financial Statements (unaudited)		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
Item 4. Controls and Procedures		39
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		40
Item 1A. Risk Factors		40
Item 5. Other Information		40
Item 6. Exhibits		44
SIGNATURES		45
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

Cautionary Statement Regarding Forward-Looking Statements

Certain matters within this Quarterly Report on Form 10Q include “forward–looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements included in this Form 10Q, other than statements of historical fact, may constitute forward-looking statements. Forward-looking statements can be identified by the use of words such as “may,” “should,” “will,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. For a description of the risk factors, please review the “Risk Factors” section or other sections in the Company’s Annual Report on Form 10-K filed March 12, 2010 and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by such risk factors. We undertake no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

3

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

	June 30,			December 31,
	2010			2009
Assets
Current assets
Cash and cash equivalents	$	435,715		$	437,737
Inventories		10,302			9,854
Accounts receivable		40,638			32,793
Income tax receivable		13,961			13,025
Current deferred tax asset		3,289			3,321
Prepaid expenses and other		9,453			10,051
Accounts receivable from parent		8,281			7,656
Total current assets		521,639			514,437
Theatre properties and equipment		1,948,064			1,936,535
Less accumulated depreciation and amortization		763,810			716,947
Theatre properties and equipment — net		1,184,254			1,219,588
Other assets
Goodwill		1,114,343			1,116,302
Intangible assets — net		339,210			342,998
Investment in NCM		64,283			34,232
Investment in DCIP		13,469			640
Investment in Real D		6,521			—
Investments in and advances to affiliates		3,849			2,889
Deferred charges and other assets — net		65,809			52,502
Total other assets		1,607,484			1,549,563
Total assets	$	3,313,377		$	3,283,588
Liabilities and equity
Current liabilities
Current portion of long-term debt	$	11,112		$	12,227
Current portion of capital lease obligations		7,344			7,340
Current liability for uncertain tax positions		2,652			13,229
Accounts payable and accrued expenses		229,254			247,938
Total current liabilities		250,362			280,734
Long-term liabilities
Long-term debt, less current portion		1,526,805			1,531,478
Capital lease obligations, less current portion		131,680			133,028
Deferred tax liability		110,339			124,823
Liability for uncertain tax positions		15,753			18,432
Deferred lease expenses		29,359			27,698
Deferred revenue — NCM		232,212			203,006
Other long-term liabilities		48,188			42,248
Total long-term liabilities		2,094,336			2,080,713
Commitments and contingencies (see Note 19)
Equity
Cinemark USA, Inc.’s stockholder’s equity:
Class A common stock, $0.01 par value: 10,000,000 shares authorized, 1,500 shares issued and outstanding		—			—
Class B common stock, no par value: 1,000,000 shares authorized, 239,893 shares issued and 182,648 shares outstanding		49,543			49,543
Treasury stock, 57,245 Class B shares at cost		(24,233	)		(24,233	)
Additional paid-in-capital		1,162,894			1,151,166
Retained deficit		(220,633	)		(261,672	)
Accumulated other comprehensive loss		(10,370	)		(7,459	)
Total Cinemark USA, Inc.’s stockholder’s equity		957,201			907,345
Noncontrolling interests		11,478			14,796
Total equity		968,679			922,141
Total liabilities and equity	$	3,313,377		$	3,283,588

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

4

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, unaudited)

	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009
Revenues
Admissions	$	353,085		$	339,088		$	696,075		$	618,971
Concession		165,230			158,926			318,334			288,957
Other		21,054			19,494			41,591			35,380
Total revenues		539,369			517,508			1,056,000			943,308
Cost of operations
Film rentals and advertising		193,550			190,826			382,369			337,952
Concession supplies		24,494			24,027			46,900			43,744
Salaries and wages		56,250			52,070			108,792			96,420
Facility lease expense		61,990			59,195			124,705			114,933
Utilities and other		57,648			54,168			112,869			102,896
General and administrative expenses		24,461			23,247			49,452			44,658
Depreciation and amortization		34,657			37,535			68,590			73,668
Amortization of favorable/unfavorable leases		258			346			416			669
Impairment of long-lived assets		4,688			3,930			5,035			4,969
Loss on sale of assets and other		1,191			1,186			4,358			1,458
Total cost of operations		459,187			446,530			903,486			821,367
Operating income		80,182			70,978			152,514			121,941
Other income (expense)
Interest expense		(28,605	)		(15,257	)		(54,615	)		(30,539	)
Interest income		1,379			937			2,432			2,610
Foreign currency exchange gain		348			472			80			538
Distributions from NCM		1,332			5,027			11,278			11,606
Equity in loss of affiliates		(3,182	)		(415	)		(3,155	)		(1,020	)
Total other expense		(28,728	)		(9,236	)		(43,980	)		(16,805	)
Income before income taxes		51,454			61,742			108,534			105,136
Income taxes		10,392			18,190			30,425			36,651
Net income	$	41,062		$	43,552		$	78,109		$	68,485
Less: Net income attributable to noncontrolling interests		1,077			1,137			2,695			1,923
Net income attributable to Cinemark USA, Inc.	$	39,985		$	42,415		$	75,414		$	66,562

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

5

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

	Six months ended June 30,
	2010			2009
Operating activities
Net income	$	78,109		$	68,485
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		66,378			71,678
Amortization of intangible and other assets and unfavorable leases		2,628			2,659
Amortization of long-term prepaid rents		779			750
Amortization of debt issue costs		2,357			1,727
Amortization of deferred revenues, deferred lease incentives and other		(3,005	)		(2,167	)
Amortization of accumulated other comprehensive loss related to interest rate swap agreement		2,317			2,317
Amortization of bond discount		381			—
Impairment of long-lived assets		5,035			4,969
Share based awards compensation expense		2,873			2,153
Loss on sale of assets and other		2,325			1,458
Loss on contribution and sale of digital projection systems to DCIP		2,033			—
Deferred lease expenses		1,697			2,121
Deferred income tax expenses		(14,176	)		(17,006	)
Equity in loss of affiliates		3,155			1,020
Tax benefit related to stock option exercises		1,904			—
Increase in deferred revenue related to new U.S. beverage agreement		—			6,550
Distributions from equity investees		2,059			1,078
Changes in assets and liabilities		(48,965	)		21,261
Net cash provided by operating activities		107,884			169,053
Investing activities
Additions to theatre properties and equipment		(56,960	)		(60,918	)
Proceeds from sale of theatre properties and equipment		2,148			653
Acquisition of theatres in the U.S.		—			(48,950	)
Investment in joint venture — DCIP, net of cash distributions		(644	)		(1,500	)
Net cash used for investing activities		(55,456	)		(110,715	)
Financing activities
Capital contributions from parent		—			19,650
Dividends paid to parent		(34,375	)		(452,975	)
Payroll taxes paid as a result of noncash stock option exercises and restricted stock withholdings		(416	)		—
Proceeds from issuance of senior notes		—			458,532
Payment of debt issue costs		(8,706	)		(12,423	)
Repayments of long-term debt		(6,136	)		(6,289	)
Payments on capital leases		(3,606	)		(2,830	)
Other		(110	)		(795	)
Net cash provided by (used for) financing activities		(53,349	)		2,870
Effect of exchange rate changes on cash and cash equivalents		(1,101	)		7,959
Increase (decrease) in cash and cash equivalents		(2,022	)		69,167
Cash and cash equivalents:
Beginning of period		437,737			313,238
End of period	$	435,715		$	382,405
Supplemental information (See Note 15)

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

6

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

1. The Company and Basis of Presentation

     Cinemark USA, Inc. and subsidiaries (the “Company”) is a leader in the motion picture exhibition industry, with theatres in the United States (“U.S.”), Canada, Brazil, Mexico, Chile, Colombia, Argentina, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala. The Company also managed additional theatres in the U.S., Brazil, and Colombia during the six months ended June 30, 2010.

     The condensed consolidated financial statements have been prepared by the Company, without audit, according to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these interim financial statements reflect all adjustments of a recurring nature necessary to state fairly the financial position and results of operations as of, and for, the periods indicated. Majority-owned subsidiaries that the Company has control of are consolidated while those affiliates of which the Company owns between 20% and 50% and does not control are accounted for under the equity method. Those affiliates of which the Company owns less than 20% are generally accounted for under the cost method, unless the Company is deemed to have the ability to exercise significant influence over the affiliate, in which case the Company would account for its investment under the equity method. The results of these subsidiaries and affiliates are included in the condensed consolidated financial statements effective with their formation or from their dates of acquisition. Intercompany balances and transactions are eliminated in consolidation.

     These condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and the notes thereto for the year ended December 31, 2009, included in the Annual Report on Form 10-K filed March 12, 2010 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the six months ended June 30, 2010, are not necessarily indicative of the results to be achieved for the full year.

2. New Accounting Pronouncements

     In April 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS 107-1 and APB 28-1 (FASB ASC Topic 825) “Interim Disclosures about Fair Value of Financial Instruments”. FSP FAS 107-1 and APB 28-1 (FASB ASC Topic 825) require that disclosures about the fair value of financial instruments be included in the notes to financial statements issued during interim periods. Fair value information must be presented in the notes to financial statements together with the carrying amounts of the financial instruments. It must be clearly stated whether the amounts are assets or liabilities and how they relate to information presented in the balance sheet. The disclosures must include methods and significant assumptions used to estimate fair values, along with any changes in those methods and assumptions from prior periods. FSP FAS 107-1 and APB 28-1 (FASB ASC Topic 825) were effective for interim and annual periods ending after June 15, 2009, with early adoption permitted. Upon adoption of FSP FAS 107-1 and APB 28-1(FASB ASC Topic 825), the Company added a disclosure regarding the fair value of its long-term debt (see Note 10). Below is a summary of the Company’s financial instruments:

	June 30, 2010						December 31, 2009
	Carrying			Fair			Carrying			Fair
	Value			Value			Value			Value
Debt (see Note 10)	$	(1,537,917	)	$	(1,516,184	)	$	(1,543,705	)	$	(1,513,838	)
Interest rate swap agreements (see Note 11)	$	(19,257	)	$	(19,257	)	$	(18,524	)	$	(18,524	)

     In May 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 165 (FASB ASC Topic 855), “Subsequent Events". SFAS No. 165 (FASB ASC Topic 855) should not result in significant changes in the subsequent events that an entity reports. Rather, SFAS No. 165 (FASB ASC Topic 855) introduced the concept of financial statements that are available to be issued. Financial statements are considered available to be issued when they are complete in a form and format that complies with generally accepted accounting principles and all approvals necessary for issuance have been obtained. SFAS No. 165 (FASB ASC Topic 855) was effective for interim or annual financial periods ending after June 15, 2009. The adoption of SFAS No. 165 (FASB ASC Topic 855) did not have a significant impact on the Company’s condensed consolidated financial statements.

7

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

     In June 2009, the FASB issued SFAS No. 168 (FASB ASC Topic 105), “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles", which authorizes the Codification as the sole source for authoritative generally accepted accounting principles in the U.S. (“U.S. GAAP”). SFAS No. 168 (FASB ASC Topic 105) was effective for financial statements issued for reporting periods that end after September 15, 2009. SFAS No. 168 (FASB ASC Topic 105) supersedes all accounting standards in U.S. GAAP, aside from those issued by the SEC. SFAS No. 168 (FASB ASC Topic 105) replaced SFAS No. 162 to establish a new hierarchy of GAAP sources for non-governmental entities under the FASB Accounting Standards Codification. The adoption of SFAS No. 168 (FASB ASC Topic 105) did not have a significant impact on the Company’s condensed consolidated financial statements.

     In December 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-17,“Consolidations (Topic 810) — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.”ASU No. 2009-17 changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. ASU No. 2009-17 requires a reporting entity to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity is required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements. ASU No. 2009-17 is effective for fiscal years beginning after November 15, 2009, and interim periods within those fiscal years. The Company adopted ASU No. 2009-17 as of January 1, 2010, and its application had no impact on the Company’s condensed consolidated financial statements.

     In January 2010, the FASB issued FASB ASU 2010-06, “Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements(“ASU 2010-06”)”, which amends FASB ASC Topic 820-10, “Fair Value Measurements and Disclosures". The update requires additional disclosures for transfers in and out of Levels 1 and 2 and for activity in Level 3 and clarifies certain other existing disclosure requirements. The Company adopted ASU 2010-06 beginning January 1, 2010. This update did not have a significant impact on the Company’s disclosures.

