Cinemark Usa 10-Q 2005 Q3 Quarterly report

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 September 30, 2005

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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

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

     As of October 31, 2005, 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 September 30, 2005 (unaudited) and December 31, 2004		3
	Condensed Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2005 and 2004		4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2005 and 2004		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35
Item 4.	Controls and Procedures		36
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		36
Item 5.	Other Information		36
Item 6.	Exhibits		40
SIGNATURES			43
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	September 30,			December 31,
	2005			2004
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	133,738		$	100,228
Inventories		4,109			4,237
Accounts receivable		14,723			11,303
Income tax receivable		—			7,037
Prepaid expenses and other		5,016			3,819
Total current assets		157,586			126,624
THEATRE PROPERTIES AND EQUIPMENT		1,369,952			1,307,088
Less accumulated depreciation and amortization		587,816			521,493
Theatre properties and equipment — net		782,136			785,595
OTHER ASSETS
Goodwill		44,283			45,006
Intangible assets — net		10,600			6,084
Investments in and advances to affiliates		2,179			1,710
Deferred charges and other assets — net		42,185			36,546
Total other assets		99,247			89,346
TOTAL ASSETS	$	1,038,969		$	1,001,565
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt	$	6,841		$	6,539
Income tax payable		3,001			—
Accounts payable and accrued expenses		99,050			122,324
Total current liabilities		108,892			128,863
LONG-TERM LIABILITIES
Senior credit agreements		261,332			265,510
Senior subordinated notes		353,721			354,894
Deferred income taxes		24,168			23,138
Deferred lease expenses		29,135			27,962
Deferred gain on sale leasebacks		3,366			3,641
Deferred revenues and other long-term liabilities		7,084			12,025
Total long-term liabilities		678,806			687,170
COMMITMENTS AND CONTINGENCIES		—			—
MINORITY INTERESTS IN SUBSIDIARIES		16,458			16,697
SHAREHOLDER’S EQUITY
Class A common stock, $.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 outstanding		49,543			49,543
Additional paid-in-capital		58,005			51,070
Retained earnings		206,740			169,577
Treasury stock, 57,245 Class B shares at cost		(24,233	)		(24,233	)
Accumulated other comprehensive loss		(55,242	)		(77,122	)
Total shareholder’s equity		234,813			168,835
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY	$	1,038,969		$	1,001,565

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

3

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2005			2004			2005			2004
REVENUES
Admissions	$	161,626		$	164,174		$	470,535		$	486,735
Concession		80,461			82,077			234,564			242,664
Other		14,213			13,797			41,909			38,891
Total revenues		256,300			260,048			747,008			768,290
COSTS AND EXPENSES
Cost of operations:
Film rentals and advertising		86,262			88,357			253,511			261,528
Concession supplies		13,756			14,041			38,151			40,401
Salaries and wages		25,520			26,720			75,245			77,392
Facility lease expense		35,190			32,244			101,026			94,213
Utilities and other		32,022			29,692			90,884			84,424
Total cost of operations		192,750			191,054			558,817			557,958
General and administrative expenses		13,367			12,143			37,872			37,134
Stock option compensation and change of control expenses related to the Recapitalization		—			—			—			31,995
Depreciation and amortization		18,966			16,002			56,887			49,707
Impairment of long-lived assets		2,317			—			2,543			1,000
Loss on sale of assets and other		1,070			3,189			1,908			2,636
Total costs and expenses		228,470			222,388			658,027			680,430
OPERATING INCOME		27,830			37,660			88,981			87,860
OTHER INCOME (EXPENSE)
Interest expense		(11,014	)		(10,047	)		(32,535	)		(32,429	)
Amortization of debt issue costs		(697	)		(702	)		(2,075	)		(1,969	)
Interest income		2,182			564			4,206			1,442
Foreign currency exchange gain (loss)		262			(385	)		(698	)		187
Loss on early retirement of debt		—			(372	)		—			(5,949	)
Equity in income of affiliates		60			145			182			110
Minority interests in income of subsidiaries		(442	)		(718	)		(882	)		(4,311	)
Total other expenses		(9,649	)		(11,515	)		(31,802	)		(42,919	)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		18,181			26,145			57,179			44,941
Income taxes		7,538			6,524			20,016			13,825
INCOME FROM CONTINUING OPERATIONS		10,643			19,621			37,163			31,116
Income from discontinued operations, net of taxes (See Note 5)		—			868			—			667
NET INCOME	$	10,643		$	20,489		$	37,163		$	31,783

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

4

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

	Nine months ended September 30,
	2005			2004
OPERATING ACTIVITIES
Net income	$	37,163		$	31,783
Noncash items in net income:
Depreciation		54,802			49,221
Amortization of intangible and other assets		2,085			486
Amortization of foreign advanced rents		999			1,324
Amortized compensation — stock options		—			145
Amortization of debt issue costs		2,075			1,969
Amortization of gain on sale leasebacks		(274	)		(274	)
Amortization of debt discount and premium		(1,173	)		(1,144	)
Amortization of deferred revenues		(358	)		(420	)
Impairment of long-lived assets		2,543			1,000
Loss on sale of assets and other		1,908			2,636
Write-off unamortized debt issue costs and debt discount and premium related to the early retirement of debt		—			938
Write-off of unearned compensation related to the Recapitalization		—			1,595
Deferred lease expenses		1,173			222
Deferred income tax expenses		1,030			438
Equity in income of affiliates		(182	)		(110	)
Minority interests in income of subsidiaries		882			4,311
Other noncash items		—			743
Changes in assets and liabilities:
Inventories		128			158
Accounts receivable		(3,420	)		435
Prepaid expenses and other		(1,197	)		1,147
Other assets		(15,056	)		(6,700	)
Advances with affiliates		6,758			(395	)
Accounts payable and accrued expenses		(19,609	)		(36,914	)
Other long-term liabilities		529			597
Income tax receivable/payable		10,038			(7,151	)
Net cash provided by operating activities		80,844			46,040
INVESTING ACTIVITIES
Additions to theatre properties and equipment		(47,676	)		(59,233	)
Proceeds from sale of theatre properties and equipment		1,266			3,419
Proceeds from sale of equity investment		—			1,250
Purchase of shares in National CineMedia		(7,329	)		—
Purchase of minority partner shares in Cinemark Brasil		—			(44,958	)
Purchase of minority partner shares in Cinemark Mexico		—			(5,379	)
Dividends/capital returned from affiliates		284			203
Net cash used for investing activities		(53,455	)		(104,698	)
FINANCING ACTIVITIES
Capital contribution from parent		6,935			29,500
Retirement of senior subordinated notes		—			(122,750	)
Proceeds from long-term debt		307			284,589
Repayments of long-term debt		(4,831	)		(175,850	)
Debt issue costs		(202	)		(7,909	)
Increase in deferred revenues		671			—
Increase in minority investment in subsidiaries		133			758
Decrease in minority investment in subsidiaries		(1,253	)		(1,917	)
Net cash provided by financing activities		1,760			6,421
Effect of exchange rate changes on cash and cash equivalents		4,361			(217	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		33,510			(52,454	)
CASH AND CASH EQUIVALENTS:
Beginning of period		100,228			107,319
End of period	$	133,738		$	54,865

SUPPLEMENTAL INFORMATION (See Note 11)

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

5

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, UNAUDITED)

1. The Company and Basis of Presentation

     Cinemark USA, Inc. and subsidiaries (the “Company”) are one of the leaders in the motion picture exhibition industry in terms of both revenues and the number of screens in operation, with theatres in the United States (“U.S.”), Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia. The Company also managed additional theatres in the U.S., Canada, Brazil and Taiwan during the nine months ended September 30, 2005.

     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 necessary to state fairly the financial position and results of operations as of, and for, the periods indicated. The condensed consolidated financial statements include the accounts of Cinemark USA, Inc. and its subsidiaries. Majority-owned subsidiaries that the Company controls are consolidated while those subsidiaries of which the Company owns between 20% and 50% and does not control are accounted for as affiliates under the equity method. Those subsidiaries of which the Company owns less than 20% are accounted for as affiliates under the cost 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. Significant intercompany balances and transactions are eliminated in consolidation. Certain reclassifications have been made to the 2004 financial statements to conform to the 2005 presentation.

     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, 2004, included in the Annual Report filed March 29, 2005 on Form 10-K by the Company under the Securities Exchange Act of 1934. Operating results for the nine months ended September 30, 2005 are not necessarily indicative of the results to be achieved for the full year.

2. Recapitalization of Cinemark, Inc. and Refinancing of Certain Long-Term Debt

     Recapitalization of Cinemark, Inc.- On March 12, 2004, the Company’s parent, Cinemark, Inc., entered into an agreement and plan of merger with a newly formed subsidiary of Madison Dearborn Partners, LLC (“Madison”). The transaction was completed on April 2, 2004, at which time the newly formed subsidiary of Madison was merged with and into Cinemark, Inc., with Cinemark, Inc. continuing as the surviving corporation. Simultaneously, an affiliate of Madison purchased shares of common stock of Cinemark, Inc. for $518,245 in cash and became the controlling stockholder of Cinemark, Inc., owning approximately 83% of Cinemark, Inc.’s capital stock. Lee Roy Mitchell, the Company’s Chief Executive Officer, and the Mitchell Special Trust collectively retained approximately 16% ownership of Cinemark, Inc.’s capital stock with certain members of management owning the remaining 1%. Based on the terms of the transaction, including Mr. Mitchell’s ownership retention, the transaction was accounted for as a recapitalization, which resulted in Cinemark, Inc. and its subsidiaries retaining their historical book values. Since April 2, 2004, Madison sold approximately 10% of its stock in Cinemark, Inc. to outside investors and Cinemark, Inc. issued an additional 221 shares to other outside investors. As of September 30, 2005, Madison owned approximately 74% of the capital stock of Cinemark, Inc., outside investors owned approximately 9%, Lee Roy Mitchell and the Mitchell Special Trust collectively owned approximately 16% and certain members of management owned the remaining 1%.

     On March 31, 2004, Cinemark, Inc. issued $577,173 aggregate principal amount at maturity of 9³/4% senior discount notes due 2014. The gross proceeds at issuance of $360,000 were used to fund in part the Recapitalization. Interest on the notes accretes until March 15, 2009 up to their aggregate principal amount. Cash interest will accrue and be payable semi-annually in arrears on March 15 and September 15, commencing on September 15, 2009. Due to the holding company status of Cinemark, Inc., payments of principal and interest under these notes will be dependent on loans, dividends and other payments from the Company to Cinemark, Inc. On September 22, 2005, Cinemark, Inc. repurchased $1,840 aggregate principal amount at maturity of the 9³/4% senior discount notes as part of an open market purchase for approximately $1,302, including accreted interest. As of September 30, 2005, the accreted principal balance of the notes was $414,013 and the aggregate principal amount at maturity will be $575,333. Upon a change of control, Cinemark, Inc. would be required to make an offer to repurchase all of the 9³/4% senior discount notes at a price equal to 101% of the accreted value of the notes plus accrued and unpaid interest, if any, through the date of purchase. The Company has no obligation, contingent or otherwise, to pay the amounts due under the 9³/4% senior discount notes or to make funds available to pay those amounts. The 9³/4% senior discount notes are general, unsecured senior obligations of Cinemark,

6

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

Inc. that are effectively subordinated to indebtedness and other liabilities of the Company.

     Upon consummation of the Recapitalization on April 2, 2004, all outstanding stock options of Cinemark, Inc. immediately vested and the majority were repurchased, which resulted in compensation expense of $16,245 recorded by the Company during April 2004. Compensation expense, which was included in general and administrative expenses, consisted of the write-off of the unamortized unearned compensation expense for options outstanding as of the date of the Recapitalization and the impact of the cash settlement of these options. As part of the transaction, Cinemark, Inc. paid change of control fees and other management compensation expenses of $15,749, which were also included in general and administrative expenses during April 2004.

     As a result of the Recapitalization, the Company’s Brazilian partners exercised their option to cause Cinemark, Inc. to purchase all of their shares of common stock of Cinemark Brasil S.A., which represented 47.2% of total common stock of Cinemark Brasil S.A. See Note 3.

     Refinancing of Certain Long-Term Debt- On March 16, 2004, the Company initiated a tender offer for its then outstanding $105,000 aggregate principal amount 8¹/2% senior subordinated notes due 2008 and a consent solicitation to remove substantially all restrictive covenants in the indenture governing those notes. On March 25, 2004, a supplemental indenture removing substantially all of the covenants was executed and became effective on the date of the Recapitalization. Additionally, on the date of the Recapitalization, the Company amended its senior secured credit facility to provide for a $260,000 seven year term loan and a $100,000 six and one-half year revolving credit line, which was left undrawn. The net proceeds from the amended senior secured credit facility were used to repay the term loan under the Company’s then existing senior secured credit facility of approximately $163,763 and to redeem the $94,165 aggregate principal amount of the Company’s outstanding $105,000 aggregate principal amount of 8¹/2% senior subordinated notes that were tendered pursuant to the tender offer. The tender offer was made at 104.5% of the aggregate principal amount of the notes tendered on or prior to the consent date and at 101.5% of the aggregate principal amount of the notes tendered subsequent to the consent date but prior to the expiration date.

     On April 6, 2004, as a result of the consummation of the Recapitalization and in accordance with the terms of the indenture governing the Company’s 9% senior subordinated notes due 2013, the Company made a change of control offer to purchase the 9% senior subordinated notes at a purchase price of 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, at the date of purchase. Approximately $17,750 aggregate principal amount of the 9% senior subordinated notes were tendered and not withdrawn in the change of control offer, which expired on May 26, 2004. Payment of the change of control price was made with available cash by the Company on June 1, 2004.

     On July 28, 2004, the Company provided notice to the holders of the remaining outstanding 8¹/2% senior subordinated notes due 2008 of its election to redeem all outstanding notes at a redemption price of 102.833% of the aggregate principal amount plus accrued interest. On August 27, 2004, the Company redeemed the remaining $10,835 aggregate principal amount of notes utilizing available cash and borrowings under the Company’s amended revolving credit line.

     The amended senior secured credit facility was further amended on August 18, 2004 to, among other things, reduce the interest rate applicable to the term loan. Under the amended term loan, principal payments of $650 are due each calendar quarter through March 31, 2010 and increase to $61,100 each calendar quarter from June 30, 2010 to maturity at March 31, 2011. The amended term loan bears interest, at the Company’s option, at: (A) the base rate equal to the higher of (i) the prime lending rate as set forth on the British Banking Association Telerate page 5 or (ii) the federal funds effective rate from time to time plus 0.50%, plus a margin of 1.00% per annum, or (B) a “eurodollar rate” plus a margin of 2.00% per annum. After the completion of two fiscal quarters after the closing date, the margin under the amended term loan applicable to base rate loans ranges from 0.75% per annum to 1.00% per annum and the margin applicable to eurodollar rate loans ranges from 1.75% per annum to 2.00% per annum, and will be adjusted based upon the Company achieving certain performance targets.

