|  |
|--|
|  |
|  |
|  |
|  |

UNITEDSTATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

|  |
|--|
|  |  |  |  |
|  |

FORM 10-Q

(MarkOne)

|        |                                                                                       |
|--------|---------------------------------------------------------------------------------------|
|   | QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 |

|        |                                                  |
|--------|--------------------------------------------------|
|   | For the quarterly period ended September 30,2004 |

OR

|        |                                                                                        |
|--------|----------------------------------------------------------------------------------------|
|   | TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

For the transition period from                                to                                

Commission file number: 001-12391

|  |
|--|
|  |  |  |  |
|  |

PANAVISION INC.(Exact name of Registrant as specified in itscharter)

|                                                             |  |                                    |  |  |  |  |
|-------------------------------------------------------------|--|------------------------------------|--|--|--|--|
| Delaware                                                    |  | 13-3593063                         |
| (Stateor other jurisdiction ofincorporation ororganization) |  | (I.R.S. EmployerIdentificationNo.) |
|                                                        |  |
| 6219De Soto AvenueWoodland Hills, California                |  | 91367                              |
| (Address of principal executive offices)                    |  | (Zipcode)                          |
|                                                             |

(818) 316-1000

|  |
|--|
|  |  |  |  |
|  |

Registrant'stelephone number including area code

|  |
|--|
|  |  |  |  |
|  |

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

**Indicate by checkmark whether theregistrant is an accelerated filer (as defined in Rule 12b-2 of theSecurities Exchange Act of 1934).    Yes   ****    No   **

APPLICABLE ONLY TO CORPORATE ISSUERS:

**Indicate the number of shares outstanding of each of theIssuer's classes of common stock, as of the latest practicabledate.**

As of November 11, 2004, there were 8,769,919 sharesof Panavision Inc. Common Stock, par value $0.01 per share,outstanding.    

|  |
|--|
|  |
|  |
|  |
|  |

----

PANAVISION INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDEDSEPTEMBER 30,2004

|            |  |                                                                                      |    |        |    |        |  |  |  |  |
|------------|--|--------------------------------------------------------------------------------------|----|--------|----|--------|--|--|--|--|
| PartI.     |  | FinancialInformation                                                                 |    |
| Item 1.    |  | FinancialStatements                                                                  |    |
|       |  | Condensed ConsolidatedStatements of Operations                                       |    |   | 3  |   |
|       |  | Condensed Consolidated BalanceSheets                                                 |    |   | 4  |   |
|       |  | Condensed ConsolidatedStatements of Cash Flows                                       |    |   | 6  |   |
|       |  | Notesto Condensed Consolidated Financial Statements                                  |    |   | 8  |   |
| Item 2.    |  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations |    |   | 17 |   |
| Item 3.    |  | Quantitative and Qualitative Disclosures AboutMarket Risk                            |    |   | 27 |   |
| Item 4.    |  | Controls andProcedures                                                               |    |   | 28 |   |
| PartII.    |  | Other Information                                                                    |    |
| Item1.     |  | Legal Proceedings                                                                    |    |   | 29 |   |
| Item2.     |  | Unregistered Sales of Equity Securities and Use ofProceeds                           |    |   | 29 |   |
| Item 3.    |  | Defaults UponSenior Securities                                                       |    |   | 29 |   |
| Item4.     |  | Submission of Matters to a Vote of SecurityHolders                                   |    |   | 29 |   |
| Item 5.    |  | OtherInformation                                                                     |    |   | 29 |   |
| Item 6.    |  | Exhibits                                                                             |    |   | 29 |   |
| SIGNATURES |  |                                                                                 | 31 |   |
|            |

2

----

PANAVISION INC.

PART I – FINANCIAL INFORMATION

Item1.    Financial Statements

The financial information hereinand management's discussion thereof include consolidated data forPanavision Inc. ("Registrant" or"Panavision") and its subsidiaries.Registrant and its subsidiaries are sometimes herein referred tocollectively as the "Company".