3. Buyout of Colombia Noncontrolling Interest

     During April 2010, the Company’s partners in Colombia (the “Colombian Partners”) exercised an option available to them under an Exchange Option Agreement dated April 9, 2007 between Cinemark Holdings, Inc. and the Colombian Partners (the “Exchange Option Agreement”). Under this option, which was contingent upon completion of an initial public offering of common stock by Cinemark Holdings, Inc., the Colombian Partners were entitled to exchange their shares in Cinemark Colombia S.A. for shares of Cinemark Holdings, Inc.’s common stock (the “Colombia Share Exchange”). The number of shares to be exchanged was determined based on Cinemark Holdings, Inc.’s equity value and the equity value of the Colombian Partners’ interest in Cinemark Colombia S.A., both of which are defined in the Exchange Option Agreement. As a result of the Colombia Share Exchange, on June 14, 2010, Cinemark Holdings, Inc. issued 1,112,723 shares of its common stock to the Colombian Partners. Simultaneously, Cinemark Holdings, Inc. contributed the shares it received in Cinemark Colombia S.A. to the Company. The increase in the Company’s ownership interest in its Colombian subsidiary was accounted for as an equity transaction. The Company recorded an increase in additional-paid-in-capital of approximately $6,951, which represented the book value of the Colombian partners’ noncontrolling interest account of approximately $5,865 plus the Colombian partners’ share of accumulated other comprehensive loss of approximately $1,086. As a result of this transaction, the Company now owns 100% of the shares in Cinemark Colombia S.A.

8

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

4. Equity

     Below is a summary of changes in stockholder’s equity attributable to Cinemark USA, Inc., noncontrolling interests and total equity for the six months ended June 30, 2010 and 2009:

	Cinemark
	USA, Inc.
	Stockholder’s			Noncontrolling			Total
	Equity			Interests			Equity
Balance at January 1, 2010	$	907,345		$	14,796		$	922,141
Colombia Share Exchange (see Note 3)		5,865			(5,865	)		—
Share based awards compensation expense		2,873			—			2,873
Dividends paid to parent		(34,375	)		—			(34,375	)
Tax benefit related to stock option exercises		1,904			—			1,904
Dividends paid to noncontrolling interests		—			(110	)		(110	)
Comprehensive income:
Net income		75,414			2,695			78,109
Fair value adjustments on interest rate swap agreements, net of taxes of $276		(456	)		—			(456	)
Amortization of accumulated other comprehensive loss on terminated swap agreement		2,317			—			2,317
Foreign currency translation adjustment		(3,686	)		(38	)		(3,724	)
Balance at June 30, 2010	$	957,201		$	11,478		$	968,679

	Cinemark
	USA, Inc.
	Stockholder’s			Noncontrolling			Total
	Equity			Interests			Equity
Balance at January 1, 2009	$	1,142,920		$	12,971		$	1,155,891
Share based awards compensation expense		2,153			—			2,153
Dividends paid to parent		(452,975	)		—			(452,975	)
Capital contributions from parent		55,525			—			55,525
Dividends paid to noncontrolling interests		—			(700	)		(700	)
Purchase of noncontrolling interest share of an Argentina subsidiary		23			(117	)		(94	)
Comprehensive income:
Net income		66,562			1,923			68,485
Fair value adjustments on interest rate swap agreements, net of taxes of $2,181		3,605			—			3,605
Amortization of accumulated other comprehensive loss on terminated swap agreement		2,317			—			2,317
Foreign currency translation adjustment		33,414			127			33,541
Balance at June 30, 2009	$	853,544		$	14,204		$	867,748

5. Acquisition of U.S. Theatres

     On March 18, 2009, the Company acquired four theatres with 82 screens from Muvico Entertainment L.L.C. in an asset purchase for $48,950 in cash. The acquisition resulted in an expansion of the Company’s U.S. theatre base, as three of the theatres are located in Florida and one theatre is located in Maryland. The Company incurred approximately $113 in transaction costs, which are reflected in general and administrative expenses on the condensed consolidated statement of income for the six months ended June 30, 2009.

9

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

     The transaction was accounted for by applying the acquisition method. The following table represents the identifiable assets acquired and liabilities assumed that have been recognized by the Company in its condensed consolidated balance sheet as of the date of acquisition:

Theatre properties and equipment	$	25,575
Brandname		3,500
Noncompete agreement		1,630
Goodwill		44,565
Unfavorable lease		(3,600	)
Capital lease liability (for one theatre)		(22,720	)
Total	$	48,950

     The brandname and noncompete agreement are presented as intangible assets and the unfavorable lease is presented as other long-term liabilities on the Company’s condensed consolidated balance sheets. The weighted average remaining amortization period for these intangible assets and the unfavorable lease are 8.4 years and 8.8 years, respectively. Goodwill represents excess of the costs of acquiring these theatres over amounts assigned to assets acquired, including intangible assets, and liabilities assumed. The goodwill recorded is fully deductible for tax purposes.

6. Investment in National CineMedia

     Below is a summary of activity with NCM included in the Company’s condensed consolidated financial statements:

	Investment			Deferred			Distributions			Equity			Other			Cash
	in NCM			Revenue			from NCM			Earnings			Revenue			Received
Balance as of December 31, 2009	$	34,232		$	(203,006	)
Receipt of common units due to annual common unit adjustment		30,683			(30,683	)	$	—		$	—		$	—		$	—
Change of interest gain due to 2010 extraordinary common unit adjustment		271			—			—			—			—			—
Revenues earned under exhibitor services agreement		—			—			—			—			(2,434	)		2,434
Receipt of excess cash distributions		(1,454	)		—			(8,211	)		—			—			9,665
Receipt under tax receivable agreement		(477	)		—			(3,067	)		—			—			3,544
Equity in earnings		1,028			—			—			(1,028	)		—			—
Amortization of deferred revenue		—			1,477			—			—			(1,477	)		—
Balance as of and for the period ended June 30, 2010	$	64,283		$	(232,212	)	$	(11,278	)	$	(1,028	)	$	(3,911	)	$	15,643

     During March 2010, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company received an additional 1,757,548 common units of NCM, each of which is convertible into one share of NCM, Inc. common stock. The Company recorded the additional common units received at fair value as an investment with a corresponding adjustment to deferred revenue of $30,683. The common unit adjustment resulted in a change in the Company’s ownership percentage in NCM from approximately 15.0% to 16.3%. Subsequent to the annual common unit adjustment discussed above, in May 2010, one of NCM’s other founding members completed an acquisition of another theatre circuit that required an extraordinary common unit adjustment calculation by NCM in accordance with the Common Unit Adjustment Agreement. As a result of this extraordinary common unit adjustment, the founding member was granted additional common units of NCM, which resulted in dilution of the Company’s ownership interest in NCM from 16.3% to 15.4%. The Company recognized a change of interest gain of approximately $271 during the three and six months ended June 30, 2010 as a result of this extraordinary common unit adjustment, which is reflected net of other losses in loss on sale of assets and other on the condensed consolidated statement of income.

10

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

     As of June 30, 2010, the Company owned a total of 16,946,503 common units of NCM. The Company continues to account for its investment in NCM under the equity method of accounting. During the six months ended June 30, 2010 and June 30, 2009, the Company recorded equity earnings of approximately $1,028 and $407, respectively.

     Pursuant to the terms of the Exhibitor Services Agreement, the Company recorded other revenues, excluding the amortization of deferred revenue, of approximately $2,434 and $2,870 during the six months ended June 30, 2010 and 2009, respectively. These amounts include the per patron and per digital advertising screen theatre access fee and theatre rental revenue, net of amounts due to NCM for on-screen advertising time provided to the Company’s beverage concessionaire of $5,183 and $4,790, respectively.

     Below is summary financial information for NCM for the three and six months ended July 1, 2010:

	Three Months		Six Months
	Ended July 1, 2010		Ended July 1, 2010
Gross revenues	$	98,998	$	183,656
Operating income	$	43,550	$	69,710
Net earnings	$	27,546	$	40,193

7. Investment in Digital Cinema Implementation Partners

     On February 12, 2007, the Company, AMC Entertainment Inc. and Regal Entertainment Group entered into a joint venture known as Digital Cinema Implementation Partners LLC (“DCIP”) to facilitate the implementation of digital cinema in the Company’s theatres and to establish agreements with major motion picture studios for the financing of digital cinema.

     During January 2010, the Company contributed $500 to DCIP. On March 10, 2010, the Company signed a master equipment lease agreement and other related agreements (collectively the “agreements”) with Kasima LLC (“Kasima”), which is an indirect subsidiary of DCIP and a related party to the Company. Upon signing the agreements, the Company contributed cash of $1,201 and digital projection systems at a fair value of $16,380 to DCIP (collectively the “contributions”), which DCIP then contributed to Kasima. The net book value of the contributed equipment was approximately $18,090, and as a result, the Company recorded a loss of approximately $1,710, which is reflected in loss on sale of assets and other on the condensed consolidated statement of income for the six months ended June 30, 2010. Subsequent to the contributions, the Company continues to have a 33% voting interest in DCIP and has a 24.3% economic interest in DCIP. On April 24, 2010, the Company sold digital projection systems with a net book value of approximately $1,520 to Kasima for approximately $1,197, resulting in an additional loss of approximately $323, which is reflected in loss on sale of assets and other on the condensed consolidated statement of income for the three and six months ended June 30, 2010.

     The Company has a variable interest in Kasima through the terms of its master equipment lease agreement; however, the Company has determined that it is not the primary beneficiary of Kasima, as the Company does not have the ability to direct the activities of Kasima that most significantly impact Kasima’s economic performance. The Company accounts for its investment in DCIP and its subsidiaries under the equity method of accounting. During the six months ended June 30, 2010 and 2009, the Company recorded equity losses of $4,195 and $1,478, respectively, relating to this investment. During March 2010, the Company received a cash distribution of $1,057 from DCIP.

     As a result of these agreements, the Company will continue to roll out digital projection systems to a majority of its first run U.S. theatres. The digital projection systems will be leased from Kasima under an operating lease with an initial term of twelve years that contains ten one-year fair value renewal options. The equipment lease agreement also contains a fair value purchase option. Under the equipment lease agreement, the Company pays minimum annual rent of one thousand dollars per digital projection system for the first six and a half years from the effective date of the agreement and minimum annual rent of three thousand dollars per digital projection system beginning at six and a half years from the effective date through the end of the lease term. The Company may also be subject to various types of other rent if such digital projection systems do not meet minimum performance

11

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

requirements as outlined in the agreements. Certain of the other rent payments are subject to either a monthly or an annual maximum. As of June 30, 2010, the Company had 537 digital projection systems being leased under the master equipment lease agreement with Kasima. The Company recorded equipment lease expense of approximately $252 during the six months ended June 30, 2010, which is included in utilities and other costs on the condensed consolidated statement of income.

     The digital projection systems leased from Kasima will replace a majority of the Company’s existing 35 millimeter projection systems in its U.S. theatres. Therefore, upon signing the agreements, the Company began accelerating the depreciation of these existing 35 millimeter projection systems, based on the estimated two year replacement timeframe. The Company recorded depreciation expense of approximately $3,695 on its domestic 35 millimeter projectors during the six months ended June 30, 2010. The net book value of the existing 35 millimeter projection systems to be replaced was approximately $15,990 as of June 30, 2010.

8. Investment in Real D

     Under its license agreement with Real D, the Company earns options to purchase shares of common stock once it has installed a certain number of 3-D systems as outlined in the license agreement. During June 2010, the Company reached the first target level and vested in 407,593 options to purchase shares of common stock in Real D, which have an exercise price of $0.00667. Upon vesting in these options, the Company recorded an investment in Real D of approximately $6,521, which represents the estimated fair value of the options, with an offset to deferred lease incentive liability. The fair value of the options was determined using Real D’s initial public offering price, which falls under Level 2 of the U.S. GAAP fair value hierarchy as defined by ASC Topic 820-10-35. The Company will account for the investment in Real D as a cost method investment. The deferred lease incentive liability, which is reflected in other long-term liabilities on the condensed consolidated balance sheet as of June 30, 2010, will be amortized over the remaining term of the license agreement, which is approximately seven and one-half years. Under the license agreement, the Company can earn up to 815,186 additional options to purchase shares of common stock of Real D as it meets additional 3-D system installation targets as outlined in the license agreement.

9. Share Based Awards

     Stock Options —A summary of activity and related information for Cinemark Holdings, Inc. stock options that are held by the Company’s employees for the six months ended June 30, 2010 is as follows:

						Weighted Average
	Number of			Weighted Average		Grant Date Fair		Aggregate Intrinsic
	Options			Exercise Price		Value		Value
Outstanding at December 31, 2009		1,231,892		$	7.63	$	3.51
Exercised		(772,727	)	$	7.63	$	3.51
Outstanding at June 30, 2010		459,165		$	7.63	$	3.51	$	2,535
Options exercisable at June 30, 2010		459,165		$	7.63	$	3.51	$	2,535

     The total intrinsic value of options exercised during the six month period ended June 30, 2010 was $6,554. The Company recognized a tax benefit of approximately $1,904 related to the options exercised during the six months ended June 30, 2010.

     As of June 30, 2010, there was no remaining unrecognized compensation expense related to outstanding stock options and all outstanding options fully vested on April 2, 2009. All options outstanding at June 30, 2010 have an average remaining contractual life of approximately four years.

     Restricted Stock- During the six months ended June 30, 2010, Cinemark Holdings, Inc. granted 679,308 shares of restricted stock to directors of Cinemark Holdings, Inc. and employees of the Company. The fair value of the restricted stock granted was determined based on the market value of Cinemark Holdings, Inc.’s stock on the dates of grant, which ranged from $13.15 to $18.47 per share. The Company assumed forfeiture rates ranging from zero to 5% for the restricted stock awards. The restricted stock granted to directors vests over periods ranging from six

12

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

months to one year and the restricted stock granted to employees vest over four years based on continued service.