     Borrowings under the amended revolving credit line bear interest, at the Company’s option, at: (A) a base rate equal to the higher of (i) the prime lending rate as set forth on the British Banking Association Telerate page 5 or (ii) the federal funds effective rate from time to time plus 0.50%, plus a margin of 1.50% per annum, or (B) a “eurodollar rate” plus a margin of 2.50% per annum. After the completion of two fiscal quarters after the closing date, the margin under the amended revolving credit line applicable to base rate loans ranges from 1.00% per annum to 1.50% per annum and the margin applicable to eurodollar rate loans ranges from 2.00% per annum to 2.50% per annum, and will be adjusted based

7

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

upon the Company achieving certain performance targets. The Company is required to pay a commitment fee calculated at the rate of 0.50% per annum on the average daily unused portion of the amended revolving credit line, payable quarterly in arrears.

3. Acquisitions

     As a result of the Recapitalization, the Company’s Brazilian partners exercised their option to cause Cinemark, Inc. to purchase all of their shares of common stock of Cinemark Brasil S.A., which represented 47.2% of total common stock of Cinemark Brasil S.A. The Company, through its subsidiary Brasil Holdings, LLC, directly and indirectly purchased the partners’ shares of Cinemark Brasil S.A. for $44,958 with available cash on August 18, 2004. The Company also incurred $771 of legal, accounting and other direct costs, which were capitalized as part of the acquisition. Prior to the acquisition, Cinemark Brasil S.A. was reported as a consolidated subsidiary and the Brazilian partners’ 47.2% interest was shown as minority interest in subsidiaries on the Company’s condensed consolidated balance sheet. As a result of this acquisition, the Company owns 100% of the common stock in Cinemark Brasil S.A. The Company accounted for the purchase as a step acquisition, which resulted in the following purchase price allocation:

Net favorable leases	$	730
Vendor contracts		2,231
Goodwill		23,962
Reduction of minority interest liability		18,806
	$	45,729

     The net favorable leases and vendor contracts are presented as intangible assets on the Company’s condensed consolidated balance sheet as of September 30, 2005. The net favorable leases will be amortized over three to seventeen years based upon the pattern in which the economic benefits are realized during the terms of the lease agreements. The vendor contracts will be amortized on a straight-line basis over the remaining terms of the contracts. The average remaining years for the net favorable leases and the vendor contracts are approximately five and two years, respectively. As of September 30, 2005, accumulated amortization on the intangible assets was $1,388. The goodwill recorded as a result of the acquisition is deductible for tax purposes in Brazil.

     On September 15, 2004, the Company purchased shares of common stock of its Mexican subsidiary from its Mexican partners, increasing its ownership interest in the Mexican subsidiary from 95.0% to 99.4%. The purchase price was $5,379 and was funded with available cash and borrowings on the Company’s amended revolving credit line. Prior to the acquisition, Cinemark Mexico USA was reported as a consolidated subsidiary and the Mexican partners’ 4.4% interest was shown as minority interest in subsidiaries on the Company’s condensed consolidated balance sheet. The Company accounted for the purchase as a step acquisition, which resulted in the following purchase price allocation:

Vendor contract	$	439
Net favorable leases		480
Tradename		1,179
Goodwill		1,715
Reduction of minority interest liability		1,566
	$	5,379

     The vendor contract, net favorable leases and tradename are presented as intangible assets on the Company’s condensed consolidated balance sheet as of September 30, 2005. The vendor contract will be amortized on a straight-line basis over the remaining term of the contract, which is approximately two years. The net favorable leases will be amortized over five to twenty-one years based upon the pattern in which the economic benefits are realized during the terms of the lease agreements. The average remaining years for the net favorable leases is approximately ten years. The tradename is an indefinite lived intangible asset and is not amortized, but will be tested for impairment annually. As of September 30, 2005, accumulated amortization on these intangible assets was $166. The goodwill recorded as a result of the acquisition is not deductible for tax purposes.

8

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

4. Investment in National CineMedia

     On July 15, 2005, Cinemark Media, Inc., a wholly-owned subsidiary of the Company, purchased a 20.7% interest in National CineMedia LLC (“National CineMedia”) for approximately $7,329. National CineMedia is a joint venture between Regal Entertainment Group, AMC Entertainment Inc. and the Company. National CineMedia provides marketing, sales and distribution of cinema advertising and promotional products; business communications and training services; and the distribution of digital alternative content. As part of the transaction, the Company and National CineMedia entered into an exhibitor services agreement, pursuant to which National CineMedia will provide advertising, promotion and event services to Cinemark’s theatres, and a software license agreement in connection with the licensing of certain software and related rights. Throughout the remainder of 2005, the Company is using only limited services offered by National CineMedia until the Company fulfills its existing contractual theatre advertising obligations.

     The Company is accounting for its investment in National CineMedia under the equity method of accounting. The Company’s investment in National CineMedia is included in investments in and advances to affiliates on the Company’s condensed consolidated balance sheets. During the nine months ended September 30, 2005, the Company did not record any equity income of National CineMedia since National CineMedia did not provide services to the Company during this period. The Company estimates that it will spend approximately $25,000 for digital projectors and related equipment necessary to show various digital media. As of September 30, 2005, the Company had purchased approximately $1,300 of this equipment and expects to purchase the remaining $23,700 over the next nine months.

     As part of the joint venture, the Company, Regal Entertainment Group, AMC Entertainment Inc. and National CineMedia signed a promissory note under which the Company, Regal Entertainment Group and AMC Entertainment Inc. are obligated to make loans to National CineMedia on a revolving basis as needed. The maximum amount that National CineMedia can borrow under the note is $11 million for which the Company’s obligation would be approximately $2.3 million. Amounts borrowed by National CineMedia are due in full upon the earlier of March 31, 2007 or an event of default as defined in the promissory note. National CineMedia will pay interest on outstanding amounts on a monthly basis at a rate of LIBOR plus 200 basis points. No amounts were outstanding under this promissory note as of September 30, 2005.

5. Discontinued Operations

     As of March 31, 2004, the Company’s two United Kingdom theatres met the criteria of assets held for sale in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,“Accounting for Impairment or Disposal of Long-Lived Assets.”On April 30, 2004, the Company sold its two United Kingdom theatres through the sale of all of the capital stock of Cinemark Theatres UK, Ltd., its United Kingdom subsidiary. The Company received $2,646 in proceeds upon closing of the transaction and an additional $540 once the final working capital position was determined in accordance with the stock purchase agreement. The sale resulted in a loss of $463, which was recorded during the nine months ended September 30, 2004.

     On December 23, 2004, the Company sold eleven discount theatres (“Interstate theatres”) through the sale of all of the capital stock of Interstate Holdings, Inc. The Company received $5,810 in proceeds upon closing of the transaction. The sale resulted in a gain of $2,715, which was recorded during December 2004.

     The results of operations for the United Kingdom and Interstate theatres have been classified as discontinued operations for all periods presented. Amounts reported as discontinued operations in the Company’s condensed consolidated statements of income include the following components:

9

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

	Three Months Ended			Nine months ended
	September 30, 2004			September 30, 2004
REVENUES
Admissions	$	1,210		$	4,125
Concession		1,774			4,318
Other		272			872
Total revenues		3,256			9,315
COSTS AND EXPENSES
Cost of operations:
Film rentals and advertising		534			1,834
Concession supplies		303			706
Salaries and wages		603			1,816
Facility lease expense		383			1,396
Utilities and other		525			1,708
Total cost of operations		2,348			7,460
General and administrative expenses		—			498
Depreciation and amortization		52			238
(Gain) loss on sale of assets and other		(103	)		463
Total costs and expenses		2,297			8,659
OPERATING INCOME		959			656
Minority interests in income of subsidiaries		(77	)		(41	)
INCOME BEFORE INCOME TAXES		882			615
Income tax expense (benefit)		14			(52	)
Income from discontinued operations	$	868		$	667

6. Stock Option Accounting

     Upon consummation of the Recapitalization on April 2, 2004, all outstanding stock options of Cinemark, Inc. immediately vested and the majority were repurchased, resulting in compensation expense of $16,245 recorded by the Company during April 2004. Compensation expense, which was included in general and administrative expenses, consisted of the write-off of the remaining unearned compensation for options outstanding as of the date of the Recapitalization and the impact of the cash settlement of these options. The then existing stock option plans were terminated.

     During September 2004, the Board of Directors of Cinemark, Inc. approved the 2004 Long Term Incentive Plan (the “Plan”) under which approximately 3,075 shares of Cinemark, Inc. Class A common stock are available for issuance to selected employees, directors and consultants of the Company. The Plan provides for restricted share grants, incentive option grants and nonqualified option grants. Cinemark, Inc. granted approximately 2,362 options under the Plan on September 30, 2004 at an exercise price of $22.58 per option (equal to the market value at the date of grant). Options to purchase approximately 234 shares vested immediately and the remaining options granted in 2004 vest daily over the period ending April 1, 2009 and expire ten years from the grant date.

     On January 28, 2005, Cinemark, Inc. granted approximately 4 options under the Plan at an exercise price of $22.58 per option (equal to the market value at the date of grant). The options granted during January 2005 vest daily over five years and the options expire ten years from the grant date.

     Although the Company did not have any options outstanding during the periods presented, compensation expense related to outstanding options of Cinemark, Inc. was recorded in the Company’s condensed consolidated statements of income during the nine months ended September 30, 2004. The Company applies Accounting Principles Board (“APB”) Opinion No. 25 and related interpretations in accounting for stock option plans. Had compensation costs been determined

10

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

based on the fair value at the date of grant for awards under the plans, consistent with the method of SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based Compensation Transition and Disclosure”, the Company’s net income would have been reduced to the pro-forma amounts indicated below:

	Three Months Ended						Nine months ended
	September 30,						September 30,
	2005			2004			2005			2004
Net income as reported	$	10,643		$	20,489		$	37,163		$	31,783
Compensation expense included in reported net income, net of tax		—			—			—			88
Compensation expense under fair value method, net of tax		(741	)		(1,212	)		(2,223	)		(1,374	)
Pro-forma net income	$	9,902		$	19,277		$	34,940		$	30,497

     The weighted average fair value per share of stock options granted by Cinemark, Inc. during 2004 was $22.58 (all of which had an exercise price equal to the market value at the date of grant). For each 2004 grant, compensation expense under the fair value method of SFAS No. 123 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0 percent; an expected life of 6.5 years; expected volatility of approximately 39 percent; and a risk-free interest rate of 3.79 percent. The weighted average fair value per share of stock options granted by Cinemark, Inc. during 2005 was $22.58 (all of which had an exercise price equal to the market value at the date of grant). For the 2005 grant, compensation expense under the fair value method of SFAS No. 123 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0 percent; an expected life of 6.5 years; expected volatility of approximately 44 percent; and a risk-free interest rate of 3.93 percent.

7. Goodwill and Other Intangible Assets

     The Company’s goodwill was as follows:

									Foreign
			Purchase Price						Currency
	Balance at		Allocation			Impairment			Translation			Balance at
	December 31, 2004		Adjustment			Charges			Adjustment			September 30, 2005
United States	$	4,932	$	—		$	(667	)	$	—		$	4,265
Brazil		30,069		(2,961	)		—			4,862			31,970
Mexico		3,884		(2,098	)		—			26			1,812
Chile		3,206		—			—			157			3,363
Peru		2,679		—			—			(50	)		2,629
Argentina		236		—			—			8			244
Total	$	45,006	$	(5,059	)	$	(667	)	$	5,003		$	44,283

     During the nine months ended September 30, 2005, the Company recorded an impairment charge of $667 to write-down goodwill on one theatre in the United States to its estimated fair value. During the nine months ended September 30, 2005, the Company recorded intangible assets as a result of the final purchase price allocations for its Brazil and Mexico acquisitions (see Note 3).

11

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

     Intangible assets consisted of the following:

	September 30,			December 31,
	2005			2004
Capitalized licensing fees	$	8,250		$	7,750
Vendor contracts		3,285			—
Net favorable leases		1,434			—
Other intangible assets		450			438
Less: Accumulated amortization		(4,081	)		(2,120	)
Amortized intangible assets		9,338			6,068
Tradename		1,246			—
Other unamortized intangible assets		16			16
Total	$	10,600		$	6,084

     Aggregate amortization expense of $2,085 for the nine months ended September 30, 2005 consisted of $1,961 of amortization of intangible assets and $124 of amortization of other assets. Estimated aggregate future amortization expense for intangible assets is as follows:

For the three months ended December 31, 2005	$	528
For the twelve months ended December 31, 2006		1,656
For the twelve months ended December 31, 2007		1,198
For the twelve months ended December 31, 2008		946
For the twelve months ended December 31, 2009		719
Thereafter		4,291
Total	$	9,338

8. Impairment of Long-Lived Assets

     In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company reviews long-lived assets for impairment 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, goodwill carrying values, the age of a recently built theatre, competitive theatres in the marketplace, the sharing of a market with other Company theatres, changes in foreign currency exchange rates, the impact of recent ticket price changes, available lease renewal options and other factors in its assessment of impairment of individual theatre assets. Long-lived assets are evaluated for impairment on an individual theatre basis or a group basis if the group of theatres shares the same marketplace, 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 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 with its estimated fair value, which is determined based on a multiple of cash flows. When estimated fair value is determined to be lower than the carrying value of the long-lived asset, the asset is written down to its estimated fair value and the impairment loss is recognized in the Company’s condensed consolidated statements of income. During the nine months ended September 30, 2005, the Company recorded asset impairment charges of $2,543 to write-down long-lived assets for five theatres in the United States, which included $667 of goodwill, and two theatres in Chile, to their estimated fair values.

12

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

9. Foreign Currency Translation

     The accumulated other comprehensive loss account in shareholder’s equity of $55,242 and $77,122 at September 30, 2005 and December 31, 2004, respectively, primarily relates to the cumulative foreign currency adjustments from translating the financial statements of Cinemark Argentina, S.A., Cinemark Brasil S.A., Cinemark de Mexico, S.A. de C.V. and Cinemark Chile S.A. into U.S. dollars.

     In 2005 and 2004, all foreign countries where the Company has operations, including Argentina, Brazil, Mexico and Chile were deemed non-highly inflationary. Thus, any fluctuation in the currency results in a cumulative foreign currency translation adjustment to the accumulated other comprehensive loss account recorded as an increase in, or reduction of, shareholder’s equity.

     On September 30, 2005, the exchange rate for the Brazilian real was 2.22 reais to the U.S. dollar (the exchange rate was 2.65 reais to the U.S. dollar at December 31, 2004). As a result, the effect of translating the September 30, 2005 Brazilian 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 shareholder’s equity of $17,680. At September 30, 2005, the total assets of the Company’s Brazilian subsidiaries were U.S. $126,476.

     On September 30, 2005, the exchange rate for the Mexican peso was 10.81 pesos to the U.S. dollar (the exchange rate was 11.22 pesos to the U.S. dollar at December 31, 2004). As a result, the effect of translating the September 30, 2005 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 shareholder’s equity of $3,183. At September 30, 2005, the total assets of the Company’s Mexican subsidiaries were U.S. $101,105.