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(In thousands, except per shareamounts)

|                                                                                                                  |  |                                        |        |                                      |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|------------------------------------------------------------------------------------------------------------------|--|----------------------------------------|--------|--------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                                             |  | Forthe Three MonthsEnded September 30, |        | For the NineMonthsEnded September30, |
|                                                                                                             |  | 2004                                   |        | 2003                                 |  | 2004   |         | 2003    |
| Camerarental                                                                                                     |  | $                                      | 33,238 |                                 |  | $      | 30,695  |    |  | $      | 90,837  |    |  | $      | 86,222  |    |
| Lightingrental                                                                                                   |  |                                   | 10,960 |                                 |  |   | 11,399  |    |  |   | 30,437  |    |  |   | 27,663  |    |
| Salesand other                                                                                                   |  |                                   | 9,820  |                                 |  |   | 8,127   |    |  |   | 28,773  |    |  |   | 24,449  |    |
| Totalrental revenue and sales                                                                                    |  |                                   | 54,018 |                                 |  |   | 50,221  |    |  |   | 150,047 |    |  |   | 138,334 |    |
| Costof camera rental                                                                                             |  |                                   | 17,805 |                                 |  |   | 16,208  |    |  |   | 50,329  |    |  |   | 46,517  |    |
| Costof lighting rental                                                                                           |  |                                   | 9,240  |                                 |  |   | 9,727   |    |  |   | 27,221  |    |  |   | 25,242  |    |
| Costof sales and other                                                                                           |  |                                   | 5,714  |                                 |  |   | 4,525   |    |  |   | 16,594  |    |  |   | 13,715  |    |
| Grossmargin                                                                                                      |  |                                   | 21,259 |                                 |  |   | 19,761  |    |  |   | 55,903  |    |  |   | 52,860  |    |
| Selling,general and administrative expenses                                                                      |  |                                   | 15,238 |                                 |  |   | 13,729  |    |  |   | 47,766  |    |  |   | 43,827  |    |
| Researchand development expenses                                                                                 |  |                                   | 1,370  |                                 |  |   | 1,152   |    |  |   | 4,290   |    |  |   | 3,710   |    |
| Operatingincome                                                                                                  |  |                                   | 4,651  |                                 |  |   | 4,880   |    |  |   | 3,847   |    |  |   | 5,323   |    |
| Interestincome                                                                                                   |  |                                   | 31     |                                 |  |   | 75      |    |  |   | 241     |    |  |   | 260     |    |
| Interestexpense                                                                                                  |  |                                   | (8,013 | )                               |  |   | (7,155  | )  |  |   | (23,788 | )  |  |   | (22,541 | )  |
| Foreignexchange loss                                                                                             |  |                                   | (562   | )                               |  |   | (192    | )  |  |   | (77     | )  |  |   | (944    | )  |
| Refinancingexpense                                                                                               |  |                                   | (55    | )                               |  |   | (1,549  | )  |  |   | (6,525  | )  |  |   | (1,549  | )  |
| Otherincome, net                                                                                                 |  |                                   | 1,725  |                                 |  |   | 435     |    |  |   | 3,466   |    |  |   | 1,122   |    |
| Lossfrom continuing operations before income taxes                                                               |  |                                   | (2,223 | )                               |  |   | (3,506  | )  |  |   | (22,836 | )  |  |   | (18,329 | )  |
| Incometax benefit                                                                                                |  |                                   | 7,093  |                                 |  |   | 1,335   |    |  |   | 5,427   |    |  |   | 6,177   |    |
| Netincome (loss) from continuing operations                                                                      |  |                                   | 4,870  |                                 |  |   | (2,171  | )  |  |   | (17,409 | )  |  |   | (12,152 | )  |
| Discontinuedoperations:                                                                                          |  |
| Income (loss) from EFILM (net ofincome tax provision of $376 and $460 (2004) and benefit of $131 and$809 (2003)) |  |                                   | (48    | )                               |  |   | (205    | )  |  |   | 717     |    |  |   | (1,260  | )  |
| Gainon disposal of EFILM (net of income taxes of$6,697)                                                          |  |                                   | 10,432 |                                 |  |   | — |    |  |   | 10,432  |    |  |   | — |    |
| Netincome (loss) from discontinued operations                                                                    |  |                                   | 10,384 |                                 |  |   | (205    | )  |  |   | 11,149  |    |  |   | (1,260  | )  |
| Netincome (loss)                                                                                                 |  | $                                      | 15,254 |                                 |  | $      | (2,376  | )  |  | $      | (6,260  | )  |  | $      | (13,412 | )  |
| Netloss from continuing operations attributable to common stockholders                                           |  | $                                      | (761   | )                               |  | $      | (6,266  | )  |  | $      | (33,784 | )  |  | $      | (21,739 | )  |
| Netloss from continuing operations per share – basic and diluted                                           |  | $                                      | (0.09  | )                               |  | $      | (0.72   | )  |  | $      | (3.85   | )  |  | $      | (2.48   | )  |
| Netincome (loss) per share – basic and diluted                                                             |  | $                                      | 1.10   |                                 |  | $      | (0.74   | )  |  | $      | (2.58   | )  |  | $      | (2.62   | )  |
| Shares used incomputation – basic and diluted                                                              |  |                                   | 8,770  |                                 |  |   | 8,770   |    |  |   | 8,770   |    |  |   | 8,770   |    |
|                                                                                                                  |