     Below is a summary of restricted stock activity for the six months ended June 30, 2010:

	Shares of			Weighted Average
	Restricted			Grant Date
	Stock			Fair Value
Outstanding at December 31, 2009		764,078		$	11.10
Granted		679,308		$	17.94
Forfeited		(2,719	)	$	11.03
Vested		(189,885	)	$	12.64
Outstanding at June 30, 2010		1,250,782		$	14.58
Unvested restricted stock at June 30, 2010		1,250,782		$	14.58

     The Company recorded compensation expense of $1,753 and Cinemark Holdings, Inc. recorded an additional $381 related to these restricted stock awards during the six months ended June 30, 2010. As of June 30, 2010, the remaining unrecognized compensation expense related to restricted stock awards was $15,214 and the weighted average period over which this remaining compensation expense will be recognized is approximately three years. Upon vesting, the Company receives an income tax deduction. The total fair value of shares that vested during the six months ended June 30, 2010 was $3,260. The Company recognized a tax benefit of approximately $1,229 related to these vested shares. The recipients of restricted stock are entitled to receive dividends and to vote their respective shares, however the sale and transfer of the restricted shares is prohibited during the restriction period.

     Restricted Stock Units— During the six months ended June 30, 2010, Cinemark Holdings, Inc. granted restricted stock units to employees of the Company representing 396,432 hypothetical shares of common stock under the Restated Incentive Plan. The restricted stock units vest based on a combination of financial performance factors and continued service. The financial performance factors are based on an implied equity value concept that determines an internal rate of return (“IRR”) during the three fiscal year period ending December 31, 2012 based on a formula utilizing a multiple of Adjusted EBITDA subject to certain specified adjustments (as defined in the restricted stock unit award agreement). The financial performance factors for the restricted stock units have a threshold, target and maximum level of payment opportunity. If the IRR for the three year period is at least 8.5%, which is the threshold, one-third of the restricted stock units vest. If the IRR for the three year period is at least 10.5%, which is the target, two-thirds of the restricted stock units vest. If the IRR for the three year period is at least 12.5%, which is the maximum, 100% of the restricted stock units vest. Grantees are eligible to receive a ratable portion of the common stock issuable if the IRR is within the targets previously noted. All payouts of restricted stock units that vest will be subject to an additional service requirement and will be paid in the form of common stock if the participant continues to provide services through March 31, 2014, which is the fourth anniversary of the grant date. Restricted stock unit award participants are eligible to receive dividend equivalent payments if and at the time the restricted stock unit awards are paid out.

     Below is a table summarizing the potential number of shares that could vest under restricted stock unit awards granted during the six months ended June 30, 2010 at each of the three target levels of financial performance (excluding forfeiture assumptions):

	Number of
	Shares		Value at
	Vesting		Grant
at IRR of at least 8.5%		132,144	$	2,423
at IRR of at least 10.5%		264,288	$	4,847
at IRR of at least 12.5%		396,432	$	7,271

     Due to the fact that the IRR for the three year performance period could not be determined at the time of grant, the Company estimated that the most likely outcome is the achievement of the mid-point IRR level. The Company assumed a forfeiture rate of 5% for the restricted stock unit awards. If during the service period, additional information becomes available to lead the Company to believe a different IRR level will be achieved for the three

13

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

year performance period, the Company will reassess the number of units that will vest for the grant and adjust its compensation expense accordingly on a prospective basis over the remaining service period.

     During the six months ended June 30, 2010, the Compensation Committee of Cinemark Holdings, Inc.’s board of directors approved a modification of restricted stock unit awards granted to employees during 2008. Cinemark Holdings, Inc.’s Compensation Committee also approved the cancellation and replacement of restricted stock unit awards granted to the Company’s top five executive officers during 2008. Both the modification and the cancellation and replacement were accounted for as modifications of share based awards. As a result of these modifications, the Company recorded incremental compensation expense of approximately $391 during the six months ended June 30, 2010, which represents the difference between the grant date fair value and the modification date fair value of these awards for the portion of the service period that has been satisfied. The service period for the modified awards did not change. The Company will record additional incremental compensation expense of $304 over the remaining service period.

     No restricted stock unit awards have vested. There were no forfeitures of restricted stock unit awards during the six months ended June 30, 2010. The Company recorded compensation expense of $1,120 related to these restricted stock unit awards during the six months ended June 30, 2010, including the aforementioned $391 related to the modification of the 2008 restricted stock unit awards. As of June 30, 2010, the Company had restricted stock units outstanding that represented a total of 883,943 hypothetical shares of common stock, net of actual cumulative forfeitures of 20,019 units, assuming the maximum IRR of at least 12.5% is achieved for all of the grants. As of June 30, 2010, the remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $6,622, which assumes the mid-point IRR level will be achieved for all of the restricted stock units outstanding. The weighted average period over which this remaining compensation expense will be recognized is approximately three years.

10. Long-Term Debt Activity

     Senior Notes

     On June 29, 2009, Cinemark USA, Inc. issued $470,000 aggregate principal amount of 8.625% senior notes due 2019 with an original issue discount of $11,468, resulting in proceeds of approximately $458,532. The proceeds were primarily used to fund the repurchase of $402,459 aggregate principal amount at maturity of Cinemark, Inc.’s 9³/4% senior discount notes discussed below. Interest is payable on June 15 and December 15 of each year beginning December 15, 2009. The senior notes mature on June 15, 2019. As of June 30, 2010, the carrying value of the senior notes was $459,278.

     Cash Tender Offer for Cinemark, Inc.’s 9³/4% Senior Discount Notes due 2014

     On June 15, 2009, Cinemark, Inc. commenced a cash tender offer for any and all of its 9³/4% senior discount notes due 2014, of which $419,403 aggregate principal amount at maturity remained outstanding. In connection with the tender offer, Cinemark, Inc. solicited consents to adopt proposed amendments to the indenture to eliminate substantially all restrictive covenants and certain events of default provisions. On June 29, 2009, approximately $402,459 aggregate principal amount at maturity of the 9³/4% senior discount notes were tendered and repurchased by Cinemark, Inc. for approximately $433,415, including accrued interest of $11,336 and tender premiums paid of $19,620. The Company funded the repurchase with a dividend paid to Cinemark, Inc. utilizing the proceeds from the issuance of its senior notes discussed above.

     Amendment and Extension of Senior Secured Credit Facility

     On March 2, 2010, the Company completed an amendment and extension to its existing senior secured credit facility to primarily extend the maturities of the facility and make certain other modifications. Approximately $924,375 of the Company’s then remaining outstanding $1,083,600 term loan debt was extended from an original maturity date of October 2013 to a maturity date of April 2016. The remaining term loan debt of $159,225 that was not extended matures on the original maturity date of October 2013. Payments on the extended amount are due in equal quarterly installments of $2,311 through March 31, 2016 with the remaining principal amount of $866,602 due April 30, 2016. Payments on the original amount that was not extended are due in equal quarterly installments

14

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

of approximately $398 beginning March 31, 2010 through September 30, 2012 and increase to approximately $37,418 each calendar quarter from December 31, 2012 to June 30, 2013 with one final payment of approximately $42,593 at maturity on October 5, 2013. The amendment also imposed a 1.0% prepayment premium for one year on certain prepayments of the extended portion of the term loan debt. As of June 30, 2010, there was $1,078,182 outstanding under the term loan.

     The interest rate on the original term loan debt that was not extended accrues interest, at Cinemark USA, Inc.’s option, at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50% (the “base rate”), plus a margin that ranges from 0.50% to 0.75% per annum, or (B) a “eurodollar rate” plus a margin that ranges from 1.50% to 1.75%, per annum. The margin of the original term loan debt is a function of the applicable corporate credit rating. The interest rate on the original portion of the term loan debt accrues interest, at Cinemark USA, Inc.’s option at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50%, plus a 2.25% margin per annum, or (B) a “eurodollar rate” plus a 3.25% margin per annum.

     In addition, the maturity date of $73,500 of Cinemark USA, Inc.’s $150,000 revolving credit line has been extended from October 2012 to March 2015. The maturity date of the remaining $76,500 of Cinemark USA, Inc.’s revolving credit line did not change and remains October 2012. As of June 30, 2010, the Company had no borrowings outstanding under the revolving credit line. The interest rate on the original revolving credit line accrues interest, at Cinemark USA, Inc.’s option, at: (A) a base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5 and (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 0.50% to 1.00% per annum, or (B) a “eurodollar rate” plus a margin that ranges from 1.50% to 2.00% per annum. The interest rate on the extended revolving credit line accrues interest, at Cinemark USA, Inc.’s option at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 1.75% to 2.0% per annum, or (B) a “eurodollar rate” plus a margin that ranges from 2.75% to 3.0% per annum. The margin of the revolving credit line is a function of the consolidated net senior secured leverage ratio as defined in the credit agreement.

     The Company incurred debt issue costs of approximately $8,700 during the six months ended June 30, 2010 related to the amendment and extension of its senior secured credit facility. These costs will be amortized using the straight-line method over the remaining term of the facility.

     Fair Value of Long-Term Debt

     The Company estimates the fair value of its long-term debt primarily using quoted market prices, which fall under Level 2 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35. The carrying value of the Company’s long-term debt was $1,537,917 and $1,543,705 as of June 30, 2010 and December 31, 2009, respectively. The fair value of the Company’s long-term debt was $1,516,184 and $1,513,838 as of June 30, 2010 and December 31, 2009, respectively.

11. Interest Rate Swap Agreements

     The Company has two interest rate swap agreements, both of which qualify for cash flow hedge accounting.The fair values of the interest rate swaps are recorded on the Company’s condensed consolidated balance sheet as an asset or liability with the effective portion of the interest rate swaps’ gains or losses reported as a component of accumulated other comprehensive loss and the ineffective portion reported in earnings. The evaluation technique used to determine fair value is the income approach and under this approach, the Company uses projected future interest rates as provided by counterparties to the interest rate swap agreements and the fixed rates that the Company is obligated to pay under these agreements. The Company’s measurements use significant unobservable inputs, which fall in Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35. There were no changes in valuation techniques during the period, no transfers in or out of Level 3 and no gains or losses included in earnings that were attributable to the change in unrealized gains or losses related to the interest rate swap agreements.

15

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

     As of June 30, 2010, the aggregate fair values of the two interest rate swap agreements was a liability of approximately $19,257 which has been recorded as a component of other long-term liabilities. A corresponding cumulative amount of $11,824, which is net of deferred taxes of $7,433, has been recorded as an increase in accumulated other comprehensive loss on the Company’s condensed consolidated balance sheet as of June 30, 2010. The interest rate swaps exhibited no ineffectiveness during the six months ended June 30, 2010.

     Below is a reconciliation of our interest rate swap values from January 1 to June 30:

	2010		2009
Beginning liability balance — January 1	$	18,524	$	24,781
Total (gain) loss included in accumulated other comprehensive loss		733		(5,786	)
Ending liability balance — June 30	$	19,257	$	18,995

     The Company amortized approximately $2,317 to interest expense during each of the six months ended June 30, 2009 and 2010, related to a previously terminated interest rate swap agreement. The Company will amortize approximately $4,634 to interest expense for this terminated interest rate swap agreement over the next twelve months.

12. Goodwill and Other Intangible Assets

     The Company’s goodwill was as follows:

	U.S.		International
	Operating		Operating
	Segment		Segment			Total
Balance at December 31, 2009(1)	$	948,026	$	168,276		$	1,116,302
Foreign currency translation adjustments		—		(1,959	)		(1,959	)
Balance at June 30, 2010(1)	$	948,026	$	166,317		$	1,114,343

⁽¹⁾ Balances are presented net of accumulated impairment losses of $214,031 for the U.S. operating segment and $27,622 for the international operating segment.

     The Company evaluates goodwill for impairment on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of goodwill might exceed its estimated fair value.

     The Company evaluates goodwill for impairment at the reporting unit level and has allocated goodwill to the reporting unit based on an estimate of its relative fair value. The Company considers the reporting unit to be each of its sixteen regions in the U.S. and each of its eight countries internationally (Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala are considered one reporting unit). Goodwill impairment is evaluated using a two-step approach requiring the Company to compute the fair value of a reporting unit and compare it with its carrying value. If the carrying value of the reporting unit exceeds the estimated fair value, a second step is performed to measure the potential goodwill impairment. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected operating performance, recent market transactions and current industry trading multiples. Fair value is determined based on a multiple of cash flows, which was six and a half times for the evaluation performed during the fourth quarter of 2009. No events or changes in circumstances occurred during the six months ended June 30, 2010, that indicated that the carrying value of goodwill might exceed its estimated fair value.