     On September 30, 2005, the exchange rate for the Argentine peso was 2.88 pesos to the U.S. dollar (the exchange rate was 2.97 pesos to the U.S. dollar at December 31, 2004). As a result, the effect of translating the September 30, 2005 Argentine 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 shareholder’s equity of $490. At September 30, 2005, the total assets of the Company’s Argentine subsidiaries were U.S. $17,401.

     On September 30, 2005, the exchange rate for the Chilean peso was 533.69 pesos to the U.S. dollar (the exchange rate was 559.83 pesos to the U.S. dollar at December 31, 2004). As a result, the effect of translating the September 30, 2005 Chilean 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 shareholder’s equity of $641. At September 30, 2005, the total assets of the Company’s Chilean subsidiaries were U.S. $19,831.

10. Comprehensive Income

     SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the condensed consolidated financial statements. The Company’s comprehensive income was as follows:

	Three Months Ended				Nine months ended
	September 30,				September 30,
	2005		2004		2005		2004
Net income	$	10,643	$	20,489	$	37,163	$	31,783
Foreign currency translation adjustment		6,655		6,266		21,880		1,152
Comprehensive income	$	17,298	$	26,755	$	59,043	$	32,935

13

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

11. Supplemental Cash Flow Information

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

	Nine months ended
	September 30,
	2005			2004
Cash paid for interest	$	41,172		$	43,889
Net cash paid (refunds received) for income taxes	$	(1,228	)	$	16,274
Noncash activities:
Change in construction lease obligations related to construction of theatres	$	(5,783	)	$	—
Changes in accounts payable and accrued expenses for the acquisition of theatre properties and equipment	$	1,607		$	2,846

12. Financial Information About Geographic Areas

     The Company operates in one business segment as a motion picture exhibitor. The Company has operations in the U.S., Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia, which are reflected in the condensed consolidated financial statements. Below is a breakdown of select financial information by geographic area:

	Nine months ended
	September 30,
Revenues	2005			2004
U.S. and Canada (1)	$	553,631		$	582,284
Brazil		81,614			68,118
Mexico		54,939			59,930
Other foreign countries (1)		58,028			59,185
Eliminations		(1,204	)		(1,227	)
Total	$	747,008		$	768,290

Theatre Properties and	September 30,		December 31,
Equipment-net	2005		2004
U.S. and Canada	$	621,957	$	622,578
Brazil		56,369		51,982
Mexico		54,016		61,043
Other foreign countries		49,794		49,992
Total	$	782,136	$	785,595

(1) Revenues for the nine months ended September 30, 2004 do not include results of the two United Kingdom theatres or the eleven Interstate theatres that were sold during 2004, as the results of operations for these theatres are included as discontinued operations for all periods presented.

14

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

13. New Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 153, “Exchanges of Non-monetary Assets-Amendment of APB Opinion No. 29”. SFAS No. 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance, defined as transactions that are not expected to result in significant changes in the cash flows of the reporting entity. This statement is effective for exchanges of non-monetary assets occurring after June 15, 2005. The adoption of SFAS No. 153 did not have a material impact on the Company’s condensed consolidated financial statements.

     In December 2004, the FASB issued SFAS No. 123(R),“Share-Based Payment”, which establishes accounting standards for all transactions in which an entity exchanges its equity instruments for goods and services. SFAS No. 123(R) focuses primarily on accounting for transactions with employees, and carries forward without change prior guidance for share-based payments for transactions with non employees. SFAS No. 123(R) eliminates the intrinsic value measurement objective in APB Opinion No. 25 and generally requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award on the date of the grant. The standard requires grant date fair value to be estimated using either an option-pricing model, which is consistent with the terms of the award, or a market observed price, if such a price exists. Such cost must be recognized over the period during which an employee is required to provide service in exchange for the award (which is usually the vesting period). The standard also requires the Company to estimate the number of instruments that will ultimately be issued, rather than accounting for forfeitures as they occur. The Company is required to apply SFAS No. 123(R) to all awards granted, modified or settled in its first annual reporting period after December 15, 2005. The Company will be required to use the “modified prospective method”, under which it must recognize compensation cost for all awards granted after it adopts the standard and for the unvested portion of previously granted awards that are outstanding on that date. The Company performed a preliminary analysis of the impact of SFAS 123(R), and estimates that it will have approximately 1,538 unvested options outstanding on January 1, 2006 and the pre-tax compensation expense related to these options will be approximately $2,900 for the year ended December 31, 2006.

     FASB Staff Position (“FSP”) No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (the “Jobs Act”) provides guidance on enterprises’ income tax expense and deferred tax liability. The Jobs Act was enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109 “Accounting for Income Taxes”. The Company has not yet completed evaluating the impact of the repatriation provisions. The Company is currently performing an earnings and profit study to enable it to model and evaluate the impact. Results cannot be estimated at this time. Accordingly, as provided for in FSP 109-2, the Company has not adjusted its tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act. The Company will complete its evaluation by the end of 2005.

15

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

14. Related Party Transactions

     The Company has paid certain fees and expenses on behalf of its parent, Cinemark, Inc., and Cinemark, Inc. has paid certain fees and expenses on behalf of the Company. These transactions are included in investments in and advances to affiliates on the Company’s condensed consolidated balance sheets. At September 30, 2005, the amount due to Cinemark, Inc. was $6,411. The Company also received capital contributions from Cinemark, Inc. totaling $6,935 during the nine months ended September 30, 2005 related to an income tax benefit recorded on Cinemark, Inc. that was contributed to the Company.

     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 million and 3% of annual theatre revenues in excess of $50 million. The Company recorded $149 of management fee revenues and received $450 in dividends from Laredo during the nine months ended September 30, 2005. All such amounts are included in the Company’s condensed consolidated financial statements with the intercompany amounts eliminated in consolidation.

     The Company leases one theatre from Plitt Plaza Joint Venture (“Plitt Plaza”). Plitt Plaza is indirectly owned by Lee Roy Mitchell. Annual rent is approximately $118 plus certain taxes, maintenance expenses and insurance. The Company recorded $116 of facility lease expense payable to Plitt Plaza joint venture during the nine months ended September 30, 2005.

     The Company entered into an amended and restated profit participation agreement on March 12, 2004 with its President, Alan Stock, which became effective upon consummation of the Recapitalization and amends a profit participation agreement with Mr. Stock in effect since May 2002. Under the agreement, Mr. Stock receives a profit interest in two theatres once the Company has recovered its capital investment in these theatres plus its borrowing costs. During the nine months ended September 30, 2005, the Company recorded $435 in profit participation expense payable to Mr. Stock, which is included in general and administrative expenses on the Company’s condensed consolidated statements of income. In the event that Mr. Stock’s employment is terminated without cause, profits will be distributed according to a formula set forth in the profit participation agreement.

15. Litigation

     DOJ Litigation- In March 1999, the Department of Justice (“DOJ”) filed suit in the U.S. District Court, Northern District of Ohio, Eastern Division, against the Company alleging certain violations of the Americans with Disabilities Act of 1990 (the “ADA”) relating to the Company’s wheelchair seating arrangements and seeking remedial action. An order granting summary judgment to the Company was issued in November 2001. The Department of Justice appealed the district court’s ruling with the Sixth Circuit Court of Appeals. On November 7, 2003, the Sixth Circuit Court of Appeals reversed the summary judgment and sent the case back to the district court for further review without deciding whether wheelchair seating at the Company’s theatres comply with the ADA. The Sixth Circuit Court of Appeals also stated that if the district court found that the theatres did not comply with the ADA, any remedial action should be prospective only. The Company and the United States have resolved this lawsuit. A Consent Order was entered by the U.S. District Court for the Northern District of Ohio, Eastern Division, on November 17, 2004. This Consent Order fully and finally resolves theUnited States v. Cinemark USA, Inc.lawsuit, and all claims asserted against the Company in that lawsuit have been dismissed with prejudice. Under the Consent Order, the Company will make modifications to wheelchair seating locations in fourteen stadium-style movie theatres within the Sixth Circuit and elsewhere, and spacing and companion seating modifications at 67 auditoriums at other stadium-styled movie theatres. These modifications must be completed during the five-year period commencing on the date the Consent Order was executed. Upon completion of these modifications, such theatres will comply with all existing and pending ADA wheelchair seating requirements, and no further modifications will be necessary to remaining stadium-style movie theatres in the United States to comply with the wheelchair seating requirements of the ADA. Under the Consent Order, the DOJ approved the seating plans for nine stadium-styled movie theatres under construction. The Company and the DOJ have also created a safe harbor framework for the Company to construct all of its future stadium-style movie theatres. The DOJ has stipulated that all theatres built in compliance with the Consent Order will comply with the wheelchair seating requirements of the ADA. Management believes that its

16

CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, UNAUDITED)

obligations under the Consent Order are not material in the aggregate to its financial position, results of operations, and cash flows.

     Mission, Texas Litigation- In July 2001, Sonia Rivera-Garcia and Valley Association for Independent Living filed suit in the 93^rd Judicial District Court of Hidalgo County, Texas, seeking remedial action for certain alleged violations of the Human Resources Code, the Texas Architectural Barriers Act, the Texas Accessibility Standards and the Deceptive Trade Practices Act relating to accessibility of movie theatres for patrons using wheelchairs at one theatre in the Mission, Texas market. During the first quarter of 2005, the plaintiff dismissed any claims under the Deceptive Trade Practices Act. A jury in a similar case in Austin, Texas found that the Company did not violate the Human Resources Code, the Texas Architectural Business Act or the Texas Accessibility Standards. The judge in that case dismissed the claim under the Deceptive Trade Practices Act. The Company has filed an answer denying the allegations and is vigorously defending this suit. The Company is unable to predict the outcome of this litigation or the range of potential loss, however, management believes that based upon current precedent the Company’s potential liability with respect to such proceeding is not material in the aggregate to the Company’s financial position, results of operations and cash flows. Accordingly, the Company has not established a reserve for loss in connection with this proceeding.

     From time to time, the Company is involved in other various legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters and contractual disputes, most 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.

16. Condensed Consolidating Financial Statements of Subsidiary Guarantors

     As of September 30, 2005, the Company had outstanding $342,250 aggregate principal amount of 9% senior subordinated notes due 2013. These senior subordinated notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated unsecured basis by the following subsidiaries of Cinemark USA, Inc.:

     Cinemark, L.L.C., Sunnymead Cinema Corp., Cinema 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 Delaware Investments I, L.L.C., CNMK Delaware Investments II, L.L.C., CNMK Delaware Investments Properties, L.P., CNMK Texas Properties, Ltd., Laredo Theatre, Ltd., and Cinemark Investments Corporation.

     The following supplemental condensed consolidating financial statements present:

1. Condensed consolidating balance sheets as of September 30, 2005 and December 31, 2004 and condensed consolidating statements of income and cash flows for each of the nine months ended September 30, 2005 and 2004.

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.

17

CINEMARK USA, INC. AND SUBSIDIARIES
SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
SEPTEMBER 30, 2004
(in thousands)

	Parent		Subsidiary		Subsidiary
	Company		Guarantors		Non-Guarantors			Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	31,875	$	27,052	$	74,811		$	—		$	133,738
Inventories		1,733		1,134		1,242			—			4,109
Accounts receivable		15,062		20,344		6,922			(27,605	)		14,723
Income tax receivable		3,436		152		7,748			(11,336	)		—
Prepaid expenses and other		7,106		665		917			(3,672	)		5,016
Total current assets		59,212		49,347		91,640			(42,613	)		157,586
THEATRE PROPERTIES AND EQUIPMENT — net		284,674		316,952		180,510			—			782,136
OTHER ASSETS
Goodwill		6,818		2,452		34,904			109			44,283
Investments in and advances to affiliates		635,341		567,928		8,196			(1,209,286	)		2,179
Intangible assets, deferred charges and other assets — net		23,355		5,167		83,397			(59,134	)		52,785
Total other assets		665,514		575,547		126,497			(1,268,311	)		99,247
TOTAL ASSETS	$	1,009,400	$	941,846	$	398,647		$	(1,310,924	)	$	1,038,969
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt	$	2,656	$	—	$	4,185		$	—		$	6,841
Income tax payable		7,035		—		7,302			(11,336	)		3,001
Accounts payable and accrued expenses		55,788		32,195		40,989			(29,922	)		99,050
Total current liabilities		65,479		32,195		52,476			(41,258	)		108,892
LONG-TERM LIABILITIES
Long-term debt, less current portion		635,718		44,018		71,704			(136,387	)		615,053
Deferred income taxes		15,064		11,882		(2,778	)		—			24,168
Other long-term liabilities and deferrals		31,368		73,829		8,050			(73,662	)		39,585
Total long-term liabilities		682,150		129,729		76,976			(210,049	)		678,806
COMMITMENTS AND CONTINGENCIES		—		—		—			—			—
MINORITY INTERESTS IN SUBSIDIARIES		—		296		16,162			—			16,458
SHAREHOLDER’S EQUITY
Common stock		49,543		19		167,802			(167,821	)		49,543
Other shareholder’s equity		212,228		779,607		85,231			(891,796	)		185,270
Total shareholder’s equity		261,771		779,626		253,033			(1,059,617	)		234,813
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY	$	1,009,400	$	941,846	$	398,647		$	(1,310,924	)	$	1,038,969

18

CINEMARK USA, INC. AND SUBSIDIARIES
SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 2005
(in thousands)

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated
REVENUES	$	336,302		$	256,016		$	206,362		$	(51,672	)	$	747,008
COSTS AND EXPENSES
Cost of operations		293,563			162,431			154,495			(51,672	)		558,817
General and administrative expenses		3,370			22,726			11,776			—			37,872
Depreciation and amortization		17,307			18,166			21,414			—			56,887
Impairment of long-lived assets		898			904			741			—			2,543
Loss on sale of assets and other		691			864			353			—			1,908
Total costs and expenses		315,829			205,091			188,779			(51,672	)		658,027
OPERATING INCOME		20,473			50,925			17,583			—			88,981
OTHER INCOME (EXPENSE)
Interest expense		(32,688	)		(2,634	)		(4,866	)		7,653			(32,535	)
Amortization of debt issue costs		(2,060	)		—			(15	)		—			(2,075	)
Interest income		3,465			5,103			3,292			(7,654	)		4,206
Foreign currency exchange loss		—			—			(698	)		—			(698	)
Equity in income of affiliates		57,824			13,215			82			(70,939	)		182
Minority interests in income of subsidiaries		—			(163	)		(719	)		—			(882	)
Total other income (expense)		26,541			15,521			(2,924	)		(70,940	)		(31,802	)
INCOME BEFORE INCOME TAXES		47,014			66,446			14,659			(70,940	)		57,179
Income taxes		8,362			9,482			2,172			—			20,016
NET INCOME	$	38,652		$	56,964		$	12,487		$	(70,940	)	$	37,163