Seeaccompanying notes.

3

----

PANAVISION INC.

CONDENSEDCONSOLIDATED BALANCE SHEETS(In thousands, except sharedata)

|                                                                            |  |                   |         |                   |  |        |         |        |  |  |
|----------------------------------------------------------------------------|--|-------------------|---------|-------------------|--|--------|---------|--------|--|--|
|                                                                       |  | September30, 2004 |         | December 31, 2003 |
|                                                                       |  | (Unaudited)       |         | (Note 1)          |
| **ASSETS**                                                                 |  |
| Currentassets:                                                             |  |              |    |              |  |   |    |   |
| Cash and cashequivalents                                                   |  | $                 | 5,163   |              |  | $      | 6,770   |   |
| Restrictedcash                                                             |  |              | 10,889  |              |  |   | — |   |
| Accountsreceivable (net of allowance of $1,893 in 2004 and $2,586 in 2003) |  |              | 32,200  |              |  |   | 27,272  |   |
| Inventories                                                                |  |              | 14,313  |              |  |   | 11,794  |   |
| Prepaidexpenses                                                            |  |              | 4,701   |              |  |   | 4,211   |   |
| Notereceivable                                                             |  |              | 5,851   |              |  |   | — |   |
| Other currentassets                                                        |  |              | 1,395   |              |  |   | 1,255   |   |
| Total currentassets                                                        |  |              | 74,512  |              |  |   | 51,302  |   |
| Property,plant and equipment, net                                          |  |              | 213,314 |              |  |   | 210,251 |   |
| Goodwill, net                                                              |  |              | 261,530 |              |  |   | 259,208 |   |
| Patents andtrademarks, net                                                 |  |              | 66,138  |              |  |   | 66,389  |   |
| Otherassets                                                                |  |              | 7,001   |              |  |   | 12,907  |   |
| Net assets ofdiscontinued operations                                       |  |              | — |              |  |   | 11,489  |   |
| Totalassets                                                                |  | $                 | 622,495 |              |  | $      | 611,546 |   |
|                                                                            |

Seeaccompanying notes.

4

----

PANAVISION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, exceptsharedata)