16

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

     Intangible assets consisted of the following:

	Balance at						Foreign Currency			Balance at
	December 31,						Translation			June 30,
	2009			Amortization			Adjustments & Other			2010
Intangible assets with finite lives:
Vendor contracts:
Gross carrying amount	$	56,474		$	—		$	61		$	56,535
Accumulated amortization		(29,870	)		(1,634	)		—			(31,504	)
Net carrying amount		26,604			(1,634	)		61			25,031
Other intangible assets:
Gross carrying amount		26,510			—			(1,896	)		24,614
Accumulated amortization		(20,596	)		(1,125	)		726			(20,995	)
Net carrying amount		5,914			(1,125	)		(1,170	)		3,619
Total net intangible assets with finite lives		32,518			(2,759	)		(1,109	)		28,650
Intangible assets with indefinite lives:
Tradename		310,480			—			80			310,560
Total intangible assets — net	$	342,998		$	(2,759	)	$	(1,029	)	$	339,210

     Estimated aggregate future amortization expense for intangible assets is as follows:

For the six months ended December 31, 2010	$	2,643
For the twelve months ended December 31, 2011		5,158
For the twelve months ended December 31, 2012		5,002
For the twelve months ended December 31, 2013		4,256
For the twelve months ended December 31, 2014		3,710
Thereafter		7,881
Total	$	28,650

13. Impairment of Long-Lived Assets

     The Company reviews long-lived assets for impairment indicators on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable.

     The Company considers actual theatre level cash flows, future years budgeted theatre level cash flows, theatre property and equipment carrying values, amortizing intangible assets carrying values, the age of a recently built theatre, competitive theatres in the marketplace, changes in foreign currency exchange rates, the impact of recent ticket price changes, available lease renewal options and other factors considered relevant in its assessment of impairment of individual theatre assets. Long-lived assets are evaluated for impairment on an individual theatre basis, which the Company believes is the lowest applicable level for which there are identifiable cash flows. The impairment evaluation is based on the estimated undiscounted cash flows from continuing use through the remainder of the theatre’s useful life. The remainder of the useful life correlates with the available remaining lease period, which includes the probability of renewal periods for leased properties and a period of twenty years for fee owned properties. If the estimated undiscounted cash flows are not sufficient to recover a long-lived asset’s carrying value, the Company then compares the carrying value of the asset group (theatre) with its estimated fair value. When estimated fair value is determined to be lower than the carrying value of the asset group (theatre), the asset group (theatre) is written down to its estimated fair value. The estimated aggregate fair value of the long-lived assets impaired during the six months ended June 30, 2010 was approximately $5,504.

     Significant judgment is involved in estimating cash flows and fair value. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected operating performance, recent market transactions and current industry trading multiples. Fair value is determined based on a multiple of cash flows, which was six and a half times for the evaluations performed during the six months ended June 30, 2009 and 2010.

17

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

     The long-lived asset impairment charges recorded during this period are specific to theatres that were directly and individually impacted by increased competition, or adverse changes in market demographics.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
United States theatre properties	$	2,494	$	3,844	$	2,841	$	4,665
International theatre properties		1,063		86		1,063		233
Subtotal	$	3,557	$	3,930	$	3,904	$	4,898
Intangible assets		1,131		—		1,131		71
Impairment of long-lived assets	$	4,688	$	3,930	$	5,035	$	4,969

14. Foreign Currency Translation

     The accumulated other comprehensive loss account in stockholder’s equity of $7,459 and $10,370 at December 31, 2009 and June 30, 2010, respectively, includes the cumulative foreign currency adjustments of $16,070 and $11,299, respectively, from translating the financial statements of the Company’s international subsidiaries, and also includes the change in fair values of the Company’s interest rate swap agreements.

     In 2009 and 2010, all foreign countries where the Company has operations were deemed non-highly inflationary and the local currency is the same as the functional currency in all of the locations. Thus, any fluctuation in the currency results in a cumulative foreign currency translation adjustment recorded to accumulated other comprehensive loss.

     On June 30, 2010, the exchange rate for the Brazilian real was 1.80 reais to the U.S. dollar (the exchange rate was 1.75 reais to the U.S. dollar at December 31, 2009). As a result, the effect of translating the June 30, 2010 Brazilian financial statements into U.S. dollars is reflected as a cumulative foreign currency translation adjustment to the accumulated other comprehensive loss account as a decrease in stockholder’s equity of $5,724. At June 30, 2010, the total assets of the Company’s Brazilian subsidiaries were U.S. $274,317.

     On June 30, 2010, the exchange rate for the Mexican peso was 12.84 pesos to the U.S. dollar (the exchange rate was 13.04 pesos to the U.S. dollar at December 31, 2009). As a result, the effect of translating the June 30, 2010 Mexican financial statements into U.S. dollars is reflected as a cumulative foreign currency translation adjustment to the accumulated other comprehensive loss account as an increase in stockholder’s equity of $1,513. At June 30, 2010, the total assets of the Company’s Mexican subsidiaries were U.S. $127,081.

     On June 30, 2010, the exchange rate for the Chilean peso was 550.66 pesos to the U.S. dollar (the exchange rate was 519.30 pesos to the U.S. dollar at December 31, 2009). As a result, the effect of translating the June 30, 2010 Chilean financial statements into U.S. dollars is reflected as a cumulative foreign currency translation adjustment to the accumulated other comprehensive loss account as a decrease in stockholder’s equity of $1,232. At June 30, 2010, the total assets of the Company’s Chilean subsidiaries were U.S. $31,559.

     The effect of translating the June 30, 2010 financial statements of the Company’s other international subsidiaries, with local currencies other than the U.S. dollar, is reflected as a cumulative foreign currency translation adjustment to the accumulated other comprehensive loss account as an increase in stockholder’s equity of $1,758.

     During June 2010, the Company’s ownership in its Colombian subsidiary increased from 50.1% to 100%, as a result of the Colombia Share Exchange. As part of this transaction, the Company recorded the amount of accumulated other comprehensive loss previously allocated to the noncontrolling interest of $1,086 to accumulated other comprehensive loss with an offsetting credit to additional paid-in-capital. See Note 3.

18

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

15. Supplemental Cash Flow Information

The following is provided as supplemental information to the condensed consolidated statements of cash flows:

	Six Months Ended
	June 30,
	2010			2009
Cash paid for interest	$	47,788		$	28,220
Cash paid for income taxes, net of refunds received	$	56,429		$	33,893
Noncash investing and financing activities:
Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment(1)	$	97		$	(7,118	)
Theatre properties acquired under capital lease(2)	$	2,191		$	20,400
Change in fair market values of interest rate swap agreements, net of taxes	$	(456	)	$	3,605
Investment in NCM — receipt of common units (see Note 6)	$	30,683		$	15,536
Investment in NCM — change of interest gain (see Note 6)	$	271		$	—
Equipment contributed to DCIP (see Note 7)	$	18,090		$	—
Investment in Real D (see Note 8)	$	6,521		$	—
Capital contribution from former parent, Cinemark, Inc., primarily related to income taxes	$	—		$	35,875
Capital contribution from Cinemark Holdings, Inc. as a result of Colombia Share Exchange (see Note 3)	$	6,951		$	—

(1)	Additions to theatre properties and equipment included in accounts payable as of December 31, 2009 and June 30, 2010 were $7,823 and $7,919, respectively.
(2)	Amount recorded during the six months ended June 30, 2009 was a result of the acquisition of theatres in the U.S. as discussed in Note 5.

16. Segments

     The Company manages its international market and its U.S. market as separate reportable operating segments. The international segment consists of operations in Brazil, Mexico, Chile, Colombia, Argentina, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala. The U.S. segment includes U.S. and Canada operations. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues, primarily screen advertising. The measure of segment profit and loss the Company uses to evaluate performance and allocate its resources is Adjusted EBITDA, as defined in the reconciliation table below. The Company does not report asset information by segment because that information is not used to evaluate the performance of or allocate resources between segments.

19

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

     Below is a breakdown of selected financial information by reportable operating segment:

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Revenues
U.S.	$	410,964		$	419,575		$	799,579		$	761,019
International		129,641			98,962			258,912			184,158
Eliminations		(1,236	)		(1,029	)		(2,491	)		(1,869	)
Total Revenues	$	539,369		$	517,508		$	1,056,000		$	943,308
Adjusted EBITDA
U.S.	$	96,857		$	100,879		$	186,596		$	182,850
International		28,568			20,216			60,944			36,485
Total Adjusted EBITDA	$	125,425		$	121,095		$	247,540		$	219,335
Capital Expenditures
U.S.	$	23,508		$	27,171		$	36,008		$	43,422
International		13,935			10,875			20,952			17,496
Total Capital Expenditures	$	37,443		$	38,046		$	56,960		$	60,918

     The following table sets forth a reconciliation of net income to Adjusted EBITDA:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2010		2009			2010		2009
Net income	$	41,062	$	43,552		$	78,109	$	68,485
Add (deduct):
Income taxes		10,392		18,190			30,425		36,651
Interest expense(1)		28,605		15,257			54,615		30,539
Other (income) expense(2)		1,455		(994	)		643		(2,128	)
Depreciation and amortization		34,657		37,535			68,590		73,668
Amortization of favorable/unfavorable leases		258		346			416		669
Impairment of long-lived assets		4,688		3,930			5,035		4,969
Loss on sale of assets and other		1,191		1,186			4,358		1,458
Deferred lease expenses		914		1,034			1,697		2,121
Amortization of long-term prepaid rents		438		360			779		750
Share based awards compensation expense		1,765		699			2,873		2,153
Adjusted EBITDA	$	125,425	$	121,095		$	247,540	$	219,335

(1)	Includes amortization of debt issue costs.
(2)	Includes interest income, foreign currency exchange gain, and equity in loss of affiliates and excludes distributions from NCM. Distributions from NCM are reported entirely within the U.S. operating segment.

     Financial Information About Geographic Areas

     The Company has operations in the U.S., Canada, Brazil, Mexico, Chile, Colombia, Argentina, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala, which are reflected in the condensed consolidated financial statements. Below is a breakdown of selected financial information by geographic area:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Revenues	2010			2009			2010			2009
U.S. and Canada	$	410,964		$	419,575		$	799,579		$	761,019
Brazil		69,999			49,323			139,217			92,581
Mexico		17,715			15,311			35,097			29,528
Other foreign countries		41,927			34,328			84,598			62,049
Eliminations		(1,236	)		(1,029	)		(2,491	)		(1,869	)
Total	$	539,369		$	517,508		$	1,056,000		$	943,308

20

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

	June 30,		December 31,
Theatre Properties and Equipment-net	2010		2009
U.S. and Canada	$	1,000,033	$	1,040,395
Brazil		97,797		91,996
Mexico		37,938		39,371
Other foreign countries		48,486		47,826
Total	$	1,184,254	$	1,219,588

17. Related Party Transactions

     The Company leased one theatre from Plitt Plaza Joint Venture (“Plitt Plaza”) on a month-to-month basis. Plitt Plaza is indirectly owned by Lee Roy Mitchell, Cinemark Holdings, Inc.’s Chairman of the Board, who owns approximately 12% of Cinemark Holdings, Inc.’s issued and outstanding shares of common stock. Annual rent is approximately $118 plus certain taxes, maintenance expenses and insurance. The Company recorded $59 and $30 of facility lease and other operating expenses payable to Plitt Plaza joint venture during the six months ended June 30, 2009 and 2010, respectively. The Company closed this theatre during March 2010. During the six months ended June 30, 2010, the Company recorded approximately $107 related to the termination of the lease, which is reflected in loss on sale of assets and other on the condensed consolidated statements of income.

     The Company manages one theatre for Laredo Theatre, Ltd. (“Laredo”). The Company is the sole general partner and owns 75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Under the agreement, management fees are paid by Laredo to the Company at a rate of 5% of annual theatre revenues up to $50,000 and 3% of annual theatre revenues in excess of $50,000. The Company recorded $49 and $50 of management fee revenues during the six months ended June 30, 2009 and 2010, respectively. All such amounts are included in the Company’s condensed consolidated financial statements with the intercompany amounts eliminated in consolidation.

     The Company leases 21 theatres and one parking facility from Syufy Enterprises, LP (“Syufy”) or affiliates of Syufy, which owns approximately 2% of Cinemark Holdings, Inc.’s issued and outstanding shares of common stock. Raymond Syufy is one of Cinemark Holdings, Inc.’s directors and is an officer of the general partner of Syufy. Of these 22 leases, 18 have fixed minimum annual rent in an aggregate amount of approximately $21,029. The four leases without minimum annual rent have rent based upon a specified percentage of gross sales as defined in the lease with no minimum annual rent. For the six months ended June 30, 2009 and 2010, the Company paid approximately $850 and $687, respectively, in percentage rent for these four leases.

     The Company has paid certain fees and expenses on behalf of its parent, Cinemark Holdings, Inc. and Cinemark Holdings, Inc. has paid income taxes on behalf of the Company. The net receivable from Cinemark Holdings, Inc. as of June 30, 2010 and December 31, 2009 was $8,281 and $7,656, respectively.

18. Income Taxes

     During the six months ended June 30, 2010, the Company had a reduction in its liabilities for uncertain tax positions of approximately $14,115 due to settlements and closures of various tax years. These settlements and closures also resulted in a reduction in income tax expense of approximately $8,882 for the six months ended June 30, 2010.