19

CINEMARK USA, INC. AND SUBSIDIARIES
SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 2005
(in thousands)

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated
OPERATING ACTIVITIES
Net income	$	38,652		$	56,964		$	12,487		$	(70,940	)	$	37,163
Noncash items in net income:
Depreciation and amortization		17,562			18,166			22,428			—			58,156
Impairment of long-lived assets		898			904			741			—			2,543
Loss on sale of assets and other		691			864			353			—			1,908
Deferred lease expenses		873			(11	)		311			—			1,173
Deferred income tax expenses		(8,280	)		9,277			33			—			1,030
Equity in income of affiliates		(57,824	)		(13,215	)		(82	)		70,939			(182	)
Minority interests in income of subsidiaries		—			163			719			—			882
Changes in assets and liabilities		(1,622	)		(9,209	)		(20,604	)		9,606			(21,829	)
Net cash provided by (used for) operating activities		(9,050	)		63,903			16,386			9,605			80,844
INVESTING ACTIVITIES
Additions to theatre properties and equipment		(10,752	)		(23,232	)		(13,692	)		—			(47,676	)
Proceeds from sale of theatre properties and equipment		679			80			507			—			1,266
Purchase of shares in National CineMedia		—			—			(7,329	)		—			(7,329	)
Net transactions with affiliates		21,976			(31,053	)		21,600			(12,239	)		284
Net cash provided by (used for) investing activities		11,903			(54,205	)		1,086			(12,239	)		(53,455	)
FINANCING ACTIVITIES
Capital contribution from parent		6,935			—			—			—			6,935
Proceeds from long-term debt		—			7			300			—			307
Repayments of long-term debt		(1,950	)		(56	)		(2,825	)		—			(4,831	)
Debt issue costs		(202	)		—			—			—			(202	)
Change in intercompany notes		—			—			(2,634	)		2,634			—
Increase in deferred revenue		671			—			—			—			671
Increase in minority investment in subsidiaries		—			—			133			—			133
Decrease in minority investment in subsidiaries		—			(150	)		(1,103	)		—			(1,253	)
Net cash provided by (used for) financing activities		5,454			(199	)		(6,129	)		2,634			1,760
Effect of exchange rate changes on cash and cash equivalents		—			—			4,361			—			4,361
INCREASE IN CASH AND CASH EQUIVALENTS		8,307			9,499			15,704			—			33,510
CASH AND CASH EQUIVALENTS:
Beginning of period		23,568			17,553			59,107			—			100,228
End of period	$	31,875		$	27,052		$	74,811		$	—		$	133,738

20

CINEMARK USA, INC. AND SUBSIDIARIES
SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 2004
(in thousands)

	Parent		Subsidiary		Subsidiary
	Company		Guarantors		Non-Guarantors			Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	23,568	$	17,553	$	59,107		$	—		$	100,228
Inventories		1,822		1,204		1,211			—			4,237
Accounts receivable		13,769		22,743		4,528			(29,737	)		11,303
Income tax receivable		12,002		168		8,388			(13,521	)		7,037
Prepaid expenses and other		6,789		577		517			(4,064	)		3,819
Total current assets		57,950		42,245		73,751			(47,322	)		126,624
THEATRE PROPERTIES AND EQUIPMENT — net		291,847		309,721		184,027			—			785,595
OTHER ASSETS
Goodwill		7,485		4,225		33,246			50			45,006
Investments in and advances to affiliates		560,301		421,765		808			(981,164	)		1,710
Intangible assets, deferred charges and other assets — net		25,312		1,815		72,566			(57,063	)		42,630
Total other assets		593,098		427,805		106,620			(1,038,177	)		89,346
TOTAL ASSETS	$	942,895	$	779,771	$	364,398		$	(1,085,499	)	$	1,001,565
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt	$	2,655	$	—	$	3,884		$	—		$	6,539
Income tax payable		5,211		—		8,310			(13,521	)		—
Accounts payable and accrued expenses		72,867		39,638		39,045			(29,226	)		122,324
Total current liabilities		80,733		39,638		51,239			(42,747	)		128,863
LONG-TERM LIABILITIES
Long-term debt, less current portion		610,439		44,018		66,721			(100,774	)		620,404
Deferred income taxes		23,344		2,605		(2,811	)		—			23,138
Other long-term liabilities and deferrals		29,804		74,236		13,642			(74,054	)		43,628
Total long-term liabilities		663,587		120,859		77,552			(174,828	)		687,170
COMMITMENTS AND CONTINGENCIES		—		—		—			—			—
MINORITY INTERESTS IN SUBSIDIARIES		—		283		16,414			—			16,697
SHAREHOLDER’S EQUITY
Common stock		49,543		19		96,813			(96,832	)		49,543
Other shareholder’s equity		149,032		618,972		122,380			(771,092	)		119,292
Total shareholder’s equity		198,575		618,991		219,193			(867,924	)		168,835
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY	$	942,895	$	779,771	$	364,398		$	(1,085,499	)	$	1,001,565

21

SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 2004
(in thousands)

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated
REVENUES	$	356,463		$	270,500		$	199,724		$	(58,397	)	$	768,290
COSTS AND EXPENSES
Cost of operations		307,843			164,453			144,439			(58,777	)		557,958
General and administrative expenses		7,745			50,257			10,747			380			69,129
Depreciation and amortization		16,014			17,075			16,618			—			49,707
Impairment of long-lived assets		—			1,000			—			—			1,000
Loss on sale of assets and other		1,741			778			117			—			2,636
Total costs and expenses		333,343			233,563			171,921			(58,397	)		680,430
OPERATING INCOME		23,120			36,937			27,803			—			87,860
OTHER INCOME (EXPENSE)
Interest expense		(32,669	)		(2,621	)		(4,892	)		7,753			(32,429	)
Amortization of debt issue costs		(1,927	)		—			(42	)		—			(1,969	)
Interest income		3,062			4,883			1,250			(7,753	)		1,442
Foreign currency exchange gain		—			—			187			—			187
Loss on early retirement of debt		(5,949	)		—			—			—			(5,949	)
Equity in income of affiliates		46,464			15,965			136			(62,455	)		110
Minority interests in income of subsidiaries		—			(549	)		(3,762	)		—			(4,311	)
Total other income (expense)		8,981			17,678			(7,123	)		(62,455	)		(42,919	)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (BENEFIT)		32,101			54,615			20,680			(62,455	)		44,941
Income taxes (benefit)		(175	)		9,790			4,210			—			13,825
INCOME FROM CONTINUING OPERATIONS		32,276			44,825			16,470			(62,455	)		31,116
Income from discontinued operations, net of taxes		—			—			667			—			667
NET INCOME	$	32,276		$	44,825		$	17,137		$	(62,455	)	$	31,783

22

SUBSIDIARY GUARANTORS
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 2004
(in thousands)

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated
OPERATING ACTIVITIES
Net income	$	32,276		$	44,825		$	17,137		$	(62,455	)	$	31,783
Noncash items in net income:
Depreciation and amortization		16,248			17,075			17,984			—			51,307
Impairment of long-lived assets		—			1,000			—			—			1,000
Loss on sale of assets and other		1,741			778			117			—			2,636
Write-off unamortized debt issue costs and debt premium/discount		938			—			—			—			938
Write-off of unearned compensation related to Recapitalization		1,595			—			—			—			1,595
Deferred lease expenses		1,004			(9	)		(773	)		—			222
Deferred income tax expenses		(9,478	)		9,720			196			—			438
Equity in income of affiliates		(46,464	)		(15,965	)		(136	)		62,455			(110	)
Minority interests in income of subsidiaries		—			549			3,762			—			4,311
Other noncash items		—			—			743			—			743
Changes in assets and liabilities		(63,081	)		16,076			(588	)		(1,230	)		(48,823	)
Net cash provided by (used for) operating activities		(65,221	)		74,049			38,442			(1,230	)		46,040
INVESTING ACTIVITIES
Additions to theatre properties and equipment		(8,770	)		(31,728	)		(18,735	)		—			(59,233	)
Proceeds from sale of theatre properties and equipment		—			—			3,419			—			3,419
Proceeds from sale of equity investment		1,250			—			—			—			1,250
Purchase of minority partner shares in Cinemark Brasil		—			—			(44,958	)		—			(44,958	)
Purchase of minority partner shares in Cinemark Mexico		—			(5,379	)		—			—			(5,379	)
Net transactions with affiliates		14,455			(45,941	)		34,897			(3,208	)		203
Net cash provided by (used for) investing activities		6,935			(83,048	)		(25,377	)		(3,208	)		(104,698	)
FINANCING ACTIVITIES
Capital contribution from parent		29,500			—			—			—			29,500
Retirement of senior subordinated notes		(122,750	)		—			—			—			(122,750	)
Increase in long-term debt		282,510			—			2,079			—			284,589
Decrease in long-term debt		(170,531	)		—			(5,319	)		—			(175,850	)
Increase in debt issue cost		(7,859	)		—			(50	)		—			(7,909	)
Change in intercompany notes		—			—			(4,438	)		4,438			—
Increase in minority investment in subsidiaries		—			—			758			—			758
Decrease in minority investment in subsidiaries		—			(188	)		(1,729	)		—			(1,917	)
Net cash provided by (used for) financing activities		10,870			(188	)		(8,699	)		4,438			6,421
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		—			—			(217	)		—			(217	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(47,416	)		(9,187	)		4,149			—			(52,454	)
CASH AND CASH EQUIVALENTS:
Beginning of period		46,919			9,523			50,877			—			107,319
End of period	$	(497	)	$	336		$	55,026		$	—		$	54,865

23

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 one of the leaders in the motion picture exhibition industry, in terms of both revenues and the number of screens in operation, with theatres in the U.S., Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia. 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 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. Highly anticipated films such asStar Wars: Episode III – Revenge of the Sith,MadagascarandWar of the Worldswere released during the first nine months of 2005. Film releases scheduled for the remainder of 2005 include high profile films such asKing Kong,Harry Potter and the Goblet of Fire,andThe Chronicles of Narnia: The Lion, the Witch and the Wardrobe.

     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. Generally, a film that runs for a longer period results in lower film rental costs as a percentage of revenues. Film rental rates are 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 bulk 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 handle 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 leased versus fee owned facilities.

     Utilities and other costs include certain costs that are fixed such as property taxes, certain costs that are variable such as liability insurance, and certain costs that possess both fixed and variable components such as utilities, repairs and maintenance and security services.

Critical Accounting Policies

     We prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The significant accounting policies, which we believe are the most critical to aid in fully understanding and evaluating our reported condensed consolidated financial results, include the following:

Revenue and Expense Recognition

     Revenues are recognized when admissions and concession sales are received at the box office and screen advertising is shown in the theatres. We record proceeds from the sale of gift cards and other advanced sale-type certificates in current liabilities and recognize admissions and concession revenue when a holder redeems the card or certificate. We recognize unredeemed gift cards and other advanced sale-type certificates as revenue only after such a period of time indicates,

24

based on historical experience, the likelihood of redemption is remote. In evaluating the likelihood of redemption, we consider the period outstanding, the level and frequency of activity, and the period of inactivity.

     Film rental costs are accrued based on the applicable box office receipts and either the mutually agreed upon firm terms established prior to the opening of the picture or estimates of the final mutually agreed upon settlement, which occurs at the conclusion of the picture run, subject to the film licensing arrangement. Estimates are based on the expected success of a film over the length of its run in the theatres. The success of a film can typically be determined a few weeks after a film is released when initial box office performance of the film is known. Accordingly, final settlements typically approximate estimates since box office receipts are known at the time the estimate is made and the expected success of a film over the length of its run in theatres can typically be estimated early in the film’s run. The final film settlement amount is negotiated at the conclusion of the film’s run based upon how a film actually performs. If actual settlements are higher than those estimated, additional film rental costs are recorded at that time. We recognize advertising costs and any sharing arrangements with film distributors in the same accounting period. Our advertising costs are expensed as incurred.

     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 monthly percentage rent only, which is accrued each month based on actual revenues. Certain of our other theatres require payment of percentage rent in addition to fixed monthly rent if a target annual revenue level is achieved. Percentage rent expense is recorded for these theatres on a monthly basis if the theatre’s historical performance or forecasted performance indicates that the annual target will be reached. The estimate of percentage rent expense recorded during the year is based on a trailing twelve months of revenues. Once annual revenues are known, which is generally at the end of the year, the percentage rent expense is adjusted based on actual revenues.

     Theatre properties and equipment are depreciated using the straight-line method over their estimated useful lives. In estimating the useful lives of our theatre properties and equipment, we have relied upon our experience with such assets and our historical replacement period. We periodically evaluate these estimates and assumptions and adjust them as necessary. Adjustments to the expected lives of assets are accounted for on a prospective basis through depreciation expense.

Impairment of Long-Lived Assets

     We review long-lived assets for impairment on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. We assess many factors including the following to determine whether to impair individual theatre assets:

• actual theatre level cash flows;

• future years budgeted theatre level cash flows;

• theatre property and equipment carrying values;

• goodwill carrying values;

• the age of a recently built theatre;

• competitive theatres in the marketplace;

• the sharing of a market with our other theatres;

• changes in foreign currency exchange rates;

• the impact of recent ticket price changes;

• available lease renewal options; and

• other factors considered relevant in our assessment of impairment of individual theatre assets.

     Long-lived assets are evaluated for impairment on an individual theatre basis or a group basis if the group of theatres shares the same marketplace, which we believe is the lowest applicable level for which there are identifiable cash flows. The 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 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, we then compare the carrying value of the asset with its estimated fair value, which is determined based on a multiple of cash flows. When estimated fair value is determined to be lower

25

than the carrying value of the long-lived asset, the asset is written down to its estimated fair value.

Goodwill

     Our recorded goodwill was $44.3 million at September 30, 2005. We evaluate goodwill for impairment annually at fiscal year-end and any time events or circumstances indicate the carrying amount of the goodwill may not be fully recoverable. We evaluate goodwill for impairment on an individual theatre basis, which is the lowest level of identifiable cash flows and the level at which goodwill is recorded. The evaluation is a two-step approach requiring us to compute the fair value of a theatre and compare it with its carrying value. If the carrying value exceeds fair value, a second step would be performed to measure the potential goodwill impairment. Fair value is determined based on a multiple of cash flows,which was seven times for the year ended December 31, 2004. When estimated fair value is determined to be lower than the carrying value of the asset, the asset is written down to its estimated fair value.

Acquisitions

     We account for acquisitions under the purchase method of accounting. The purchase method requires that we estimate the fair value of the assets and liabilities acquired and allocate consideration paid accordingly. For significant acquisitions, we obtain independent third party valuation studies for certain of the assets and liabilities acquired to assist us in determining fair value. The estimation of the fair values of the assets and liabilities acquired involves a number of estimates and assumptions that could differ materially from the actual amounts. We completed acquisitions in 2004 as discussed in Note 3 to our condensed consolidated financial statements.