|                                                                                                                                                                                                                                                     |  |                   |          |                  |  |        |          |         |  |  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|-------------------|----------|------------------|--|--------|----------|---------|--|--|
|                                                                                                                                                                                                                                                |  | September30, 2004 |          | December 31,2003 |
|                                                                                                                                                                                                                                                |  | (Unaudited)       |          | (Note1)          |
| **LIABILITIES ANDSTOCKHOLDERS' EQUITY**                                                                                                                                                                                                             |  |
| Currentliabilities:                                                                                                                                                                                                                                 |  |              |     |             |  |   |     |    |
| Accountspayable                                                                                                                                                                                                                                     |  | $                 | 9,948    |             |  | $      | 6,554    |    |
| Accruedliabilities                                                                                                                                                                                                                                  |  |              | 26,802   |             |  |   | 26,697   |    |
| Dueto relatedparties                                                                                                                                                                                                                                |  |              | 90       |             |  |   | 1,190    |    |
| Currentmaturities of long-termdebt                                                                                                                                                                                                                  |  |              | 8,692    |             |  |   | 5,885    |    |
| Totalcurrentliabilities                                                                                                                                                                                                                             |  |              | 45,532   |             |  |   | 40,326   |    |
| Long-termdebt                                                                                                                                                                                                                                       |  |              | 290,151  |             |  |   | 312,388  |    |
| Notes payableto affiliate                                                                                                                                                                                                                           |  |              | 11,384   |             |  |   | 21,401   |    |
| Deferredtax liabilities,net                                                                                                                                                                                                                         |  |              | 29,091   |             |  |   | 30,060   |    |
| Otherliabilities                                                                                                                                                                                                                                    |  |              | 3,452    |             |  |   | 2,701    |    |
| CommitmentsandContingencies                                                                                                                                                                                                                         |  |              |     |             |  |   |     |    |
| Stockholders'equity:                                                                                                                                                                                                                                |  |              |     |             |  |   |     |    |
| Series ANon-Cumulative Perpetual Participating Preferred Stock, $0.01 parvalue; 1,500,000 shares authorized; 1,381,690 shares issued andoutstanding at December 31, 2003 (liquidation preference of $1 pershare plus declared and unpaiddividends)  |  |              | —  |             |  |   | 14       |    |
| SeriesC Cumulative Pay-in-Kind Preferred Stock, $0.01 par value; 200,000shares authorized; 159,644 shares issued and outstanding at December31, 2003 (liquidation preference of $1,000 per share plus accrued andunpaid dividends)                  |  |              | —  |             |  |   | 2        |    |
| Series DCumulative Pay-in-Kind Preferred Stock, $0.01 par value; 300,000 sharesauthorized; 215,274 shares issued and outstanding at September 30, 2004(liquidation preference of $1,000 per share plus accrued and unpaiddividends)                 |  |              | 2        |             |  |   | —  |    |
| Series ENon-Cumulative Perpetual Participating Preferred Stock, $0.01 parvalue; 1,500,000 shares authorized; 1,381,690 shares issued andoutstanding at September 30, 2004 (liquidation preference of $1 pershare plus declared and unpaiddividends) |  |              | 14       |             |  |   | —  |    |
| Common Stock,$0.01 par value; 50,000,000 shares authorized; 8,769,919 sharesissued and outstanding at September 30, 2004 and December 31,2003                                                                                                       |  |              | 88       |             |  |   | 88       |    |
| Additional paid-incapital                                                                                                                                                                                                                           |  |              | 368,968  |             |  |   | 329,127  |    |
| Revaluationcapital                                                                                                                                                                                                                                  |  |              | 333,199  |             |  |   | 333,199  |    |
| Accumulateddeficit                                                                                                                                                                                                                                  |  |              | (463,103 | )           |  |   | (461,795 | )  |
| Accumulatedother comprehensiveincome                                                                                                                                                                                                                |  |              | 3,717    |             |  |   | 4,035    |    |
| Totalstockholders'equity                                                                                                                                                                                                                            |  |              | 242,885  |             |  |   | 204,670  |    |
| Totalliabilities and stockholders'equity                                                                                                                                                                                                            |  | $                 | 622,495  |             |  | $      | 611,546  |    |
|                                                                                                                                                                                                                                                     |

Seeaccompanying notes.

5

----

PANAVISION INC.

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited) (Inthousands)