19. Commitments and Contingencies

     From time to time, the Company is involved in various legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters, landlord-tenant disputes and contractual disputes, some of which are covered by insurance. The Company believes its potential liability with respect to proceedings currently pending is not material, individually or in the aggregate, to the Company’s financial position, results of operations and cash flows.

21

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data

20. Condensed Consolidating Financial Information of Subsidiary Guarantors

     As of June 30, 2010, the Company had outstanding $470,000 aggregate principal amount of 8.625% senior notes due 2019. These senior notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by the following subsidiaries of Cinemark USA, Inc.:

     Cinemark, L.L.C., Sunnymead Cinema Corp., Cinemark Properties, Inc., Greeley Holdings, Inc., Trans Texas Cinema, Inc., Cinemark Mexico (USA), Inc., Brasil Holdings, LLC, Cinemark Leasing Company, Cinemark Partners I, Inc., Multiplex Properties, Inc., Multiplex Services, Inc., CNMK Investments, Inc., CNMK Texas Properties, LLC., Cinemark Concessions LLC, Laredo Theatres, Ltd, Century Theatres, Inc., Marin Theatre Management, LLC, Century Theatres NG, LLC, Cinearts LLC, Cinearts Sacramento, LLC, Corte Madera Theatres, LLC, Novato Theatres, LLC, San Rafael Theatres, LLC, Northbay Theatres, LLC, Century Theatres Summit Sierra, LLC and Century Theatres Seattle, LLC.

     The following supplemental condensed consolidating financial information presents:

1.	Condensed consolidating balance sheet information as of December 31, 2009 and June 30, 2010, condensed consolidating statements of income information for each of the three and six months ended June 30, 2009 and 2010, and condensed consolidating statements of cash flows information for each of the six months ended June 30, 2009 and 2010.
2.	Cinemark USA, Inc. (the “Parent” and “Issuer”), combined Guarantor Subsidiaries and combined Non-Guarantor Subsidiaries with their investments in subsidiaries accounted for using the equity method of accounting and therefore, the Parent column reflects the equity income (loss) of its Guarantor Subsidiaries and Non-Guarantor Subsidiaries, which are also separately reflected in the stand-alone Guarantor Subsidiaries and Non-Guarantor Subsidiaries column. Additionally, the Guarantor Subsidiaries column reflects the equity income (loss) of its Non-Guarantor Subsidiaries, which are also separately reflected in the stand-alone Non-Guarantor Subsidiaries column.
3.	Elimination entries necessary to consolidate the Parent and all of its Subsidiaries.

22

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
JUNE 30, 2010

	Parent			Subsidiary		Subsidiary
	Company			Guarantors		Non-Guarantors			Eliminations			Consolidated
						(In thousands)
Assets
Current assets
Cash and cash equivalents	$	34,538		$	217,660	$	183,517		$	—		$	435,715
Other current assets		53,642			34,251		28,523			(38,773	)		77,643
Accounts receivable from (payable to) parent		(196,230	)		246,966		(42,455	)		—			8,281
Total current assets		(108,050	)		498,877		169,585			(38,773	)		521,639
Theatre properties and equipment — net		305,237			675,837		203,180			—			1,184,254
Other assets		2,738,495			632,858		365,745			(2,129,614	)		1,607,484
Total assets	$	2,935,682		$	1,807,572	$	738,510		$	(2,168,387	)	$	3,313,377
Liabilities and equity
Current liabilities
Current portion of long-term debt	$	10,836		$	—	$	276		$	—		$	11,112
Current portion of capital lease obligations		1,436			5,262		646			—			7,344
Accounts payable and accrued expenses		103,725			75,432		84,421			(31,672	)		231,906
Total current liabilities		115,997			80,694		85,343			(31,672	)		250,362
Long-term liabilities
Long-term debt, less current portion		1,552,078			1,440		33,179			(59,892	)		1,526,805
Capital lease obligations, less current portion		27,733			97,374		6,573			—			131,680
Other long-term liabilities and deferrals		282,673			166,446		58,224			(71,492	)		435,851
Total long-term liabilities		1,862,484			265,260		97,976			(131,384	)		2,094,336
Commitments and contingencies
Equity
Cinemark USA, Inc.’s stockholder’s equity:
Common stock		49,543			457,372		167,765			(625,137	)		49,543
Other stockholder’s equity		907,658			1,003,877		376,317			(1,380,194	)		907,658
Total Cinemark USA, Inc. stockholder’s equity		957,201			1,461,249		544,082			(2,005,331	)		957,201
Noncontrolling interests		—			369		11,109			—			11,478
Total equity		957,201			1,461,618		555,191			(2,005,331	)		968,679
Total liabilities and equity	$	2,935,682		$	1,807,572	$	738,510		$	(2,168,387	)	$	3,313,377

23

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 2009

	Parent			Subsidiary		Subsidiary
	Company			Guarantors		Non-Guarantors			Eliminations			Consolidated
						(In thousands)
Assets
Current assets
Cash and cash equivalents	$	39,761		$	237,540	$	160,436		$	—		$	437,737
Other current assets		55,841			32,800		16,516			(36,113	)		69,044
Accounts receivable from (payable to) parent		(153,678	)		173,888		(12,554	)		—			7,656
Total current assets		(58,076	)		444,228		164,398			(36,113	)		514,437
Theatre properties and equipment — net		307,089			713,860		198,639			—			1,219,588
Other assets		2,623,968			637,645		318,536			(2,030,586	)		1,549,563
Total assets	$	2,872,981		$	1,795,733	$	681,573		$	(2,066,699	)	$	3,283,588
Liabilities and equity
Current liabilities
Current portion of long-term debt	$	11,200		$	—	$	1,027		$	—		$	12,227
Current portion of capital lease obligations		1,313			5,527		500			—			7,340
Accounts payable and accrued expenses		120,790			94,721		75,982			(30,326	)		261,167
Total current liabilities		133,303			100,248		77,509			(30,326	)		280,734
Long-term liabilities
Long-term debt, less current portion		1,532,151			4,440		35,930			(41,043	)		1,531,478
Capital lease obligations, less current portion		28,491			99,819		4,718			—			133,028
Other long-term liabilities and deferrals		271,691			156,797		57,898			(70,179	)		416,207
Total long-term liabilities		1,832,333			261,056		98,546			(111,222	)		2,080,713
Commitments and contingencies
Equity
Cinemark USA, Inc.’s stockholder’s equity:
Common stock		49,543			457,372		167,765			(625,137	)		49,543
Other stockholder’s equity		857,802			976,729		323,285			(1,300,014	)		857,802
Total Cinemark USA, Inc. stockholder’s equity		907,345			1,434,101		491,050			(1,925,151	)		907,345
Noncontrolling interests		—			328		14,468			—			14,796
Total equity		907,345			1,434,429		505,518			(1,925,151	)		922,141
Total liabilities and equity	$	2,872,981		$	1,795,733	$	681,573		$	(2,066,699	)	$	3,283,588

24

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION
THREE MONTHS ENDED JUNE 30, 2010

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated
							(In thousands)
Revenues	$	152,662		$	270,392		$	134,235		$	(17,920	)	$	539,369
Cost of operations		—			—			—			—
Theatre operating expenses		133,969			176,658			101,225			(17,920	)		393,932
General and administrative expenses		4,725			14,158			5,578			—			24,461
Depreciation and amortization		7,413			19,289			8,213			—			34,915
Impairment of long-lived assets		166			2,358			2,164			—			4,688
Loss on sale of assets and other		240			271			680			—			1,191
Total cost of operations		146,513			212,734			117,860			(17,920	)		459,187
Operating income		6,149			57,658			16,375			—			80,182
Other income (expense)
Interest expense		(25,970	)		(2,896	)		(812	)		1,073			(28,605	)
Distributions from NCM		1			—			1,331			—			1,332
Equity in income (loss) of affiliates		45,748			6,637			(3,169	)		(52,398	)		(3,182	)
Other income		91			1,157			1,552			(1,073	)		1,727
Total other income (expense)		19,870			4,898			(1,098	)		(52,398	)		(28,728	)
Income before income taxes		26,019			62,556			15,277			(52,398	)		51,454
Income taxes		(13,966	)		21,244			3,114			—			10,392
Net income		39,985			41,312			12,163			(52,398	)		41,062
Less: Net income attributable to noncontrolling interests		—			11			1,066			—			1,077
Net income attributable to Cinemark USA, Inc.	$	39,985		$	41,301		$	11,097		$	(52,398	)	$	39,985

25

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION
THREE MONTHS ENDED JUNE 30, 2009

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated
							(In thousands)
Revenues	$	153,534		$	276,712		$	104,625		$	(17,363	)	$	517,508
Cost of operations
Theatre operating costs		134,708			183,497			79,444			(17,363	)		380,286
General and administrative expenses		4,044			13,778			5,425			—			23,247
Depreciation and amortization		6,493			24,203			7,185			—			37,881
Impairment of long-lived assets		166			3,678			86			—			3,930
(Gain) loss on sale of assets and other		292			906			(12	)		—			1,186
Total cost of operations		145,703			226,062			92,128			(17,363	)		446,530
Operating income		7,831			50,650			12,497			—			70,978
Other income (expense)
Interest expense		(12,570	)		(3,083	)		(902	)		1,298			(15,257	)
Distributions from NCM		960			—			4,067			—			5,027
Equity in income (loss) of affiliates		43,540			14,970			(409	)		(58,516	)		(415	)
Other income		217			1,243			1,247			(1,298	)		1,409
Total other income (expense)		32,147			13,130			4,003			(58,516	)		(9,236	)
Income before income taxes		39,978			63,780			16,500			(58,516	)		61,742
Income taxes		(2,437	)		23,367			(2,740	)		—			18,190
Net income		42,415			40,413			19,240			(58,516	)		43,552
Less: Net income attributable to noncontrolling interests		—			15			1,122			—			1,137
Net income attributable to Cinemark USA, Inc.	$	42,415		$	40,398		$	18,118		$	(58,516	)	$	42,415

26

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION
SIX MONTHS ENDED JUNE 30, 2010

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated
							(In thousands)
Revenues	$	300,302		$	525,285		$	268,394		$	(37,981	)	$	1,056,000
Cost of operations
Theatre operating expenses		268,852			347,672			197,092			(37,981	)		775,635
General and administrative expenses		9,010			27,771			12,671			—			49,452
Depreciation and amortization		14,325			38,540			16,141			—			69,006
Impairment of long-lived assets		513			2,358			2,164			—			5,035
Loss on sale of assets and other		628			1,589			2,141			—			4,358
Total cost of operations		293,328			417,930			230,209			(37,981	)		903,486
Operating income		6,974			107,355			38,185			—			152,514
Other income (expense)
Interest expense		(49,249	)		(5,806	)		(1,480	)		1,920			(54,615	)
Distributions from NCM		980			—			10,298			—			11,278
Equity in income (loss) of affiliates		96,333			22,002			(3,167	)		(118,323	)		(3,155	)
Other income		215			1,853			2,364			(1,920	)		2,512
Total other income (expense)		48,279			18,049			8,015			(118,323	)		(43,980	)
Income before income taxes		55,253			125,404			46,200			(118,323	)		108,534
Income taxes		(20,161	)		39,297			11,289			—			30,425
Net income		75,414			86,107			34,911			(118,323	)		78,109
Less: Net income attributable to noncontrolling interests		—			31			2,664			—			2,695
Net income attributable to Cinemark USA, Inc.	$	75,414		$	86,076		$	32,247		$	(118,323	)	$	75,414

27

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION
SIX MONTHS ENDED JUNE 30, 2009

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated
							(In thousands)
Revenues	$	273,337		$	510,388		$	194,701		$	(35,118	)	$	943,308
Cost of operations
Theatre operating costs		244,956			337,180			148,927			(35,118	)		695,945
General and administrative expenses		7,731			26,866			10,061			—			44,658
Depreciation and amortization		12,061			48,695			13,581			—			74,337
Impairment of long-lived assets		981			3,684			304			—			4,969
(Gain) loss on sale of assets and other		208			1,342			(92	)		—			1,458
Total cost of operations		265,937			417,767			172,781			(35,118	)		821,367
Operating income		7,400			92,621			21,920			—			121,941
Other income (expense)
Interest expense		(24,981	)		(6,222	)		(1,500	)		2,164			(30,539	)
Distributions from NCM		960			—			10,646			—			11,606
Equity in income (loss) of affiliates		77,865			17,378			(1,073	)		(95,190	)		(1,020	)
Other income		499			2,135			2,678			(2,164	)		3,148
Total other income (expense)		54,343			13,291			10,751			(95,190	)		(16,805	)
Income before income taxes		61,743			105,912			32,671			(95,190	)		105,136
Income taxes		(4,819	)		38,590			2,880			—			36,651
Net income		66,562			67,322			29,791			(95,190	)		68,485
Less: Net income attributable to noncontrolling interests		—			23			1,900			—			1,923
Net income attributable to Cinemark USA, Inc.	$	66,562		$	67,299		$	27,891		$	(95,190	)	$	66,562

28

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
SIX MONTHS ENDED JUNE 30, 2010