Income Taxes

     We use an asset and liability approach to financial accounting and reporting for income taxes. Deferred income taxes are provided when tax laws and financial accounting standards differ with respect to the amount of income for a year and the bases of assets and liabilities. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets unless it is more likely than not those assets will be realized. Income taxes are provided on unremitted earnings from foreign subsidiaries unless such earnings are expected to be indefinitely reinvested. Income taxes have also been provided for potential tax assessments and the related tax accruals are in the condensed consolidated balance sheets. To the extent tax accruals differ from actual payments or assessments, the accruals will be adjusted.

26

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:

	% of Revenues						% of Revenues
	Three Months Ended						Nine months ended
	September 30,						September 30,
	2005			2004			2005			2004
Revenues
Admissions		63.1	%		63.1	%		63.0	%		63.4	%
Concession		31.4	%		31.6	%		31.4	%		31.6	%
Other		5.5	%		5.3	%		5.6	%		5.0	%
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of operations		75.2	%		73.5	%		74.8	%		72.6	%
General and administrative expenses		5.2	%		4.7	%		5.1	%		4.8	%
Stock option compensation and change of control expenses		—			—			—			4.2	%
Depreciation and amortization		7.4	%		6.2	%		7.6	%		6.5	%
Impairment of long-lived assets		0.9	%		0.0	%		0.3	%		0.1	%
Loss on sale of assets and other		0.4	%		1.1	%		0.3	%		0.4	%
Total costs and expenses		89.1	%		85.5	%		88.1	%		88.6	%
Operating income		10.9	%		14.5	%		11.9	%		11.4	%

Three months ended September 30, 2005 and 2004

     Revenues.Total revenues for the three months ended September 30, 2005 (“third quarter of 2005”) decreased to $256.3 million from $260.0 million for the three months ended September 30, 2004 (“third quarter of 2004”), representing a 1.4% decrease. Admissions revenues decreased 1.6% to $161.6 million for the third quarter of 2005 from $164.2 million for the third quarter of 2004. Concession revenues decreased 2.0% to $80.5 million for the third quarter of 2005 from $82.1 million for the third quarter of 2004. The decrease in admissions revenues was attributable to a decrease in attendance partially offset by an increase in average ticket prices. Attendance declined from 47.6 million patrons for the third quarter of 2004 to 43.1 million patrons for the third quarter of 2005 while average ticket prices increased from $3.45 for the third quarter of 2004 to $3.75 for the third quarter of 2005. The decrease in concession revenues was attributable to the decrease in attendance partially offset by an increase in concession revenues per patron, which increased from $1.72 for the third quarter of 2004 to $1.87 for the third quarter of 2005. The decrease in attendance for the third quarter of 2005 was primarily due to the decline in the quality of films released during the third quarter of 2005 compared to the third quarter of 2004. The increases in average ticket prices and concession revenues per patron were primarily due to price increases implemented during the fourth quarter of 2004 and also due to favorable exchange rates in certain countries in which we operate. Revenues per screen decreased 4.3% to $78,704 for the third quarter of 2005 from $82,248 for the third quarter of 2004.

     Cost of Operations.Cost of operations was $192.8 million, or 75.2% of revenues, for the third quarter of 2005 compared to $191.1 million, or 73.5% of revenues, for the third quarter of 2004. The increase, as a percentage of revenues, was primarily due to the decrease in revenues and the fixed nature of some of our theatre operating costs, such as facility lease expense, utilities and other costs.

     Film rentals and advertising costs were $86.3 million, or 53.4% of admissions revenues, for the third quarter of 2005 compared to $88.4 million, or 53.8% of admissions revenues, for the third quarter of 2004. The slight decrease in film rentals and advertising costs as a percentage of admissions revenues was related to the decline in the quality of films released during the third quarter of 2005 compared to the third quarter of 2004. Concession supplies expense was $13.8 million, or 17.1% of concession revenues, for the third quarter of 2005 compared to $14.0 million, or 17.1% of concession revenues, for the third quarter of 2004.

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     Salaries and wages decreased to $25.5 million for the third quarter of 2005 from $26.7 million for the third quarter of 2004 primarily due to strategic reductions in certain variable salaries and wages related to the decrease in attendance. Facility lease expense increased to $35.2 million for the third quarter of 2005 from $32.2 million for the third quarter of 2004 primarily due to new theatre openings. Utilities and other costs increased to $32.0 million for the third quarter of 2005 from $29.7 million for the third quarter of 2004 primarily due to higher utility costs and new theatre openings.

     General and Administrative Expenses.General and administrative expenses increased to $13.4 million for the third quarter of 2005 from $12.1 million for the third quarter of 2004. The increase was primarily due to increases in legal, accounting and consulting expenses primarily related to the review of potential acquisition targets.

     Depreciation and Amortization.Depreciation and amortization expense was $19.0 million for the third quarter of 2005 compared to $16.0 million for the third quarter of 2004. The increase was primarily due to new theatre openings since the third quarter of 2004 and amortization of intangible assets recorded as a result of the final purchase price allocations for the Brazil and Mexico acquisitions (see Note 3).

     Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $2.3 million during the third quarter of 2005, which included the write-down of three theatres in the United States, including $0.7 million of goodwill, and two theatres in Chile to their estimated fair values.

     Loss on Sale of Assets and Other.Loss on sale of assets and other was $1.1 million for the third quarter of 2005 compared to $3.2 million for the third quarter of 2004. The loss recorded during the third quarter of 2005 was primarily due to property damage sustained at three of our theatres due to the recent hurricanes along the Gulf of Mexico coast. The loss recorded during the third quarter of 2004 consisted primarily of a write-off of a license agreement that was terminated, a write-off of theatre equipment that was replaced and a write-off of theatre equipment and goodwill associated with theatres that closed during the quarter.

     Interest Expense.Interest costs incurred, including amortization of debt issue costs, was $11.7 million for the third quarter of 2005 compared to $10.7 million for the third quarter of 2004. The increase in interest expense is primarily due to an increase in average interest rates on our variable rate debt.

     Loss on Early Retirement of Debt.During the third quarter of 2004, we recorded a loss on early retirement of debt of $0.4 million, which represented the write-off of unamortized bond discount and tender offer repurchase costs, including premiums paid, and other fees associated with the repurchase and subsequent retirement of our remaining 8¹/2% senior subordinated notes.

     Income Taxes.Income tax expense was $7.5 million for the third quarter of 2005 compared to income tax expense of $6.5 million recorded for the third quarter of 2004. The effective tax rate was 41.5% for the third quarter of 2005 versus 25.0% for the third quarter of 2004. The increase in the effective tax rate is primarily due to the effect of the interim reporting for the revaluation of certain deferred tax assets that occurred during the third quarter of 2005.

     Income from Discontinued Operations, Net of Taxes.We recorded income from discontinued operations, net of taxes, of $0.9 million during the third quarter of 2004. The income for the third quarter of 2004 includes the results of operations of the eleven Interstate theatres that were sold on December 23, 2004. See Note 5 to the condensed consolidated financial statements.

Nine months ended September 30, 2005 and 2004

     Revenues.Total revenues for the nine months ended September 30, 2005 (“the 2005 period”) decreased to $747.0 million from $768.3 million for the nine months ended September 30, 2004 (“the 2004 period”), representing a 2.8% decrease. Admissions revenues decreased 3.3% to $470.5 million for the 2005 period from $486.7 million for the 2004 period. Concession revenues decreased 3.3% to $234.6 million for the 2005 period from $242.7 million for the 2004 period. The decrease in admissions revenues was attributable to a decrease in attendance partially offset by an increase in average ticket prices. Attendance declined from 137.2 million patrons for the 2004 period to 123.5 million patrons for the 2005 period while average ticket prices increased from $3.55 for the 2004 period to $3.81 for the 2005 period. The

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decrease in concession revenues was attributable to the decrease in attendance partially offset by an increase in concession revenues per patron, which increased from $1.77 for the 2004 period to $1.90 for the 2005 period. The decrease in attendance for the 2005 period was primarily due to the decline in the quality of films released during the 2005 period compared to the 2004 period. The increases in average ticket prices and concession revenues per patron were primarily due to price increases implemented during the fourth quarter of 2004 and also due to favorable exchange rates in certain countries in which we operate. Revenues per screen decreased 5.7% to $232,185 for the 2005 period from $246,136 for the 2004 period.

     Cost of Operations.Cost of operations was $558.8 million, or 74.8% of revenues, for the 2005 period compared to $558.0 million, or 72.6% of revenues, for the 2004 period. The increase, as a percentage of revenues, was primarily due to the decrease in revenues and the fixed nature of some of our theatre operating costs, such as components of facility lease expense and utilities and other costs.

     Film rentals and advertising costs were $253.5 million, or 53.9% of admissions revenues, for the 2005 period compared to $261.5 million, or 53.7% of admissions revenues, for the 2004 period. The increase in film rentals and advertising costs as a percentage of admissions revenues was primarily related to the high film rental costs associated with certain major films released during 2005. Concession supplies expense was $38.2 million, or 16.3% of concession revenues, for the 2005 period compared to $40.4 million, or 16.6% of concession revenues, for the 2004 period. The decrease in concession supplies expense as a percentage of concession revenues was primarily due to price increases implemented during the fourth quarter of 2004 and an increase in concession rebates.

     Salaries and wages decreased to $75.2 million for the 2005 period from $77.4 million for the 2004 period primarily due to strategic reductions in certain variable salaries and wages related to the decrease in attendance. Facility lease expense increased to $101.0 million for the 2005 period from $94.2 million for the 2004 period primarily due to new theatre openings. Utilities and other costs increased to $90.9 million for the 2005 period from $84.4 million for the 2004 period primarily due to higher utility costs and new theatre openings.

     General and Administrative Expenses.General and administrative expenses, excluding the stock option compensation and change of control expenses related to the Recapitalization, increased to $37.9 million for the 2005 period from $37.1 million for the 2004 period. The increase was primarily due to increases in insurance expense, consulting expenses and credit card service fees.

     Stock option compensation expense of $16.3 million and change of control fees of $15.7 million were recorded during the 2004 period as a result of the Recapitalization. See Note 2 to the condensed consolidated financial statements.

     Depreciation and Amortization.Depreciation and amortization expense was $56.9 million for the 2005 period compared to $49.7 million for the 2004 period. The increase is primarily due to new theatre openings since the 2004 period and amortization of intangible assets recorded as a result of the final purchase price allocations for the Brazil and Mexico acquisitions (see Note 3).

     Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $2.5 million during the 2005 period compared to $1.0 million for the 2004 period. Impairment charges for 2005 include the write-down of five theatres in the United States, including $0.7 million of goodwill, and two theatres in Chile to their estimated fair values. The impairment charge for 2004 was to write-down one theatre located in the United States to its estimated fair value.

     Loss on Sale of Assets and Other.Loss on sale of assets and other was $1.9 million for the 2005 period compared to $2.6 million for the 2004 period. The loss recorded during 2005 was primarily due to property damages sustained at three of our theatres due to the recent hurricanes along the Gulf of Mexico coast and the write-off of some theatre equipment that was replaced. The loss recorded during 2004 consisted primarily of a write-off of a license agreement that was terminated, a write-off of theatre equipment that was replaced and a write-off of theatre equipment and goodwill associated with theatres that closed during the 2004 period.

     Interest Expense.Interest costs incurred, including amortization of debt issue costs, was $34.6 million for the 2005 period compared to $34.4 million for the 2004 period. The increase in interest expense is primarily due to an increase in average interest rates on our variable rate debt.

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     Loss on Early Retirement of Debt.During the 2004 period, we recorded a loss on early retirement of debt of $5.9 million, which represented the write-off of unamortized debt issue costs, unamortized bond discount, tender offer repurchase costs, including premiums paid, and other fees associated with the repurchase and subsequent retirement of our 8¹/2% senior subordinated notes and a portion of our 9% senior subordinated notes related to the Recapitalization.

     Income Taxes. Income tax expense of $20.0 million was recorded for the 2005 period compared to $13.8 million recorded for the 2004 period. The effective tax rate was 35.0% for the 2005 period versus 30.8% for the 2004 period. The increase in the effective tax rate is primarily due to the effect of the interim reporting for the revaluation of certain deferred tax assets that occurred during the 2005 period.

     Income from Discontinued Operations, Net of Taxes.We recorded income from discontinued operations, net of taxes, of $0.7 million during the 2004 period. The income for 2004 includes the results of operations of our two United Kingdom theatres that were sold on April 30, 2004 and the results of operations of the eleven Interstate theatres that were sold on December 23, 2004. See Note 5 to the condensed consolidated financial statements.

Liquidity and Capital Resources

Operating Activities

     We primarily collect our revenues in cash, mainly through box office receipts and the sale of concession supplies. We also continue to expand the number of theatres that provide the patron a choice of using a credit card, in place of cash, which we convert to cash in approximately three to four days. Because our revenues are received in cash prior to the payment of related expenses, we have an operating “float” and historically have not required traditional working capital financing. Cash provided by operating activities, as reflected in the condensed consolidated statements of cash flows, amounted to $80.8 million for the nine months ended September 30, 2005 compared to $46.0 million for the nine months ended September 30, 2004. The increase in cash provided by operating activities is primarily due to the stock option compensation and change of control expenses related to the Recapitalization that were paid during the nine months ended September 30, 2004.

Investing Activities

     Our investing activities have been principally related to the development and acquisition of additional theatres. New theatre openings and acquisitions historically have been financed with internally generated cash and by debt financing, including borrowings under our amended senior secured credit facility. Cash used for investing activities, as reflected in the condensed consolidated statements of cash flows, amounted to $53.5 million for the nine months ended September 30, 2005 compared to $104.7 million for the nine months ended September 30, 2004. The decrease in cash used for investing activities is primarily due to the funding of the Brazil acquisition ($45.0 million) and the Mexico acquisition ($5.4 million) during the nine months ended September 30, 2004 (See Note 3 to the condensed consolidated financial statements for further discussion of these acquisitions.) and a decrease in capital expenditures. Capital expenditures for the nine months ended September 30, 2005 included capital expenditures for new theatres of $33.8 million and capital expenditures for existing theatres of $13.9 million. During the nine months ended September 30, 2005, the Company purchased a 20.7% interest in National CineMedia, LLC for approximately $7.3 million. (See Note 4 to the condensed consolidated financial statements for further discussion of this investment.)

     We continue to expand our U.S. theatre circuit. We opened seven new theatres with 76 screens during the nine months ended September 30, 2005. At September 30, 2005, our total domestic screen count was 2,369 screens (12 of which are in Canada). At September 30, 2005, we had signed commitments to open four new theatres with 52 screens in domestic markets by the end of 2005 and open 12 new theatres with 174 screens in domestic markets subsequent to 2005. We estimate the remaining capital expenditures for the development of these 226 screens will be approximately $60 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities.

     We also continue to expand our international theatre circuit. We opened five new theatres with 30 screens during the nine months ended September 30, 2005, bringing our total international screen count to 898 screens. At September 30, 2005, we had signed commitments to open two new theatres with 14 screens in international markets by the end of 2005

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and open eight new theatres with 69 screens in international markets subsequent to 2005. We estimate the remaining capital expenditures for the development of these 83 screens in international markets will be approximately $41 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities.