|                                                                          |  |                               |          |         |  |        |         |         |  |  |
|--------------------------------------------------------------------------|--|-------------------------------|----------|---------|--|--------|---------|---------|--|--|
|                                                                     |  | NineMonths Ended September30, |
|                                                                     |  | 2004                          |          | 2003    |
| **Operatingactivities**                                                  |  |                          |     |    |  |   |    |    |
| Net loss fromcontinuingoperations                                        |  | $                             | (17,409  | )  |  | $      | (12,152 | )  |
| Adjustmentsto derive net cash provided by (used in) operatingactivities: |  |                          |     |    |  |   |    |    |
| Depreciationandamortization                                              |  |                          | 29,811   |    |  |   | 29,636  |    |
| Write-offof deferred financingcosts                                      |  |                          | 3,436    |    |  |   | — |    |
| Gain ondispositions of property andequipment                             |  |                          | (2,708   | )  |  |   | (996    | )  |
| Amortizationof deferred financingcosts                                   |  |                          | 812      |    |  |   | 3,160   |    |
| Dividends receivedfrom equityinvestments                                 |  |                          | 1,112    |    |  |   | — |    |
| Deferredincome tax benefit                                               |  |                          | (6,069   | )  |  |   | (7,159  | )  |
| Changes in operatingassets andliabilities:                               |  |                          |     |    |  |   |    |    |
| Accountsreceivable                                                       |  |                          | (3,400   | )  |  |   | (3,757  | )  |
| Inventories                                                              |  |                          | (2,516   | )  |  |   | (798    | )  |
| Prepaidexpenses and other currentassets                                  |  |                          | (1,933   | )  |  |   | (1,104  | )  |
| Duefrom relatedparties                                                   |  |                          | (1       | )  |  |   | 105     |    |
| Accountspayable                                                          |  |                          | 3,071    |    |  |   | 616     |    |
| Accruedliabilities                                                       |  |                          | (337     | )  |  |   | 285     |    |
| Due torelated parties                                                    |  |                          | (711     | )  |  |   | (522    | )  |
| Other,net                                                                |  |                          | (2,349   | )  |  |   | (3,579  | )  |
| Netcash provided by operatingactivities                                  |  |                          | 809      |    |  |   | 3,735   |    |
| **Investingactivities**                                                  |  |                          |     |    |  |   |    |    |
| Capitalexpenditures                                                      |  |                          | (18,766  | )  |  |   | (17,044 | )  |
| Netproceeds from sale ofEFILM                                            |  |                          | 25,300   |    |  |   | — |    |
| Net change inrestrictedcash                                              |  |                          | (10,889  | )  |  |   | — |    |
| Proceeds fromdispositions of property andequipment                       |  |                          | 3,601    |    |  |   | 1,529   |    |
| Proceeds fromcollection of notesreceivable                               |  |                          | 3,729    |    |  |   | — |    |
| Acquisitionsofbusinesses                                                 |  |                          | (7,782   | )  |  |   | — |    |
| Netcash used in investingactivities                                      |  |                          | (4,807   | )  |  |   | (15,515 | )  |
| **Financingactivities**                                                  |  |                          |     |    |  |   |    |    |
| Borrowings underAmended CreditAgreement                                  |  |                          | 135,600  |    |  |   | — |    |
| Proceedsfrom issuance of SeniorNotes                                     |  |                          | 100,000  |    |  |   | — |    |
| Repayments oflong-term debt (including capitalleases)                    |  |                          | (262,318 | )  |  |   | (16,978 | )  |
| Deferredfinancingcosts                                                   |  |                          | (1,538   | )  |  |   | (3,155  | )  |
| Capitalcontribution *                                                    |  |                          | 22,730   |    |  |   | — |    |
| Netborrowings under notes payable toaffiliate                            |  |                          | 7,995    |    |  |   | 7,500   |    |
| Proceeds fromissuance of Series B Preferred Stock*                       |  |                          | —  |    |  |   | 4,372   |    |
| Proceeds fromissuance of Series  C Preferred Stock*                      |  |                          | —  |    |  |   | 9,725   |    |
| Notes payable toDeluxe Laboratories,Inc.                                 |  |                          | —  |    |  |   | 580     |    |
| Netcash provided by financingactivities                                  |  |                          | 2,469    |    |  |   | 2,044   |    |
| Effect ofexchange rate changes oncash                                    |  |                          | (78      | )  |  |   | 376     |    |
| Netdecrease in cash and cashequivalents                                  |  |                          | (1,607   | )  |  |   | (9,360  | )  |
| Cash andcash equivalents at beginning ofperiod                           |  |                          | 6,770    |    |  |   | 11,902  |    |
| Cashand cash equivalents at end ofperiod                                 |  | $                             | 5,163    |    |  | $      | 2,542   |    |
|                                                                          |

|   |                         |
|---|-------------------------|
| * | netof transaction costs |

See accompanying notes.