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated
							(In thousands)
Operating activities
Net income	$	75,414		$	86,107		$	34,911		$	(118,323	)	$	78,109
Adjustments to reconcile net income to cash provided by (used for) operating activities		(97,447	)		31,845			26,019			118,323			78,740
Changes in assets and liabilities		85,066			(121,601	)		(12,430	)		—			(48,965	)
Net cash provided by (used for) operating activities		63,033			(3,649	)		48,500			—			107,884
Investing activities
Additions to theatre properties and equipment		(18,818	)		(17,009	)		(21,133	)		—			(56,960	)
Proceeds from sale of theatre properties and equipment		—			735			1,413			—			2,148
Investment in joint venture — DCIP, net of cash distributions		—			—			(644	)		—			(644	)
Net transactions with affiliates		113			2,753			—			(2,866	)		—
Net cash used for investing activities		(18,705	)		(13,521	)		(20,364	)		(2,866	)		(55,456	)
Financing activities
Dividends paid to parent		(34,375	)		—			(115	)		115			(34,375	)
Payroll taxes paid as a result of noncash stock option exercises and restricted stock withholdings		(416	)		—			—			—			(416	)
Payment of debt issue costs		(8,706	)		—			—			—			(8,706	)
Repayments of other long-term debt		(5,418	)		—			(718	)		—			(6,136	)
Net changes in intercompany notes		—			—			(2,751	)		2,751			—
Payments on capital leases		(636	)		(2,710	)		(260	)		—			(3,606	)
Other		—			—			(110	)		—			(110	)
Net cash used for financing activities		(49,551	)		(2,710	)		(3,954	)		2,866			(53,349	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(1,101	)		—			(1,101	)
Increase (decrease) in cash and cash equivalents		(5,223	)		(19,880	)		23,081			—			(2,022	)
Cash and cash equivalents:
Beginning of year		39,761			237,540			160,436			—			437,737
End of year	$	34,538		$	217,660		$	183,517		$	—		$	435,715

29

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
SIX MONTHS ENDED JUNE 30, 2009

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated
							(In thousands)
Operating activities
Net income	$	66,562		$	67,322		$	29,791		$	(95,190	)	$	68,485
Adjustments to reconcile net income to cash provided by operating activities		(81,909	)		47,415			18,611			95,190			79,307
Changes in assets and liabilities		115,367			(86,624	)		(7,482	)		—			21,261
Net cash provided by operating activities		100,020			28,113			40,920			—			169,053
Investing activities
Additions to theatre properties and equipment		(26,954	)		(16,158	)		(17,806	)		—			(60,918	)
Proceeds from sale of theatre properties and equipment		395			58			200			—			653
Acquisition of theatres		(48,950	)		—			—			—			(48,950	)
Net transactions with affiliates		6,998			16,283			—			(23,281	)		—
Other		—			—			(1,500	)		—			(1,500	)
Net cash provided by (used for) investing activities		(68,511	)		183			(19,106	)		(23,281	)		(110,715	)
Financing activities
Capital contributions from parent		19,650			—			—			—			19,650
Dividends paid to parent		(452,975	)		—			(9,799	)		9,799			(452,975	)
Proceeds from issuance of senior notes		458,532			—			—			—			458,532
Payment of debt issue costs		(12,423	)		—			—			—			(12,423	)
Repayments of long-term debt		(5,600	)		—			(689	)		—			(6,289	)
Net changes in intercompany notes		—			—			(13,482	)		13,482			—
Payments on capital leases		(382	)		(2,264	)		(184	)		—			(2,830	)
Other		—			—			(795	)		—			(795	)
Net cash provided by (used for) financing activities		6,802			(2,264	)		(24,949	)		23,281			2,870
Effect of exchange rate changes on cash and cash equivalents		—			—			7,959			—			7,959
Increase in cash and cash equivalents		38,311			26,032			4,824			—			69,167
Cash and cash equivalents:
Beginning of year		39,039			163,007			111,192			—			313,238
End of year	$	77,350		$	189,039		$	116,016		$	—		$	382,405

30

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes and schedules included elsewhere in this report.

     We are a leader in the motion picture exhibition industry, with theatres in the U.S., Canada, Brazil, Mexico, Chile, Colombia, Argentina, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala. As of June 30, 2010, we managed our business under two reportable operating segments — U.S. markets and international markets, in accordance with FASB ASC Topic 280,Segment Reporting. See Note 16 to our condensed consolidated financial statements.

     We generate revenues primarily from box office receipts and concession sales with additional revenues from screen advertising sales and other revenue streams, such as vendor marketing programs, pay phones, ATM machines and electronic video games located in some of our theatres. Our contracts with NCM have assisted us in expanding our offerings to advertisers and broadening ancillary revenue sources such as digital video monitor advertising, third party branding, and the use of theatres for alternative content events, such as concerts, sporting events, and other cultural events. Films driving the box office during the six months ended June 30, 2010 included the carryover ofAvatar, which grossed over $450 million in U.S. box office revenues during the period and new releases such asAlice in Wonderland, How to Train Your Dragon, Clash of the Titans, Iron Man 2, Shrek Forever After, The Karate Kid, Toy Story 3andThe Twilight Saga: Eclipse, which was released on June 30, 2010. Our revenues are affected by changes in attendance and average admissions and concession revenues per patron. Attendance is primarily affected by the quality and quantity of films released by motion picture studios. Films scheduled for release during the remainder of 2010 includeThe Last Airbender, Inception, Despicable Me, The Other Guys, Eat Pray Love, Little Fockers, Tron: Legacy, Tangled, Megamind, Yogi Bear, Chronicles of Narnia: The Voyage of the Dawn Treaderand another installment of theHarry Potterfranchise, among other films.

     Film rental costs are variable in nature and fluctuate with our admissions revenues. Film rental costs as a percentage of revenues are generally higher for periods in which more blockbuster films are released. Film rental costs can also vary based on the length of a film’s run. Film rental rates are generally negotiated on a film-by-film and theatre-by-theatre basis. Advertising costs, which are expensed as incurred, are primarily fixed at the theatre level as daily movie directories placed in newspapers represent the largest component of advertising costs. The monthly cost of these advertisements is based on, among other things, the size of the directory and the frequency and size of the newspaper’s circulation.

     Concession supplies expense is variable in nature and fluctuates with our concession revenues. We purchase concession supplies to replace units sold. We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain volume rates.

     Although salaries and wages include a fixed cost component (i.e. the minimum staffing costs to operate a theatre facility during non-peak periods), salaries and wages move in relation to revenues as theatre staffing is adjusted to respond to changes in attendance.

     Facility lease expense is primarily a fixed cost at the theatre level as most of our facility leases require a fixed monthly minimum rent payment. Certain of our leases are subject to percentage rent only while others are subject to percentage rent in addition to their fixed monthly rent if a target annual revenue level is achieved. Facility lease expense as a percentage of revenues is also affected by the number of theatres under operating leases, the number of theatres under capital leases and the number of fee-owned theatres.

     Utilities and other costs include certain costs that have both fixed and variable components such as utilities, property taxes, janitorial costs, repairs and maintenance and security services.

31

Results of Operations

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Operating data (in millions):	2010			2009			2010			2009
Revenues
Admissions	$	353.1		$	339.1		$	696.1		$	619.0
Concession		165.2			158.9			318.3			288.9
Other		21.1			19.5			41.6			35.4
Total revenues	$	539.4		$	517.5		$	1,056.0		$	943.3
Cost of operations
Film rentals and advertising		193.5			190.9			382.3			338.0
Concession supplies		24.5			24.0			46.9			43.7
Salaries and wages		56.3			52.0			108.8			96.4
Facility lease expense		62.0			59.2			124.7			114.9
Utilities and other		57.7			54.1			112.9			102.9
General and administrative expenses		24.5			23.3			49.5			44.7
Depreciation and amortization		34.9			37.9			69.0			74.3
Impairment of long-lived assets		4.6			3.9			5.0			5.0
Loss on sale of assets and other		1.2			1.2			4.4			1.5
Total cost of operations	$	459.2		$	446.5		$	903.5		$	821.4
Operating income	$	80.2		$	71.0		$	152.5		$	121.9
Operating data as a percentage of total revenues:
Revenues
Admissions		65.5	%		65.5	%		65.9	%		65.6	%
Concession		30.6	%		30.7	%		30.1	%		30.6	%
Other		3.9	%		3.8	%		4.0	%		3.8	%
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of operations(1)
Film rentals and advertising		54.8	%		56.3	%		54.9	%		54.6	%
Concession supplies		14.8	%		15.1	%		14.7	%		15.1	%
Salaries and wages		10.4	%		10.0	%		10.3	%		10.2	%
Facility lease expense		11.5	%		11.4	%		11.8	%		12.2	%
Utilities and other		10.7	%		10.5	%		10.7	%		10.9	%
General and administrative expenses		4.5	%		4.5	%		4.7	%		4.7	%
Depreciation and amortization		6.5	%		7.3	%		6.5	%		7.9	%
Impairment of long-lived assets		0.9	%		0.8	%		0.5	%		0.5	%
Loss on sale of assets and other		0.2	%		0.2	%		0.4	%		0.2	%
Total cost of operations		85.1	%		86.3	%		85.6	%		87.1	%
Operating income		14.9	%		13.7	%		14.4	%		12.9	%
Average screen count (month end average)		4,897			4,862			4,895			4,826
Revenues per average screen (dollars)	$	110,154		$	106,450		$	215,730		$	195,452

⁽¹⁾ All costs are expressed as a percentage of total revenues, except film rentals and advertising, which are expressed as a percentage of admissions revenues and concession supplies, which are expressed as a percentage of concession revenues.

32

Three months ended June 30, 2010 and 2009

     Revenues.Total revenues increased $21.9 million to $539.4 million for the three months ended June 30, 2010 (“second quarter of 2010”) from $517.5 million for the three months ended June 30, 2009 (“second quarter of 2009”), representing a 4.2% increase. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues.

	U.S. Operating Segment							International Operating Segment									Consolidated
	Three Months Ended							Three Months Ended							Three Months Ended
			June 30,							June 30,							June 30,
					%							%							%
	2010		2009		Change			2010		2009		Change			2010		2009		Change
Admissions revenues(1)	$	269.2	$	276.2		(2.5	)%	$	83.9	$	62.9		33.4	%	$	353.1	$	339.1		4.1	%
Concession revenues(1)	$	129.6	$	131.2		(1.2	)%	$	35.6	$	27.7		28.5	%	$	165.2	$	158.9		4.0	%
Other revenues(1) (2)	$	11.0	$	11.1		(0.9	)%	$	10.1	$	8.4		20.2	%	$	21.1	$	19.5		8.2	%
Total revenues(1) (2)	$	409.8	$	418.5		(2.1	)%	$	129.6	$	99.0		30.9	%	$	539.4	$	517.5		4.2	%
Attendance(1)		41.6		43.9		(5.2	)%		18.6		17.2		8.1	%	$	60.2		61.1		(1.5	)%
Revenues per average screen(2)	$	107,077	$	109,438		(2.2	)%	$	121,159	$	95,431		27.0	%	$	110,154	$	106,450		3.5	%

(1)	Amounts in millions.
(2)	U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 16 of our condensed consolidated financial statements.

• Consolidated. The increase in admissions revenues of $14.0 million was primarily attributable to a 5.8% increase in average ticket price from $5.55 for the second quarter of 2009 to $5.87 for the second quarter of 2010, partially offset by a 1.5% decrease in attendance. The increase in concession revenues of $6.3 million was primarily attributable to a 5.4% increase in concession revenues per patron from $2.60 for the second quarter of 2009 to $2.74 for the second quarter of 2010, partially offset by the 1.5% decrease in attendance. The increase in average ticket price was primarily due to incremental 3-D and premium pricing and other price increases and the favorable impact of exchange rates in certain countries in which we operate. The increase in concession revenues per patron was primarily due to price increases and the favorable impact of exchange rates in certain countries in which we operate. The 8.2% increase in other revenues was primarily due to increases in ancillary revenue and the favorable impact of exchange rates in certain countries in which we operate.

• U.S. The decrease in admissions revenues of $7.0 million was primarily attributable to a 5.2% decrease in attendance, partially offset by a 2.9% increase in average ticket price from $6.29 for the second quarter of 2009 to $6.47 for the second quarter of 2010. The decrease in concession revenues of $1.6 million was primarily attributable to the 5.2% decrease in attendance, partially offset by a 4.3% increase in concession revenues per patron from $2.99 for the second quarter of 2009 to $3.12 for the second quarter of 2010. The increase in average ticket price was primarily due to incremental 3-D and premium pricing and other price increases and the increase in concession revenues per patron was primarily due to price increases.

• International. The increase in admissions revenues of $21.0 million was primarily attributable to an 8.1% increase in attendance and a 23.2% increase in average ticket price from $3.66 for the second quarter of 2009 to $4.51 for the second quarter of 2010. The increase in concession revenues of $7.9 million was primarily attributable to the 8.1% increase in attendance and an 18.6% increase in concession revenues per patron from $1.61 for the second quarter of 2009 to $1.91 for the second quarter of 2010. The increase in average ticket price was primarily due to incremental 3-D and premium pricing and other price increases and the favorable impact of exchange rates in certain countries in which we operate. The increase in concession revenues per patron was primarily due to price increases and the favorable impact of exchange rates in certain countries in which we operate. The 20.2% increase in other revenues was primarily due to increases in ancillary revenue and the favorable impact of exchange rates in certain countries in which we operate.