     We plan to fund capital expenditures for our continued development from cash flow from operations, borrowings under our amended senior secured credit facility, subordinated note borrowings, proceeds from sale-leaseback transactions and/or sales of excess real estate. Additionally, we may from time to time, subject to compliance with our debt instruments, purchase on the open market our debt securities depending upon the availability and prices of such securities.

Financing Activities

     Cash provided by financing activities, as reflected in the condensed consolidated statements of cash flows, amounted to $1.8 million for the nine months ended September 30, 2005 compared to $6.4 million for the nine months ended September 30, 2004.

     As of September 30, 2005, our long-term debt obligations, scheduled interest payments on long-term debt, future minimum lease obligations under non-cancelable operating leases, outstanding letters of credit, obligations under employment agreements and purchase commitments for each period indicated are summarized as follows:

			Payments Due by Period
					(in millions)
			Less Than						After
Contractual Obligations	Total		One Year		1 - 3 Years		4 - 5 Years		5 Years
Long-term debt	$	621.9	$	6.8	$	10.3	$	128.9	$	475.9
Scheduled interest payments on long-term debt1		292.3		44.8		88.3		84.1		75.1
Lease obligations		1,617.5		119.7		251.0		244.4		1,002.4
Letters of credit		0.1		0.1		—		—		—
Employment agreements		8.4		2.8		5.6		—		—
Purchase commitments2		120.3		86.5		32.2		0.9		0.7
Total obligations	$	2,660.5	$	260.7	$	387.4	$	458.3	$	1,554.1

1	Amounts include scheduled interest payments on fixed rate and variable rate debt agreements. Estimates for the variable rate interest payments were based on interest rates in effect on September 30, 2005.
2	Includes estimated capital expenditures associated with the construction of new theatres to which we were committed as of September 30, 2005.

     As of September 30, 2005, we were in full compliance with all agreements governing our outstanding debt.

Recapitalization of Cinemark, Inc.

     We are a wholly-owned subsidiary of Cinemark, Inc. On March 12, 2004, Cinemark, Inc., entered into an agreement and plan of merger with a newly formed subsidiary of Madison Dearborn Partners, LLC (“Madison”). The transaction was completed on April 2, 2004, at which time the newly formed subsidiary of Madison was merged with and into Cinemark, Inc., with Cinemark, Inc. continuing as the surviving corporation. Simultaneously, an affiliate of Madison purchased shares of common stock of Cinemark, Inc. for approximately $518.3 million in cash and became the controlling stockholder of Cinemark, Inc., owning approximately 83% of Cinemark, Inc.’s capital stock. Lee Roy Mitchell, our Chief Executive Officer, and the Mitchell Special Trust collectively retained approximately 16% ownership of Cinemark, Inc.’s capital stock with certain members of management owning the remaining 1%. Based on the terms of the transaction, including Mr. Mitchell’s ownership retention, the transaction was accounted for as a recapitalization, which resulted in Cinemark, Inc. and its subsidiaries retaining their historical book values. Since April 2, 2004, Madison sold approximately 10% of its stock in Cinemark, Inc. to outside investors and an additional 0.2 million shares were issued to other outside investors. As of September 30, 2005, Madison owned approximately 74% of the capital stock of Cinemark, Inc., outside investors owned approximately 9%, Lee Roy Mitchell and the Mitchell Special Trust collectively owned approximately

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16% and certain members of management own the remaining 1%.

     On March 31, 2004, Cinemark, Inc. issued approximately $577.2 million aggregate principal amount at maturity of 9³/4% senior discount notes due 2014. The gross proceeds at issuance of approximately $360.0 million were used to fund in part the Recapitalization. Interest on the notes accretes until March 15, 2009 up to their aggregate principal amount. Cash interest will accrue and be payable semi-annually in arrears on March 15 and September 15, commencing on September 15, 2009. Due to the holding company status of Cinemark, Inc., payments of principal and interest under these notes will be dependent on loans, dividends and other payments from us to Cinemark, Inc. On September 22, 2005, Cinemark, Inc. repurchased $1,840 aggregate principal amount at maturity of the 9³/4% senior discount notes as part of an open market purchase for approximately $1,302, including accreted interest. As of September 30, 2005, the accreted principal balance of the notes was approximately $414.0 million and the aggregate principal amount at maturity will be approximately $575.3 million. Upon a change of control, Cinemark, Inc. would be required to make an offer to repurchase all of the 9³/4% senior discount notes at a price equal to 101% of the accreted value of the notes plus accrued and unpaid interest, if any, through the date of purchase. We have no obligation, contingent or otherwise, to pay the amounts due under the 9³/4% senior discount notes or to make funds available to pay those amounts. The 9³/4% senior discount notes are general, unsecured senior obligations of Cinemark, Inc. that are effectively subordinated to our indebtedness and other liabilities.

Senior Subordinated Notes

     On March 16, 2004, in connection with the Recapitalization, we initiated a tender offer for our then outstanding $105 million aggregate principal amount 8¹/2% senior subordinated notes due 2008 and a consent solicitation to remove substantially all restrictive covenants in the indenture governing those notes. On March 25, 2004, a supplemental indenture removing substantially all of the covenants was executed and became effective on the date of the Recapitalization. On April 2, 2004, we redeemed approximately $94.1 million aggregate principal amount of 8¹/2% senior subordinated notes that were tendered, pursuant to the tender offer, utilizing a portion of the proceeds from our amended senior secured credit facility. On April 14, 2004, after the expiration of the tender offer, we redeemed an additional $50,000 aggregate principal amount of 8¹/2% senior subordinated notes that were tendered, leaving outstanding approximately $10.8 million aggregate principal amount of 8¹/2% senior subordinated notes.

     On April 6, 2004, as a result of the consummation of the Recapitalization and in accordance with the terms of the indenture governing our 9% senior subordinated notes due 2013, we made a change of control offer to purchase the 9% senior subordinated notes at a purchase price of 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, at the date of purchase. Approximately $17.8 million in aggregate principal amount of the 9% senior subordinated notes were tendered and not withdrawn in the change of control offer, which expired on May 26, 2004. Payment of the change of control price was made with available cash by us on June 1, 2004.

     On July 28, 2004, we provided notice to the holders of our remaining outstanding 8¹/2% senior subordinated notes due 2008 of our election to redeem all outstanding notes at a redemption price of 102.833% of the aggregate principal amount plus accrued interest. On August 27, 2004, we redeemed the remaining $10.8 million aggregate principal amount of notes utilizing available cash and borrowings under our amended revolving credit line.

     As of September 30, 2005, we had outstanding approximately $342.3 million aggregate principal amount of 9% senior subordinated notes due 2013. Interest is payable on February 1 and August 1 of each year. We may redeem all or part of the existing 9% notes on or after February 1, 2008. Prior to February 1, 2006, we may redeem up to 35% of the aggregate principal amount of the existing 9% notes from the proceeds of certain equity offerings.

     The senior subordinated notes are general, unsecured obligations and are subordinated in right of payment to the amended senior secured credit facility or other senior indebtedness. The notes are guaranteed by certain of our domestic subsidiaries. The guarantees are subordinated to the senior debt of the subsidiary guarantors and rank pari passu with the senior subordinated debt of our guarantor subsidiaries. The notes are effectively subordinated to the indebtedness and other liabilities of our non-guarantor subsidiaries.

     The indentures governing the senior subordinated notes contain covenants that limit, among other things, dividends, transactions with affiliates, investments, sale of assets, mergers, repurchases of our capital stock, liens and additional indebtedness. Upon a change of control, we would be required to make an offer to repurchase the senior subordinated notes at a price equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest through the date of repurchase. The indentures governing the senior subordinated notes allow us to incur additional indebtedness if we

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satisfy the coverage ratio specified in each indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances.

Senior Secured Credit Facility

     On February 14, 2003, we entered into a senior secured credit facility consisting of a $75 million five year revolving credit line and a $125 million term loan with Lehman Commercial Paper, Inc. for itself and as administrative agent for a syndicate of lenders. The net proceeds from the senior secured credit facility were used to repay, in full, certain debt agreements, including our then existing credit facility.

     On August 18, 2003, we amended the senior secured credit facility to provide a $165 million term loan expiring on September 30, 2008. The net proceeds of the $165 million amended term loan and additional borrowings under the $75 million five year revolving credit line were used to (i) repay approximately $124.7 million of term loans outstanding under our senior secured credit facility entered into February 14, 2003 and (ii) redeem the remaining approximately $42 million aggregate principal amount of our then outstanding 9⁵/₈% senior subordinated notes on September 18, 2003.

     On April 2, 2004, we amended our senior secured credit facility in connection with the Recapitalization. The amended senior secured credit facility provides for a $260 million seven year term loan and a $100 million six and one-half year revolving credit line. The net proceeds from the amended senior secured credit facility were used to repay the existing term loan of approximately $163.8 million and to redeem the approximately $94.2 million aggregate principal amount of our then outstanding $105 million aggregate principal amount 8¹/2% senior subordinated notes due 2008 that were tendered pursuant to the tender offer.

     The amended senior secured credit facility was further amended on August 18, 2004 to, among other things, reduce the interest rate applicable to the term loan. Under the amended term loan, principal payments of approximately $0.7 million are due each calendar quarter through March 31, 2010 and increase to $61.1 million each calendar quarter from June 30, 2010 to maturity at March 31, 2011. The amended term loan bears interest, at our option, at: (A) the base rate equal to the higher of (i) the prime lending rate as set forth on the British Banking Association Telerate page 5 or (ii) the federal funds effective rate from time to time plus 0.50%, plus a margin of 1.00% per annum, or (B) a “eurodollar rate” plus a margin of 2.00% per annum. After the completion of two fiscal quarters after the closing date, the margin under the amended term loan applicable to base rate loans ranges from 0.75% per annum to 1.00% per annum and the margin applicable to eurodollar rate loans ranges from 1.75% per annum to 2.00% per annum, and will be adjusted based upon our achieving certain performance targets.

     Borrowings under the amended revolving credit line bear interest, at our option, at: (A) a base rate equal to the higher of (i) the prime lending rate as set forth on the British Banking Association Telerate page 5 or (ii) the federal funds effective rate from time to time plus 0.50%, plus a margin of 1.50% per annum, or (B) a “eurodollar rate” plus a margin of 2.50% per annum. After the completion of two fiscal quarters after the closing date, the margin under the amended revolving credit line applicable to base rate loans ranges from 1.00% per annum to 1.50% per annum and the margin applicable to eurodollar rate loans ranges from 2.00% per annum to 2.50% per annum, and will be adjusted based upon our achieving certain performance targets. We are required to pay a commitment fee calculated at the rate of 0.50% per annum on the average daily unused portion of the amended revolving credit line, payable quarterly in arrears.

     Our obligations under the amended senior secured credit facility are guaranteed by Cinemark, Inc., CNMK Holding, Inc. and certain of our subsidiaries and are secured by mortgages on certain fee and leasehold properties and security interests in substantially all of our domestic personal and intangible property, including without limitation, pledges of all of our capital stock, all of the capital stock of CNMK Holding, Inc. and certain of our domestic subsidiaries and 65% of the voting stock of certain of our foreign subsidiaries.

     At September 30, 2005, there was approximately $256.1 million outstanding under the amended term loan and no borrowings outstanding under the amended revolving credit line. Approximately $99.9 million was available for borrowing under the amended revolving credit line, giving effect to a $0.1 million letter of credit outstanding. The average interest rate on outstanding borrowings under the amended senior secured credit facility at September 30, 2005 was 5.2% per annum.

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Cinemark Brasil Notes Payable

     As of September 30, 2005, Cinemark Brasil S.A. had approximately $1.3 million outstanding under three financing arrangements. The interest rates applicable to the outstanding debt are variable and ranged from 11.0% to 15.3% at September 30, 2005. Approximately $0.1 million of the amount outstanding at September 30, 2005 matures in October 2005, $0.5 million matures in October 2006 and the remaining $0.7 million matures in February 2009. The debt is secured by a variety of instruments, including comfort letters from Cinemark International, L.L.C., promissory notes for up to 130% of the value, a revenue reserve account and equipment collateral.

Cinemark Chile Note Payable

     On March 26, 2002, Cinemark Chile S.A. entered into a Debt Acknowledgment, Rescheduling and Joint Guarantee and Co-Debt Agreement with Scotiabank Sud Americano and three local banks. Under this agreement, Cinemark Chile S.A. borrowed the U.S. dollar equivalent of approximately $10.6 million in Chilean pesos (adjusted for inflation pursuant to the Unidades de Fomento). Cinemark Chile S.A. was required to make 24 equal quarterly installments of principal plus accrued and unpaid interest, commencing March 27, 2002. On September 29, 2004, Cinemark Chile S.A. refinanced the outstanding debt under an amended debt agreement with two of the original local banks, Corpbanca and Banco Security. The amended agreement requires 24 equal quarterly installments of principal plus accrued and unpaid interest, which commenced December 31, 2004. The agreement requires Cinemark Chile S.A. to maintain certain financial ratios and contains other restrictive covenants typical for agreements of this type such as a limitation on dividends. Funds borrowed under this agreement bear interest at the 90 day TAB Banking rate as published by the Association of Banks and Financial Institutions Act plus 1.5%. At September 30, 2005, approximately US$6.7 million was outstanding under this agreement.

Seasonality

     Our revenues have historically been seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, the most successful motion pictures have been released during the summer, extending from Memorial Day to Labor Day, and during the holiday season, extending from Thanksgiving through year-end. The unexpected emergence of a hit film during other periods can alter this seasonality trend. The timing of such film releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or for the same period in the following year.

Cautionary Statement Regarding Forward-Looking Statements

     This quarterly report on Form 10-Q includes “forward-looking statements” based on our current expectations, assumptions, estimates, and projections about our and our subsidiaries’ business and industry. We intend that this quarterly report be governed by the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995 (the “PSLR Act”) with respect to statements that may be deemed to be forward-looking statements under the PSLR Act. They include statements relating to:

• future revenues, expenses and profitability;

• the future development and expected growth of our business;

• projected capital expenditures;

• attendance at movies generally, or in any of the markets in which we operate;

• the number or diversity of popular movies released;

• our ability to successfully license and exhibit popular films;

• competition from other exhibitors; and

• determinations in lawsuits in which we are a defendant.

     You can identify forward-looking statements by the use of words such as “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions which are intended to identify 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. In evaluating these forward-looking statements, you should carefully consider the risks and uncertainties described in this report. These forward-looking statements reflect our view only as of the date of this report. Actual

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results could differ materially from those indicated by such forward-looking statements due to a number of factors. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement. We undertake no current obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     We have exposure to financial market risks, including changes in interest rates, foreign currency exchange rates and other relevant market prices.