6

----

PANAVISION INC.

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited) (Inthousands)

|                                       |  |                               |        |        |  |        |        |        |  |  |
|---------------------------------------|--|-------------------------------|--------|--------|--|--------|--------|--------|--|--|
|                                  |  | Nine Months EndedSeptember30, |
|                                  |  | 2004                          |        | 2003   |
| **Supplementalcash flow information** |  |                          |   |   |  |   |   |   |
| Interestpaid during theperiod         |  | $                             | 24,162 |   |  | $      | 22,896 |   |
| Incometaxes paid during theperiod     |  | $                             | 1,219  |   |  | $      | 2,071  |   |
|                                       |

Supplementalnon-cash activities

As described in Note 5 of the Notes toCondensed Consolidated Financial Statements, in January, 2004 theCompany issued to PX Holding Corporation ("PXHolding") 1,381,690 shares of new Series E Non-CumulativePerpetual Participating Preferred Stock, par value $0.01,("Series E Preferred Stock") in exchange for1,381,690 shares of Series A Non-Cumulative Perpetual ParticipatingPreferred Stock, par value $0.01, ("Series A PreferredStock"), which constituted all of the outstanding Series APreferred Stock.

As described in Note 5 of the Notes toCondensed Consolidated Financial Statements, in January, 2004 theCompany issued to PX Holding 215,274 shares of new Series D CumulativePay-in-Kind Preferred Stock, par value $0.01,("Series  D Preferred Stock") inexchange for, among other consideration, 159,644 shares of SeriesC Cumulative Pay-in-Kind Preferred Stock, par value $0.01,("Series C Preferred Stock") held byPX Holding, which constituted all of the outstanding Series  CPreferred Stock. The other consideration included the contribution ofMafco Holdings Inc.'s one-third interest in the common stock ofPANY Rental Inc. and the contribution or retirement of various relatedparty notes. Total book value, which approximates fair value, of thenon-cash consideration, excluding the Series   CPreferred Stock issued, was approximately $19.0 million.

Inconnection with the August, 2004 sale of its 80% interest inEFILM, LLC ("EFILM"), the Company received,in addition to cash proceeds, a promissory note for $5 million. Inconnection with a May, 2004 sale of certain property and equipment, theCompany received, in addition to cash proceeds, promissory notestotaling approximately $1.5 million.

During the nine monthsended September 30, 2004, the Company acquired rental equipment byentering into capital leases totaling approximately $6.2 million.

On March 27, 2003, Mafco Holdings Inc. contributed $90.9 millionprincipal amount of 9 5/8% Senior SubordinatedDiscount Notes Due 2006 (the"9 5/8% Notes") and$10.0 million in cash to the Company in exchange for 102,220 shares ofSeries  C Preferred Stock, which it contributed to the capital ofPX Holding, and PX Holding contributed to the Company 53,571 shares ofSeries B Cumulative Pay-in-Kind Preferred Stock ("theSeries B Preferred Stock") in exchange for 57,424 sharesof Series  C Preferred Stock. As a result of this transaction,all of the outstanding Series B Preferred Stock was transferred to theCompany. In connection with the contribution of the9  5/8% Notes by the majority shareholder,deferred tax assets associated with these9  5/8% Notes of $18.0 millionwere charged against additional paid-in capital.

For the ninemonths ended September 30, 2003, the Company recorded an accreteddividend of $1.3  million on the Series B Preferred Stock.

See accompanying notes.

7

----

PANAVISIONINC.

NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

|          |                     |
|----------|---------------------|
| 1.  | Basisof Preparation |

The Company is an indirect majority-ownedsubsidiary of Mafco Holdings Inc. ("MafcoHoldings" or "Parent"), acorporation whose sole stockholder is Ronald O. Perelman. TheCompany's principal business operations are conducted through itssubsidiaries.