33

     Cost of Operations.The table below summarizes certain of our theatre operating costs by reportable operating segment (in millions).

					International Operating
	U.S. Operating Segment				Segment				Consolidated
	Three Months Ended				Three Months Ended				Three Months Ended
	June 30,				June 30,				June 30,
	2010		2009		2010		2009		2010		2009
Film rentals and advertising	$	150.7	$	158.8	$	42.8	$	32.1	$	193.5	$	190.9
Concession supplies		15.6		17.2		8.9		6.8		24.5		24.0
Salaries and wages		44.7		43.8		11.6		8.2		56.3		52.0
Facility lease expense		45.1		45.1		16.9		14.1		62.0		59.2
Utilities and other		40.5		40.7		17.2		13.4		57.7		54.1

• Consolidated. Film rentals and advertising costs were $193.5 million, or 54.8% of admissions revenues, for the second quarter of 2010 compared to $190.9 million, or 56.3% of admissions revenues, for the second quarter of 2009. The decrease in the film rentals and advertising rate was primarily due to favorable film rental rates on certain films in the U.S. segment in the second quarter of 2010. Concession supplies expense was $24.5 million, or 14.8% of concession revenues, for the second quarter of 2010 compared to $24.0 million, or 15.1% of concession revenues, for the second quarter of 2009. The decrease in the concession supplies rate was primarily due to favorable inventory procurement costs and the successful implementation of price increases in the U.S. segment.

Salaries and wages increased to $56.3 million for the second quarter of 2010 from $52.0 million for the second quarter of 2009 primarily due to increased minimum wages in both our U.S. and international segments, increased staffing levels to support the 8.1% increase in attendance in our international segment and the impact of exchange rates in certain countries in which we operate. Facility lease expense increased to $62.0 million for the second quarter of 2010 from $59.2 million for the second quarter of 2009 primarily due to increased percentage rent in our international segment and the impact of exchange rates in certain countries in which we operate. Utilities and other costs increased to $57.7 million for the second quarter of 2010 from $54.1 million for the second quarter of 2009 primarily due to increased 3-D equipment rental fees and the impact of exchange rates in certain countries in which we operate.

• U.S. Film rentals and advertising costs were $150.7 million, or 56.0% of admissions revenues, for the second quarter of 2010 compared to $158.8 million, or 57.5% of admissions revenues, for the second quarter of 2009. The decrease in film rentals and advertising costs of $8.1 million is due to a $7.0 million decrease in admissions revenues, which contributed $4.1 million and a decrease in our film rentals and advertising rate, which contributed $4.0 million. The decrease in the film rentals and advertising rate was primarily due to favorable film rental rates on certain films in the second quarter of 2010. Concession supplies expense was $15.6 million, or 12.0% of concession revenues, for the second quarter of 2010 compared to $17.2 million, or 13.1% of concession revenues, for the second quarter of 2009. The decrease in concession supplies expense is primarily due to a decrease in the concession supplies rate due to favorable inventory procurement costs and the successful implementation of price increases.

Salaries and wages increased to $44.7 million for the second quarter of 2010 from $43.8 million for the second quarter of 2009 primarily due to increased minimum wages, partially offset by reduced staffing levels due to the 5.2% decrease in attendance. Facility lease expense remained constant at $45.1 million for the second quarter of 2009 and 2010. Utilities and other costs decreased to $40.5 million for the second quarter of 2010 from $40.7 million for the second quarter of 2009 primarily due to decreased repairs and maintenance expense and decreased theatre supplies expense, partially offset by increased 3-D equipment rental fees.

• International. Film rentals and advertising costs were $42.8 million for the second quarter of 2010 compared to $32.1 million for the second quarter of 2009, or 51.0% of admissions revenues for each period. The increase in film rentals and advertising costs of $10.7 million was primarily due to a $21.0 million increase in admissions revenues. Concession supplies expense was $8.9 million, or 25.0% of concession revenues, for the second quarter of 2010 compared to $6.8 million, or 24.5% of concession revenues, for the second quarter of 2009. The increase in concession supplies expense of $2.1 million was primarily due to a $7.9 million increase in concession revenues.

34

Salaries and wages increased to $11.6 million for the second quarter of 2010 from $8.2 million for the second quarter of 2009 primarily due to increased staffing levels to support the 8.1% increase in attendance, increased minimum wages and the impact of exchange rates in certain countries in which we operate. Facility lease expense increased to $16.9 million for the second quarter of 2010 from $14.1 million for the second quarter of 2009 primarily due to increased percentage rent and the impact of exchange rates in certain countries in which we operate. Utilities and other costs increased to $17.2 million for the second quarter of 2010 from $13.4 million for the second quarter of 2009 primarily due to increased 3-D equipment rental fees and the impact of exchange rates in certain countries in which we operate.

     General and Administrative Expenses.General and administrative expenses increased to $24.5 million for the second quarter of 2010 from $23.3 million for the second quarter of 2009. The increase was primarily due to increased salaries and incentive compensation expense, increased professional fees and increased service charges related to increased credit card activity and the impact of exchange rates in certain countries in which we operate.

     Depreciation and Amortization.Depreciation and amortization expense, including amortization of favorable /unfavorable leases, was $34.9 million for the second quarter of 2010 compared to $37.9 million for the second quarter of 2009. The decrease was primarily related to a reduction in the depreciable basis of certain of our U.S. assets due to a significant amount of the equipment acquired in the Century Acquisition becoming fully depreciated during the fourth quarter of 2009, partially offset by the impact of accelerated depreciation taken on our domestic 35 millimeter projection systems that will be replaced with digital projection systems. We recorded approximately $2.4 million of depreciation expense related to these 35 millimeter projection systems during the second quarter of 2010.

     Impairment of Long-Lived Asset.We recorded asset impairment charges on assets held and used of $4.6 million for the second quarter of 2010 compared to $3.9 million for the second quarter of 2009. Impairment charges for the second quarter of 2010 consisted of $3.5 million of theatre properties, impacting ten of our twenty-four reporting units, and $1.1 million of intangible assets associated with Mexico theatre properties. Impairment charges for the second quarter of 2009 consisted of $3.9 million of theatre properties, impacting nine of our twenty-four reporting units. The long-lived asset impairment charges recorded during each of the periods presented were specific to theatres that were directly and individually impacted by increased competition, or adverse changes in market demographics. See Notes 12 and 13 to our condensed consolidated financial statements.

     Loss on Sale of Assets and Other.We recorded a loss on sale of assets and other of $1.2 million during the second quarter of 2010 and the second quarter of 2009.

     Interest Expense.Interest costs incurred, including amortization of debt issue costs, were $28.6 million for the second quarter of 2010 compared to $15.3 million for the second quarter of 2009. The increase was primarily due to the issuance of our 8 ⅝% senior notes during June 2009. See Note 10 to our condensed consolidated financial statements for further discussion of our long term debt.

     Interest Income.We recorded interest income of $1.4 million during the second quarter of 2010 compared to $0.9 million during the second quarter of 2009. The increase was primarily due to an increase in our cash investments.

     Distributions from NCM.We recorded distributions from NCM of $1.3 million during the second quarter of 2010 and $5.0 million during the second quarter of 2009, which were in excess of the carrying value of our investment. See Note 6 to our condensed consolidated financial statements.

     Income Taxes.Income tax expense of $10.4 million was recorded for the second quarter of 2010 compared to $18.2 million for the second quarter of 2009. The effective tax rate was 20.2% for the second quarter of 2010 compared to 29.5% for the second quarter of 2009. Income tax expense for the second quarter of 2010 includes the impact of the reduction of our liabilities for uncertain tax positions due to settlements and closures of various tax years, which resulted in a benefit of approximately $8.0 million. Income tax expense for the second quarter of 2009 includes the impact of two discrete items, including an adjustment to our deferred tax liability and an increase to our foreign unrecognized tax benefits in accordance with FIN 48. The net impact of these two items on income tax expense for the second quarter of 2009 was a benefit of approximately $4.9 million. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.

35

Six months ended June 30, 2010 and 2009

     Revenues.Total revenues increased $112.7 million to $1,056.0 million for the six months ended June 30, 2010 (“the 2010 period”) from $943.3 million for the six months ended June 30, 2009 (“the 2009 period”), representing an 11.9% increase. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues.

	U.S. Operating Segment							International Operating Segment							Consolidated
	Six Months Ended							Six Months Ended							Six Months Ended
	June 30,							June 30,							June 30,
					%							%							%
	2010		2009		Change			2010		2009		Change			2010		2009		Change
Admissions revenues (1)	$	528.5	$	501.7		5.3	%	$	167.6	$	117.3		42.9	%	$	696.1	$	619.0		12.5	%
Concession revenues(1)	$	248.1	$	237.2		4.6	%	$	70.2	$	51.7		35.8	%	$	318.3	$	288.9		10.2	%
Other revenues(1) (2)	$	20.5	$	20.2		1.5	%	$	21.1	$	15.2		38.8	%	$	41.6	$	35.4		17.5	%
Total revenues(1) (2)	$	797.1	$	759.1		5.0	%	$	258.9	$	184.2		40.6	%	$	1,056.0	$	943.3		11.9	%
Attendance(1)		81.2		81.2		0.0	%		37.5		34.0		10.3	%		118.7		115.2		3.0	%
Revenues per average screen(2)	$	208,272	$	200,379		3.9	%	$	242,459	$	177,636		36.5	%	$	215,730	$	195,452		10.4	%

(1)	Amounts in millions.
(2)	U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 16 of our condensed consolidated financial statements.

• Consolidated. The increase in admissions revenues of $77.1 million was primarily attributable to a 3.0% increase in attendance and a 9.1% increase in average ticket price from $5.37 for the 2009 period to $5.86 for the 2010 period. The increase in concession revenues of $29.4 million was primarily attributable to the 3.0% increase in attendance and a 6.8% increase in concession revenues per patron from $2.51 for the 2009 period to $2.68 for the 2010 period. The increase in average ticket price was primarily due to incremental 3-D and premium pricing and other price increases and the favorable impact of exchange rates in certain countries in which we operate. The increase in concession revenues per patron was primarily due to price increases and the favorable impact of exchange rates in certain countries in which we operate. The 17.5% increase in other revenues was primarily due to increases in ancillary revenue and the favorable impact of exchange rates in certain countries in which we operate.

• U.S. The increase in admissions revenues of $26.8 million was primarily attributable to a 5.3% increase in average ticket price from $6.18 for the 2009 period to $6.51 for the 2010 period. The increase in concession revenues of $10.9 million was primarily attributable to a 4.8% increase in concession revenues per patron from $2.92 for the 2009 period to $3.06 for the 2010 period. The increase in average ticket price was primarily due to incremental 3-D and premium pricing and other price increases and the increase in concession revenues per patron was primarily due to price increases.

• International. The increase in admissions revenues of $50.3 million was primarily attributable to a 10.3% increase in attendance and a 29.6% increase in average ticket price from $3.45 for the 2009 period to $4.47 for the 2010 period. The increase in concession revenues of $18.5 million was primarily attributable to the 10.3% increase in attendance and a 23.0% increase in concession revenues per patron from $1.52 for the 2009 period to $1.87 for the 2010 period. The increase in average ticket price was primarily due to incremental 3-D and premium pricing and other price increases and the favorable impact of exchange rates in certain countries in which we operate. The increase in concession revenues per patron was primarily due to price increases and the favorable impact of exchange rates in certain countries in which we operate. The increase in other revenues of $5.9 million was primarily due to increases in ancillary revenue and the favorable impact of exchange rates in certain countries in which we operate.

36

     Cost of Operations.The table below summarizes certain of our year-over-year theatre operating costs by reportable operating segment (in millions).

					International Operating
	U.S. Operating Segment				Segment				Consolidated
	Six Months Ended				Six Months Ended				Six Months Ended
	June 30,				June 30,				June 30,
	2010		2009		2010		2009		2010		2009
Film rentals and advertising	$	299.2	$	278.8	$	83.1	$	59.2	$	382.3	$	338.0
Concession supplies		29.5		30.6		17.4		13.1		46.9		43.7
Salaries and wages		87.1		81.1		21.7		15.3		108.8		96.4
Facility lease expense		90.8		87.7		33.9		27.2		124.7		114.9
Utilities and other		80.1		77.6		32.8		25.3		112.9		102.9

• Consolidated. Film rentals and advertising costs were $382.3 million, or 54.9% of admissions revenues, for the 2010 period compared to $338.0 million, or 54.6% of admissions revenues, for the 2009 period. The increase in film rentals and advertising costs of $44.3 million was due to a $77.1 million increase in admissions revenues, which contributed $42.1 million, and an increase in our film rentals and advertising rate, which contributed $2.2 million. The increase in the film rentals and advertising rate was primarily due to higher film rental rates in the U.S. segment due to the increase in the number of blockbuster films released, including the carryover ofAvatar, which generally have higher film rental rates. Concession supplies expense was $46.9 million, or 14.7% of concession revenues, for the 2010 period, compared to $43.7 million, or 15.1% of concession revenues, for the 2009 period. The decrease in the concession supplies rate was primarily due to favorable inventory procurement costs and the successful implementation of price increases in the U.S. segment.