Interest Rate Risk

     An increase or decrease in interest rates would affect interest costs relating to our variable rate debt facilities. We and our subsidiaries are currently parties to variable rate debt facilities. At September 30, 2005, there was an aggregate of approximately $268.1 million of variable rate debt outstanding under these facilities. Based on the interest rate levels in effect on the variable rate debt outstanding at September 30, 2005, a 100 basis point increase in market interest rates would not increase our annual interest expense by a material amount. Changes in interest rates do not have a direct impact on interest expense relating to the remaining fixed rate debt facilities.

     The tables below provide information about our fixed rate and variable rate long-term debt agreements as of September 30, 2005 and December 31, 2004:

					Expected Maturity as of September 30, 2005
							(in millions)										Average
	September 30,														Fair		Interest
	2006		2007		2008		2009		2010		Thereafter		Total		Value		Rate
Fixed rate	$	0.1	$	—	$	—	$	—	$	—	$	353.7	$	353.8	$	347.0		9.0	%
Variable rate		6.7		6.0		4.3		4.0		124.9		122.2		268.1		268.5		5.3	%
Total debt	$	6.8	$	6.0	$	4.3	$	4.0	$	124.9	$	475.9	$	621.9	$	615.5

					Expected Maturity as of December 31, 2004
							(in millions)										Average
	December 31,														Fair		Interest
	2005		2006		2007		2008		2009		Thereafter		Total		Value		Rate
Fixed rate	$	0.1	$	0.1	$	—	$	—		—	$	354.9	$	355.1	$	350.4		9.0	%
Variable rate		6.4		6.5		5.0		4.0		3.9		246.0		271.8		271.4		4.5	%
Total debt	$	6.5	$	6.6	$	5.0	$	4.0	$	3.9	$	600.9	$	626.9	$	621.8

Foreign Currency Exchange Rate Risk

     We are also exposed to market risk arising from changes in foreign currency exchange rates as a result of our international operations. Generally, we export from the U.S. certain of the equipment and construction interior finish items and other operating supplies used by our international subsidiaries. Principally all the revenues and operating expenses of our international subsidiaries are transacted in the country’s local currency. Generally accepted accounting principles in the U.S. require that our subsidiaries use the currency of the primary economic environment in which they operate as their functional currency. If our subsidiaries operate in a highly inflationary economy, generally accepted accounting principles in the U.S. require that the U.S. dollar be used as the functional currency for the subsidiary. Currency fluctuations result in us reporting exchange gains (losses) or foreign currency translation adjustments relating to our international subsidiaries depending on the inflationary environment of the country in which we operate. Based upon our equity ownership in our international subsidiaries as of September 30, 2005, holding everything else constant, a 10% immediate unfavorable

35

change in each of the foreign currency exchange rates to which we are exposed would decrease the net fair value of our investments in our international subsidiaries by approximately $16 million.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     We have established a system of controls and other procedures designed to ensure that information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. These disclosure controls and procedures have been evaluated under the direction of our Chief Executive Officer and Chief Financial Officer for the period covered by this report. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures are effective in alerting them in a timely basis to material information relating to the Company and its consolidated subsidiaries required to be included in our reports filed or submitted under the Exchange Act.

Changes in Internal Controls

     There have been no significant changes in our system of internal controls or in other factors that could significantly affect internal controls within the period covered by this report or subsequent to the evaluation by the Chief Executive Officer and Chief Financial Officer.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     Reference is made to Item 3 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

Item 5. Other Information

Supplemental Schedules specified by the senior subordinated notes Indenture:	Page
Condensed Consolidating Balance Sheets (unaudited) as of September 30, 2005	37
Condensed Consolidating Statements of Income (unaudited) for the nine months ended September 30, 2005	38
Condensed Consolidating Statements of Cash Flows (unaudited) for the nine months ended September 30, 2005	39

36

CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF SEPTEMBER 30, 2005
(in thousands, except share data, unaudited)

	Restricted			Unrestricted
	Group			Group			Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	95,324		$	38,414		$	—		$	133,738
Inventories		3,303			806			—			4,109
Accounts receivable		10,754			4,918			(949	)		14,723
Income tax receivable		(2,977	)		2,977			—			—
Prepaid expenses and other		4,465			551			—			5,016
Total current assets		110,869			47,666			(949	)		157,586
THEATRE PROPERTIES AND EQUIPMENT — net		692,398			89,738			—			782,136
OTHER ASSETS
Goodwill		9,379			34,904			—			44,283
Investments in and advances to affiliates		177,138			8,183			(183,142	)		2,179
Intangible assets, deferred charges and other assets — net		54,447			9,623			(11,285	)		52,785
Total other assets		240,964			52,710			(194,427	)		99,247
TOTAL ASSETS	$	1,044,231		$	190,114		$	(195,376	)	$	1,038,969
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt	$	2,655		$	4,186		$	—		$	6,841
Income tax payable		585			2,416			—			3,001
Accounts payable and accrued expenses		85,244			14,754			(948	)		99,050
Total current liabilities		88,484			21,356			(948	)		108,892
LONG-TERM LIABILITIES
Senior credit agreements		253,547			19,070			(11,285	)		261,332
Senior subordinated notes		353,721			—			—			353,721
Deferred income taxes		24,179			(11	)		—			24,168
Deferred lease expenses		27,482			1,653			—			29,135
Deferred gain on sale leasebacks		3,366			—			—			3,366
Deferred revenues and other long-term liabilities		1,782			5,302			—			7,084
Total long-term liabilities		664,077			26,014			(11,285	)		678,806
COMMITMENTS AND CONTINGENCIES		—			—			—			—
MINORITY INTERESTS IN SUBSIDIARIES		10,282			6,176			—			16,458
SHAREHOLDER’S EQUITY
Class A common stock, $.01 par value: 10,000,000 shares authorized, 1,500 shares issued and outstanding		—			37,942			(37,942	)		—
Class B common stock, no par value: 1,000,000 shares authorized, 239,893 shares issued and outstanding		49,543			33,050			(33,050	)		49,543
Additional paid-in-capital		58,005			112,151			(112,151	)		58,005
Retained earnings		247,470			(40,650	)		(80	)		206,740
Distributions		—			(80	)		80			—
Treasury stock, 57,245 Class B shares at cost		(24,233	)		—			—			(24,233	)
Accumulated other comprehensive loss		(49,397	)		(5,845	)		—			(55,242	)
Total shareholder’s equity		281,388			136,568			(183,143	)		234,813
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY	$	1,044,231		$	190,114		$	(195,376	)	$	1,038,969

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

37

CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005
(in thousands, unaudited)

	Restricted			Unrestricted
	Group			Group			Eliminations			Consolidated
REVENUES	$	625,601		$	122,266		$	(859	)	$	747,008
COSTS AND EXPENSES
Cost of operations		466,394			93,282			(859	)		558,817
General and administrative expenses		30,343			7,529			—			37,872
Depreciation and amortization		43,822			13,065			—			56,887
Impairment of long-lived assets		1,803			740			—			2,543
(Gain) loss on sale of assets and other		1,926			(18	)		—			1,908
Total costs and expenses		544,288			114,598			(859	)		658,027
OPERATING INCOME		81,313			7,668			—			88,981
OTHER INCOME (EXPENSE)
Interest expense		(31,683	)		(1,324	)		472			(32,535	)
Amortization of debt issue costs		(2,060	)		(15	)		—			(2,075	)
Interest income		2,747			1,931			(472	)		4,206
Foreign currency exchange loss		(618	)		(80	)		—			(698	)
Dividend income		80			—			(80	)		—
Equity in income of affiliates		100			82			—			182
Minority interests in income of subsidiaries		(706	)		(176	)		—			(882	)
Total other income (expense)		(32,140	)		418			(80	)		(31,802	)
INCOME BEFORE INCOME TAXES		49,173			8,086			(80	)		57,179
Income taxes		19,221			795			—			20,016
NET INCOME	$	29,952		$	7,291		$	(80	)	$	37,163

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

38

CINEMARK USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005
(in thousands, unaudited)

	Restricted			Unrestricted
	Group			Group			Eliminations			Consolidated
OPERATING ACTIVITIES
Net income	$	29,952		$	7,291		$	(80	)	$	37,163
Noncash items in net income:
Depreciation		43,207			11,595			—			54,802
Amortization of intangible and other assets		615			1,470			—			2,085
Amortization of foreign advanced rents		573			426			—			999
Amortization of debt issue costs		2,060			15			—			2,075
Amortization of gain on sale leasebacks		(274	)		—			—			(274	)
Amortization of debt premium		(1,173	)		—			—			(1,173	)
Amortization of deferred revenues		(358	)		—			—			(358	)
Impairment of long-lived assets		1,803			740			—			2,543
(Gain) loss on sale of assets and other		1,926			(18	)		—			1,908
Deferred lease expenses		923			250			—			1,173
Deferred income tax expenses		985			45			—			1,030
Equity in income of affiliates		(100	)		(82	)		—			(182	)
Minority interests in income of subsidiaries		706			176			—			882
Changes in assets and liabilities		(29,281	)		7,372			80			(21,829	)
Net cash provided by operating activities		51,564			29,280			—			80,844
INVESTING ACTIVITIES
Additions to theatre properties and equipment		(40,194	)		(7,482	)		—			(47,676	)
Proceeds from sale of theatre properties and equipment		1,051			215			—			1,266
Purchase of shares in National CineMedia		—			(7,329	)		—			(7,329	)
Dividends/capital returned from affiliates		204			80			—			284
Net cash used for investing activities		(38,939	)		(14,516	)		—			(53,455	)
FINANCING ACTIVITIES
Capital contribution from parent		6,935			—			—			6,935
Proceeds from long-term debt		7			300			—			307
Repayments of long-term debt		(2,006	)		(2,825	)		—			(4,831	)
Debt issue costs		(202	)		—			—			(202	)
Increase in deferred revenue		671			—			—			671
Increase in minority investment in subsidiaries		19			114			—			133
Decrease in minority investment in subsidiaries		(977	)		(276	)		—			(1,253	)
Net cash provided by (used for) financing activities		4,447			(2,687	)		—			1,760
Effect of exchange rate changes on cash and cash equivalents		1,068			3,293			—			4,361
INCREASE IN CASH AND CASH EQUIVALENTS		18,140			15,370			—			33,510
CASH AND CASH EQUIVALENTS:
Beginning of period		77,184			23,044			—			100,228
End of period	$	95,324		$	38,414		$	—		$	133,738

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

39

Item 6. Exhibits

3.1	Amended and Restated Articles of Incorporation of the Company filed with the Texas Secretary of State on September 3, 1992 (incorporated by reference to Exhibit 3.1(a) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
3.2(a)	Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 033-47040) filed April 9, 1992).
3.2(b)	Amendment to Bylaws of the Company dated March 12, 1996 (incorporated by reference to Exhibit 3.2(b) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed March 6, 1997).
4.2(a)	Indenture dated February 11, 2003 between the Company and The Bank of New York Trust Company of Florida, N.A. governing the 9% Senior Subordinated Notes issued thereunder (incorporated by reference to Exhibit 10.2(b) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed March 19, 2003).
4.2(b)	First Supplemental Indenture dated as of May 7, 2003 between the Company, the subsidiary guarantors party thereto and The Bank of New York Trust Company of Florida, N.A. (incorporated by reference to Exhibit 4.2(i) to the Company’s Registration Statement on Form S-4 (File No. 333-104940) filed May 28, 2003).
4.2(c)	Second Supplemental Indenture dated as of November 11, 2004 between the Company, the subsidiary guarantors party thereto and The Bank of New York Trust Company of Florida, N.A. (incorporated by reference to the Company’s Annual Report on Form 10-K (File No. 033-047040) filed March 29, 2005).
4.2(d)	Form of 9% Note (contained in the Indenture listed as Exhibit 4.2(a) above) (incorporated by reference to Exhibit 10.2(b) to the Company’s Annual Report on Form 10-K (File 033-47040) filed March 19, 2003).
10.1(a)	Management Agreement, dated as of July 28, 1993, between the Company and Cinemark Mexico (USA) (incorporated by reference to Exhibit 10.1(a) to Cinemark, Inc.’s Registration Statement on Form S-1 (File No. 333-88618) filed May 17, 2002).
10.1(b)	Management Agreement, dated as of September 10, 2002, between Cinemark USA, Inc. and Cinemark de Mexico (incorporated by reference to Exhibit 10.8 to Cinemark Mexico (USA)’s Registration Statement on Form S-4 (File No. 033-72114) filed on November 24, 1994).
10.1(c)	Management Agreement, dated December 10, 1993, between Laredo Theatre, Ltd. and the Company (incorporated by reference to Exhibit 10.14(b) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1994).
10.1(d)	First Amendment to Management Agreement of Laredo Theatre, Ltd. effective as of December 10, 2003 between CNMK Texas Properties, Ltd. (successor in interest to Cinemark USA, Inc.) and Laredo Theatre Ltd. (incorporated by reference to Exhibit 10.1(d) to Cinemark, Inc.’s Registration Statement on Form S-4 (File No. 333-116292) filed September 8, 2004).
10.1(e)	Management Agreement, dated September 1, 1994, between Cinemark Partners II, Ltd. and the Company (incorporated by reference to Exhibit 10.4(i) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed March 29, 1995).
10.1(f)	First Amendment to Management Agreement of Cinemark Partners II, Ltd. dated as of January 5, 1998 by and between Cinemark USA, Inc. and Cinemark Partners II, Ltd. (incorporated by reference to Exhibit 10.1(f) to the Cinemark, Inc.’s Registration Statement on Form S-4 (File No. 333-116292) filed September 8, 2004).
10.1(g)	Management Services Agreement dated April 10, 2003 between Greeley Partners L.P. and CNMK Texas Properties, Ltd. (incorporated by reference to Exhibit 10.1(g) to Cinemark, Inc.’s Registration Statement on Form S-4 (File No. 333-116292) filed September 8, 2004).
10.2	Amended and Restated Agreement to Participate in Profits and Losses, dated as of March 12, 2004, between Cinemark USA, Inc. and Alan W. Stock (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.3(a)	License Agreement, dated December 10, 1993, between Laredo Joint Venture and the Company (incorporated by reference to Exhibit 10.14(c) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1994).
10.3(b)	License Agreement, dated September 1, 1994, between Cinemark Partners II, Ltd. and the Company (incorporated by reference to Exhibit 10.10(c) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed March 29, 1995).
10.4(a)	Tax Sharing Agreement, between the Company and Cinemark International, L.L.C. (f/k/a Cinemark II, Inc. ), dated as of June 10, 1992 (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).

40

10.4(b)	Tax Sharing Agreement, dated as of July 28, 1993, between the Company and Cinemark Mexico (USA) (incorporated by reference to Exhibit 10.10 to Cinemark Mexico (USA)’s Registration Statement on Form S-4 (File No. 033-72114) filed on November 24, 1993).
10.5(a)	Indemnification Agreement, between the Company and Lee Roy Mitchell, dated as of July 13, 1992 (incorporated by reference to Exhibit 10.23(a) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
10.5(b)	Indemnification Agreement, between the Company and Tandy Mitchell, dated as of July 13, 1992 (incorporated by reference to Exhibit 10.23(b) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
10.5(c)	Indemnification Agreement, between the Company and Alan Stock, dated as of July 13, 1992 (incorporated by reference to Exhibit 10.23(d) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
10.5(d)	Indemnification Agreement, between the Company and W. Bryce Anderson, dated as of July 13, 1992 (incorporated by reference to Exhibit 10.23(f) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
10.5(e)	Indemnification Agreement, between the Company and Sheldon I. Stein, dated as of July 13, 1992 (incorporated by reference to Exhibit 10.23(g) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
10.5(f)	Indemnification Agreement, between the Company and Heriberto Guerra, dated as of December 3, 1993 (incorporated by reference to Exhibit 10.23(f) to the Company’s Annual Report on Form 10-K (File No. 033-11895) filed September 13, 1996).
10.6(a)	Senior Secured Credit Agreement dated December 4, 1995 among Cinemark International, L.L.C. (f/k/a Cinemark II, Inc., Cinemark Mexico (USA) and Cinemark de Mexico (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed April 1, 1996).
10.6(b)	First Amendment to Senior Secured Credit Agreement, dated as of September 30, 1996, by and among Cinemark II, Inc., Cinemark Mexico (USA), Inc. and Cinemark de Mexico, S.A. de C.V. (incorporated by reference to Exhibit 10.11(b) to Cinemark, Inc.’s Registration Statement on Form S-1 (File No. 333-88618) filed on May 17, 2002).
10.6(c)	Second Amendment to Senior Secured Credit Agreement, dated as of September 28, 2000, by and among Cinemark II, Inc., Cinemark Mexico (USA), Inc. and Cinemark de Mexico, S.A. de C.V. (incorporated by reference to Exhibit 10.11(c) to Cinemark, Inc.’s Registration Statement on Form S-1 (File No. 333-88618) filed on May 17, 2002).
10.7(a)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Lee Roy Mitchell (incorporated by reference to Exhibit 10.14(a) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.7(b)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Alan Stock (incorporated by reference to Exhibit 10.14(b) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.7(c)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Tim Warner (incorporated by reference to Exhibit 10.14(c) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.7(d)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Robert Copple (incorporated by reference to Exhibit 10.14(d) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.7(e)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Rob Carmony (incorporated by reference to Exhibit 10.14(e) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.7(f)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Tandy Mitchell (incorporated by reference to Exhibit 10.14(f) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).

41

10.8(a)	Amended and Restated Credit Agreement, dated April 2, 2004, among Cinemark, Inc., CNMK Holdings, Inc., the Company, the several lenders from time to time parties thereto, Lehman Brothers Inc. and Goldman Sachs Credit Partners LP, as Joint Legal Arrangers, Goldman Sachs Credit Partners LP, as Syndication Agent, Deutsche Bank Securities, Inc., The Bank of New York, General Electric Capital Corporation and CIBC Inc. as Documentation Agents and Lehman Commercial Paper Inc. as Administrative Agent (incorporated by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.8(b)	First Amendment to the Amended and Restated Credit Agreement, dated August 18, 2004, among Cinemark, Inc., CNMK Holdings, Inc., Cinemark USA, Inc., the several lenders from time to time parties thereto, Lehman Brothers Inc. and Goldman Sachs Credit Partners LP, as Joint Lead Arrangers, Goldman Sachs Credit Partners LP, as Syndication Agent, Deutsche Bank Securities, Inc., The Bank of New York, General Electric Capital Corporation and CIBC Inc. as Documentation Agents and Lehman Commercial Paper Inc. as Administrative Agent (incorporated by reference to Exhibit 10.15(b) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 13, 2005).
10.9	Amended and Restated Guaranty and Collateral Agreement, dated April 2, 2004, among Cinemark, Inc., CNMK Holdings Inc., the Company and certain of it subsidiaries in favor of Lehman Commercial Paper, Inc., as administrative agent (incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.10(a)	Stock Purchase Agreement dated as of August 18, 2004, among Cinemark Empreendimentos e Participacoes, Ltda, Venture II Equity Holdings Corporation, Inc. and Kristal Holdings Limited (incorporated by reference to Exhibit 10.20(a) to Cinemark, Inc.’s Quarterly Report on Form 10-Q (File No. 333-116292) filed May 13, 2005).
10.10(b)	Stock Purchase Agreement dated as of August 18, 2004, among Cinemark Empreendimentos e Participacoes, Ltda, Prona Global Ltd., Messrs. Edgar Gleich, Riccardo Arduini, Moises Pinsky, Eduardo Alalou, and Robert Luis Leme Klabin (incorporated by reference to Exhibit 10.20(b) to Cinemark, Inc.’s Quarterly Report on Form 10-Q (File No. 333-116292) filed May 13, 2005).
*31.1	Certification of Chief Executive Officer of Cinemark USA, Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Chief Financial Officer of Cinemark USA, Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of the Chief Executive Officer of Cinemark USA, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of the Chief Financial Officer of Cinemark USA, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* filed herewith.

42

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:November 9, 2005
	/s/Alan W. Stock
	Alan W. Stock
	President
	/s/Robert Copple
	Robert Copple
	Chief Financial Officer

43

EXHIBIT INDEX

3.1	Amended and Restated Articles of Incorporation of the Company filed with the Texas Secretary of State on September 3, 1992 (incorporated by reference to Exhibit 3.1(a) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
3.2(a)	Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 033-47040) filed April 9, 1992).
3.2(b)	Amendment to Bylaws of the Company dated March 12, 1996 (incorporated by reference to Exhibit 3.2(b) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed March 6, 1997).
4.2(a)	Indenture dated February 11, 2003 between the Company and The Bank of New York Trust Company of Florida, N.A. governing the 9% Senior Subordinated Notes issued thereunder (incorporated by reference to Exhibit 10.2(b) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed March 19, 2003).
4.2(b)	First Supplemental Indenture dated as of May 7, 2003 between the Company, the subsidiary guarantors party thereto and The Bank of New York Trust Company of Florida, N.A. (incorporated by reference to Exhibit 4.2(i) to the Company’s Registration Statement on Form S-4 (File No. 333-104940) filed May 28, 2003).
4.2(c)	Second Supplemental Indenture dated as of November 11, 2004 between the Company, the subsidiary guarantors party thereto and The Bank of New York Trust Company of Florida, N.A. (incorporated by reference to the Company’s Annual Report on Form 10-K (File No. 033-047040) filed March 29, 2005).
4.2(d)	Form of 9% Note (contained in the Indenture listed as Exhibit 4.2(a) above) (incorporated by reference to Exhibit 10.2(b) to the Company’s Annual Report on Form 10-K (File 033-47040) filed March 19, 2003).
10.1(a)	Management Agreement, dated as of July 28, 1993, between the Company and Cinemark Mexico (USA) (incorporated by reference to Exhibit 10.1(a) to Cinemark, Inc.’s Registration Statement on Form S-1 (File No. 333-88618) filed May 17, 2002).
10.1(b)	Management Agreement, dated as of September 10, 2002, between Cinemark USA, Inc. and Cinemark de Mexico (incorporated by reference to Exhibit 10.8 to Cinemark Mexico (USA)’s Registration Statement on Form S-4 (File No. 033-72114) filed on November 24, 1994).
10.1(c)	Management Agreement, dated December 10, 1993, between Laredo Theatre, Ltd. and the Company (incorporated by reference to Exhibit 10.14(b) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1994).
10.1(d)	First Amendment to Management Agreement of Laredo Theatre, Ltd. effective as of December 10, 2003 between CNMK Texas Properties, Ltd. (successor in interest to Cinemark USA, Inc.) and Laredo Theatre Ltd. (incorporated by reference to Exhibit 10.1(d) to Cinemark, Inc.’s Registration Statement on Form S-4 (File No. 333-116292) filed September 8, 2004).
10.1(e)	Management Agreement, dated September 1, 1994, between Cinemark Partners II, Ltd. and the Company (incorporated by reference to Exhibit 10.4(i) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed March 29, 1995).
10.1(f)	First Amendment to Management Agreement of Cinemark Partners II, Ltd. dated as of January 5, 1998 by and between Cinemark USA, Inc. and Cinemark Partners II, Ltd. (incorporated by reference to Exhibit 10.1(f) to the Cinemark, Inc.’s Registration Statement on Form S-4 (File No. 333-116292) filed September 8, 2004).
10.1(g)	Management Services Agreement dated April 10, 2003 between Greeley Partners L.P. and CNMK Texas Properties, Ltd. (incorporated by reference to Exhibit 10.1(g) to Cinemark, Inc.’s Registration Statement on Form S-4 (File No. 333-116292) filed September 8, 2004).
10.2	Amended and Restated Agreement to Participate in Profits and Losses, dated as of March 12, 2004, between Cinemark USA, Inc. and Alan W. Stock (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.3(a)	License Agreement, dated December 10, 1993, between Laredo Joint Venture and the Company (incorporated by reference to Exhibit 10.14(c) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1994).
10.3(b)	License Agreement, dated September 1, 1994, between Cinemark Partners II, Ltd. and the Company (incorporated by reference to Exhibit 10.10(c) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed March 29, 1995).
10.4(a)	Tax Sharing Agreement, between the Company and Cinemark International, L.L.C. (f/k/a Cinemark II, Inc. ), dated as of June 10, 1992 (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).

10.4(b)	Tax Sharing Agreement, dated as of July 28, 1993, between the Company and Cinemark Mexico (USA) (incorporated by reference to Exhibit 10.10 to Cinemark Mexico (USA)’s Registration Statement on Form S-4 (File No. 033-72114) filed on November 24, 1993).
10.5(a)	Indemnification Agreement, between the Company and Lee Roy Mitchell, dated as of July 13, 1992 (incorporated by reference to Exhibit 10.23(a) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
10.5(b)	Indemnification Agreement, between the Company and Tandy Mitchell, dated as of July 13, 1992 (incorporated by reference to Exhibit 10.23(b) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
10.5(c)	Indemnification Agreement, between the Company and Alan Stock, dated as of July 13, 1992 (incorporated by reference to Exhibit 10.23(d) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
10.5(d)	Indemnification Agreement, between the Company and W. Bryce Anderson, dated as of July 13, 1992 (incorporated by reference to Exhibit 10.23(f) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
10.5(e)	Indemnification Agreement, between the Company and Sheldon I. Stein, dated as of July 13, 1992 (incorporated by reference to Exhibit 10.23(g) to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed June 30, 1993).
10.5(f)	Indemnification Agreement, between the Company and Heriberto Guerra, dated as of December 3, 1993 (incorporated by reference to Exhibit 10.23(f) to the Company’s Annual Report on Form 10-K (File No. 033-11895) filed September 13, 1996).
10.6(a)	Senior Secured Credit Agreement dated December 4, 1995 among Cinemark International, L.L.C. (f/k/a Cinemark II, Inc., Cinemark Mexico (USA) and Cinemark de Mexico (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K (File No. 033-47040) filed April 1, 1996).
10.6(b)	First Amendment to Senior Secured Credit Agreement, dated as of September 30, 1996, by and among Cinemark II, Inc., Cinemark Mexico (USA), Inc. and Cinemark de Mexico, S.A. de C.V. (incorporated by reference to Exhibit 10.11(b) to Cinemark, Inc.’s Registration Statement on Form S-1 (File No. 333-88618) filed on May 17, 2002).
10.6(c)	Second Amendment to Senior Secured Credit Agreement, dated as of September 28, 2000, by and among Cinemark II, Inc., Cinemark Mexico (USA), Inc. and Cinemark de Mexico, S.A. de C.V. (incorporated by reference to Exhibit 10.11(c) to Cinemark, Inc.’s Registration Statement on Form S-1 (File No. 333-88618) filed on May 17, 2002).
10.7(a)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Lee Roy Mitchell (incorporated by reference to Exhibit 10.14(a) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.7(b)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Alan Stock (incorporated by reference to Exhibit 10.14(b) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.7(c)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Tim Warner (incorporated by reference to Exhibit 10.14(c) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.7(d)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Robert Copple (incorporated by reference to Exhibit 10.14(d) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.7(e)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Rob Carmony (incorporated by reference to Exhibit 10.14(e) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.7(f)	Employment Agreement, dated as of March 12, 2004, between Cinemark, Inc. and Tandy Mitchell (incorporated by reference to Exhibit 10.14(f) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).

10.8(a)	Amended and Restated Credit Agreement, dated April 2, 2004, among Cinemark, Inc., CNMK Holdings, Inc., the Company, the several lenders from time to time parties thereto, Lehman Brothers Inc. and Goldman Sachs Credit Partners LP, as Joint Legal Arrangers, Goldman Sachs Credit Partners LP, as Syndication Agent, Deutsche Bank Securities, Inc., The Bank of New York, General Electric Capital Corporation and CIBC Inc. as Documentation Agents and Lehman Commercial Paper Inc. as Administrative Agent (incorporated by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.8(b)	First Amendment to the Amended and Restated Credit Agreement, dated August 18, 2004, among Cinemark, Inc., CNMK Holdings, Inc., Cinemark USA, Inc., the several lenders from time to time parties thereto, Lehman Brothers Inc. and Goldman Sachs Credit Partners LP, as Joint Lead Arrangers, Goldman Sachs Credit Partners LP, as Syndication Agent, Deutsche Bank Securities, Inc., The Bank of New York, General Electric Capital Corporation and CIBC Inc. as Documentation Agents and Lehman Commercial Paper Inc. as Administrative Agent (incorporated by reference to Exhibit 10.15(b) to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 13, 2005).
10.9	Amended and Restated Guaranty and Collateral Agreement, dated April 2, 2004, among Cinemark, Inc., CNMK Holdings Inc., the Company and certain of it subsidiaries in favor of Lehman Commercial Paper, Inc., as administrative agent (incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q (File No. 033-47040) filed May 14, 2004).
10.10(a)	Stock Purchase Agreement dated as of August 18, 2004, among Cinemark Empreendimentos e Participacoes, Ltda, Venture II Equity Holdings Corporation, Inc. and Kristal Holdings Limited (incorporated by reference to Exhibit 10.20(a) to Cinemark, Inc.’s Quarterly Report on Form 10-Q (File No. 333-116292) filed May 13, 2005).
10.10(b)	Stock Purchase Agreement dated as of August 18, 2004, among Cinemark Empreendimentos e Participacoes, Ltda, Prona Global Ltd., Messrs. Edgar Gleich, Riccardo Arduini, Moises Pinsky, Eduardo Alalou, and Robert Luis Leme Klabin (incorporated by reference to Exhibit 10.20(b) to Cinemark, Inc.’s Quarterly Report on Form 10-Q (File No. 333-116292) filed May 13, 2005).
*31.1	Certification of Chief Executive Officer of Cinemark USA, Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Chief Financial Officer of Cinemark USA, Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of the Chief Executive Officer of Cinemark USA, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of the Chief Financial Officer of Cinemark USA, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* filed herewith