Salaries and wages increased to $108.8 million for the 2010 period from $96.4 million for the 2009 period primarily due to new theatres, increased minimum wages in both our U.S. and international segments, increased staffing levels to support the 10.3% increase in attendance in our international segment and the impact of exchange rates in certain countries in which we operate. Facility lease expense increased to $124.7 million for the 2010 period from $114.9 million for the 2009 period primarily due to new theatres, increased percentage rent and the impact of exchange rates in certain countries in which we operate. Utilities and other costs increased to $112.9 million for the 2010 period from $102.9 million for the 2009 period primarily due to new theatres, increased 3-D equipment rental fees and the impact of exchange rates in certain countries in which we operate.

• U.S. Film rentals and advertising costs were $299.2 million, or 56.6% of admissions revenues for the 2010 period compared to $278.8 million, or 55.6% of admissions revenues, for the 2009 period. The increase in film rentals and advertising costs of $20.4 million is due to a $26.8 million increase in admissions revenues, which contributed $14.9 million and an increase in our film rentals and advertising rate, which contributed $5.5 million. The increase in the film rentals and advertising rate was primarily due to the increase in the number of blockbuster films released, including the carryover ofAvatar, which generally have higher film rental rates. Concession supplies expense was $29.5 million, or 11.9% of concession revenues, for the 2010 period, compared to $30.6 million, or 12.9% of concession revenues, for the 2009 period. The decrease in concession supplies expense is primarily due to a decrease in the concession supplies rate due to favorable inventory procurement costs and the successful implementation of price increases.

Salaries and wages increased to $87.1 million for the 2010 period from $81.1 million for the 2009 period primarily due to new theatres and increased minimum wages. Facility lease expense increased to $90.8 million for the 2010 period from $87.7 million for the 2009 period primarily due to new theatres and increased percentage rent. Utilities and other costs increased to $80.1 million for the 2010 period from $77.6 million for the 2009 period primarily due to new theatres and increased 3-D equipment rental fees.

• International. Film rentals and advertising costs were $83.1 million, or 49.6% of admissions revenues, for the 2010 period compared to $59.2 million, or 50.5% of admissions revenues, for the 2009 period. The increase in film rentals and advertising costs was primarily due to a $50.3 million increase in admissions revenues, partially offset by a lower film rentals and advertising rate. Concession supplies expense was $17.4 million, or 24.8% of concession revenues, for the 2010 period compared to $13.1 million, or 25.3% of concession revenues, for the 2009 period. The increase in concession supplies expense of $4.3 million was primarily due to an $18.5 million increase in concession revenues, partially offset by a lower concession supplies rate.

37

Salaries and wages increased to $21.7 million for the 2010 period from $15.3 million for the 2009 period primarily due to new theatres, increased staffing levels to support the 10.3% increase in attendance, increased minimum wages and the impact of exchange rates in certain countries in which we operate. Facility lease expense increased to $33.9 million for the 2010 period from $27.2 million for the 2009 period primarily due to new theatres, increased percentage rent and the impact of exchange rates in certain countries in which we operate. Utilities and other costs increased to $32.8 million for the 2010 period from $25.3 million for the 2009 period primarily due to new theatres, increased 3-D equipment rental fees and the impact of exchange rates in certain countries in which we operate.

     General and Administrative Expenses.General and administrative expenses increased to $49.5 million for the 2010 period from $44.7 million for the 2009 period. The increase was primarily due to increased salaries and incentive compensation expense, increased professional fees and increased service charges related to increased credit card activity and the impact of exchange rates in certain countries in which we operate.

     Depreciation and Amortization.Depreciation and amortization expense, including amortization of favorable/unfavorable leases, was $69.0 million for the 2010 period compared to $74.3 million for the 2009 period. The decrease was primarily related to a reduction in the depreciable basis of certain of our U.S. assets due to a significant amount of the equipment acquired in the Century Acquisition becoming fully depreciated during the fourth quarter of 2009, partially offset by the impact of accelerated depreciation taken on our domestic 35 millimeter projection systems that will be replaced with digital projection systems. We recorded approximately $3.7 million of depreciation expense related to these 35 millimeter projection systems during the 2010 period.

     Impairment of Long-Lived Assets.We recorded asset impairment charges on assets held and used of $5.0 million for the 2010 period compared to $5.0 million for the 2009 period. Impairment charges for the 2010 period consisted of $3.9 million of theatre properties, impacting fifteen of our twenty-four reporting units, and $1.1 million of intangible assets associated with Mexico theatre properties. Impairment charges for the 2009 period consisted of $4.9 million of theatre properties, impacting twelve of our twenty-four reporting units, and $0.1 million of intangible assets associated with Mexico theatre properties. The long-lived asset impairment charges recorded during each of the periods presented were specific to theatres that were directly and individually impacted by increased competition, or adverse changes in market demographics. See Notes 12 and 13 to our condensed consolidated financial statements.

     Loss on Sale of Assets and Other.We recorded a loss on sale of assets and other of $4.4 million during the 2010 period compared to $1.5 million during the 2009 period. The loss recorded during the 2010 period included $1.7 million that was recorded upon the contribution of digital projection systems to DCIP and an additional $0.3 million recorded upon the subsequent sale of digital projection systems to DCIP. See Note 7 to the condensed consolidated financial statements.

     Interest Expense.Interest costs incurred, including amortization of debt issue costs, were $54.6 million for the 2010 period compared to $30.5 million for the 2009 period. The increase was primarily due to the issuance of our 8 ⅝% senior notes during June 2009. See Note 10 to our condensed consolidated financial statements for further discussion of our long term debt.

     Interest Income.We recorded interest income of $2.4 million during the 2010 period compared to $2.6 million during the 2009 period. The decrease in interest income was primarily due to lower interest rates earned on our cash investments.

     Distributions from NCM.We recorded distributions from NCM of $11.3 million during the 2010 period and $11.6 million during the 2009 period, which were in excess of the carrying value of our investment. See Note 6 to our condensed consolidated financial statements.

     Income Taxes.Income tax expense of $30.4 million was recorded for the 2010 period compared to $36.7 million for the 2009 period. The effective tax rate was 28.0% for the 2010 period compared to 34.9% for the 2009 period. Income tax expense for the 2010 period includes the impact of certain discrete non-recurring items and the reduction of our liabilities for uncertain tax positions due to settlements and closures of various tax years, which resulted in a benefit of approximately $8.9 million. Income tax expense for the 2009 period includes the impact of two discrete items, including an adjustment to our deferred tax liability and an increase to our foreign unrecognized tax benefits in accordance with FIN 48. The net impact of the two items on income tax expense for the 2009 period was a benefit of approximately $4.9 million. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.

38

Item 4. Controls and Procedures

Evaluation of the Effectiveness of Disclosure Controls and Procedures

     As of June 30, 2010, we carried out an evaluation required by the 1934 Act, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the 1934 Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2010, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Controls Over Financial Reporting

     There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 that occurred during the quarter ended June 30, 2010 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

39

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Previously reported under “Business — Legal Proceedings” in the Company’s Annual Report on Form 10-K filed March 12, 2010.

Item 1A. Risk Factors

     There have been no material changes from risk factors previously disclosed in “Risk Factors” in the Company’s Annual Report on Form 10-K filed March 12, 2010.

Item 5. Other Information

     As required by the Indenture governing the Company’s 8⁵/₈% senior notes, the Company has included in this filing, interim financial information for its subsidiaries that have been designated as unrestricted subsidiaries, as defined by the Indenture. As required by the Indenture, the Company has included a condensed consolidating balance sheet and condensed consolidating statements of income and cash flows for the Company and its subsidiaries. These supplementary schedules separately identify the Company’s restricted subsidiaries and unrestricted subsidiaries as required by the Indenture.

Supplemental Schedules specified by the senior notes Indenture:

	Page
Condensed Consolidating Balance Sheet Information as of June 30, 2010 (unaudited)		41
Condensed Consolidating Statement of Income Information for the six months ended June 30, 2010 (unaudited)		42
Condensed Consolidating Statement of Cash Flows Information for the six months ended June 30, 2010 (unaudited)		43

40

CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2010
(In thousands, unaudited)

	Restricted		Unrestricted
	Group		Group			Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	390,660	$	45,055		$	—		$	435,715
Other current assets		103,522		(17,598	)		—			85,924
Total current assets		494,182		27,457			—			521,639
Theatre properties and equipment, net		1,184,254		—			—			1,184,254
Other assets		1,556,740		77,763			(27,019	)		1,607,484
Total assets	$	3,235,176	$	105,220		$	(27,019	)	$	3,313,377
Liabilities and equity
Current liabilities
Current portion of long-term debt	$	11,112	$	—		$	—		$	11,112
Current portion of capital lease obligations		7,344		—			—			7,344
Accounts payable and accrued expenses		231,906		—			—			231,906
Total current liabilities		250,362		—			—			250,362
Long-term liabilities
Long-term debt, less current portion		1,526,805		—			—			1,526,805
Capital lease obligations, less current portion		131,680		—			—			131,680
Other long-term liabilities		405,130		30,721			—			435,851
Total long-term liabilities		2,063,615		30,721			—			2,094,336
Commitments and contingencies
Equity		921,199		74,499			(27,019	)		968,679
Total liabilities and equity	$	3,235,176	$	105,220		$	(27,019	)	$	3,313,377

Note: “Restricted Group” and “Unrestricted Group” are defined in the Indenture for the senior notes.

41

CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2010
(In thousands, unaudited)

	Restricted			Unrestricted
	Group			Group			Eliminations		Consolidated
Revenues		$1,056,000		$	—		$	—	$	1,056,000
Cost of operations
Theatre operating costs		775,635			—			—		775,635
General and administrative expenses		49,449			3			—		49,452
Depreciation and amortization		69,006			—			—		69,006
Impairment of long-lived assets		5,035			—			—		5,035
Loss on sale of assets and other		3,412			946			—		4,358
Total cost of operations		902,537			949			—		903,486
Operating income (loss)		153,463			(949	)		—		152,514
Other income (expense)		(51,153	)		7,173			—		(43,980	)
Income before income taxes		102,310			6,224			—		108,534
Income taxes		28,078			2,347			—		30,425
Net income		74,232			3,877			—		78,109
Less: Net income attributable to noncontrolling interests		2,695			—			—		2,695
Net income attributable to Cinemark USA, Inc.		$71,537		$	3,877		$	—	$	75,414

Note: “Restricted Group” and “Unrestricted Group” are defined in the Indenture for the senior notes.

42

CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2010
(In thousands, unaudited)

	Restricted			Unrestricted
	Group			Group			Eliminations		Consolidated
Operating activities
Net income	$	74,232		$	3,877		$	—	$	78,109
Adjustments to reconcile net income to cash provided by operating activities and other		72,696			6,044			—		78,740
Changes in assets and liabilities		(51,056	)		2,091			—		(48,965	)
Net cash provided by operating activities		95,872			12,012			—		107,884
Investing activities
Additions to theatre properties and equipment		(56,960	)		—			—		(56,960	)
Proceeds from sale of theatre properties and equipment		951			1,197			—		2,148
Investment in joint venture — DCIP, net of cash distributions		—			(644	)		—		(644	)
Net cash provided by (used for) investing activities		(56,009	)		553			—		(55,456	)
Financing activities
Dividends paid to parent		(34,375	)		—			—		(34,375	)
Payroll taxes paid as a result of noncash stock option exercises and restricted stock withholdings		(416	)		—			—		(416	)
Payment of debt issue costs		(8,706	)		—			—		(8,706	)
Repayments of other long-term debt		(6,136	)		—			—		(6,136	)
Payments on capital leases		(3,606	)		—			—		(3,606	)
Other		(110	)		—			—		(110	)
Net cash used for financing activities		(53,349	)		—			—		(53,349	)
Effect of exchange rate changes on cash and cash equivalents		(1,101	)		—			—		(1,101	)
Increase (decrease) in cash and cash equivalents		(14,587	)		12,565			—		(2,022	)
Cash and cash equivalents:
Beginning of year		405,247			32,490			—		437,737
End of year	$	390,660		$	45,055		$	—	$	435,715

Note: “Restricted Group” and “Unrestricted Group” are defined in the Indenture for the senior notes.

43

Item 6. Exhibits

*31.1	Certification of Alan Stock, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Robert Copple, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of Alan Stock, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of Robert Copple, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

* filed herewith.

44

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CINEMARK USA, INC.
	Registrant
DATE: August 9, 2010
	/s/ Alan W. Stock
	Alan W. Stock
	Chief Executive Officer
	/s/ Robert Copple
	Robert Copple
	Chief Financial Officer

45

EXHIBIT INDEX

*31.1	Certification of Alan Stock, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Robert Copple, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of Alan Stock, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of Robert Copple, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

* filed herewith.