As also described in Note 2 of the Company's2003 Annual Report on Form 10-K/A, on April  19, 2001, M&FWorldwide Corp. ("M&F Worldwide")purchased from PX Holding, a wholly owned subsidiary of Mafco Holdings,all 7,320,225 shares (the "Purchased Shares")of the Company's Common Stock held by PX Holding (the"M&F Purchase"). The Purchased Sharesconstituted approximately 83.5% of the Company'sthen-outstanding Common Stock. As a result of the purchase, MafcoHoldings increased its indirect interest in M&F Worldwide to amajority position.

During 2001, certain shareholders of M&FWorldwide brought lawsuits against M&F Worldwide and its directorschallenging the M&F Purchase as an alleged breach of fiduciary dutyand sought, among other things, rescission of the M&F Purchasetransaction. One of the shareholders dismissed his lawsuit pursuant toa settlement. On December 3, 2002, the remaining parties to thelitigation consummated a settlement of the litigation (the"M&F Settlement"), whereby Mafco Holdingsacquired, through PX Holding, (1) the shares of the Company'sCommon Stock that M&F Worldwide had purchased in April 2001, (2)the shares of the Company's Series  A Preferred Stock thatM&F Worldwide acquired in December 2001, (3) the9 5/8% Notes that a subsidiary of M&FWorldwide acquired in November 2001, and (4) the Las Palmas Note in theamount of $6.7 million that the Company issued to M&F Worldwide onits acquisition of the shares of Las Palmas (the "LasPalmas Note") (see Note 14 of the Company's 2003Annual Report on Form 10-K/A). In addition, all agreements whichM&F Worldwide entered into in connection with the M&F Purchaseand the December 2001 issuance of the Series  A Preferred Stockwere terminated.

Thus, after the consummation of the M&FSettlement, the Company ceased being a subsidiary of M&F Worldwide.Mafco Holdings, after giving effect to the M&F Settlement,indirectly controls 85.7% of the voting shares of the Company.The M&F Settlement did not have a significant impact on therecorded values of the Company's assets or liabilities since thetransaction was between parties under common control.

Theaccompanying condensed consolidated financial statements have beenprepared in accordance with United States generally accepted accountingprinciples for interim financial information and with the instructionsfor Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they donot include all of the information and footnotes required by UnitedStates generally accepted accounting principles for complete financialstatements. In the opinion of management, all adjustments (consistingof normal recurring adjustments) considered necessary for a fairpresentation have been included. The results of operations for interimperiods are not necessarily indicative of the results that may beexpected for the fiscal year. The condensed consolidated financialstatements should be read in conjunction with the consolidatedfinancial statements and accompanying notes included in theCompany's Annual Report on Form  10-K/A for the year endedDecember 31, 2003. All terms used but not defined elsewhere herein havethe meaning ascribed to them in the Company's 2003 Annual Reporton Form 10-K/A.

The balance sheet at December 31, 2003 includedherein has been derived from the audited financial statements at thatdate but does not include all the information and footnotes required byUnited States generally accepted accounting principles for completefinancial statements.

The condensed consolidated financialstatements include the accounts of Panavision and itsmajority-owned subsidiaries. All significant intercompany amounts andtransactions have been eliminated.

8

----

PANAVISIONINC.

NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

|          |                                 |
|----------|---------------------------------|
| 1.  | Basis ofPreparation (continued) |

Certain amounts in previously issuedfinancial statements have been reclassified to conform to the 2004presentation, including, but not necessarily limited to, thepresentation of EFILM and its holding company, LPPI, LLC, asdiscontinued operations for all periods presented.

|          |                                  |
|----------|----------------------------------|
| 2.  | Use of Estimates and Assumptions |

Thepreparation of financial statements in conformity with United Statesgenerally accepted accounting principles requires management to makeestimates and assumptions that affect the amounts reported in thefinancial statements and accompanying notes, including thecollectibility of receivables and the realizability of assets such asfixed assets and deferred taxes. Actual results could differ from suchestimates.

|          |                 |
|----------|-----------------|
| 3.  | Restricted Cash |

Underthe Amended Credit Agreement and the 2004 Indenture (both defined inNote 5), proceeds from the sale of EFILM must be held in a cashcollateral account. The Company may make withdrawals from this accountfor permitted reinvestments and capital expenditures pursuant to theterms of these debt instruments.

|          |             |
|----------|-------------|
| 4.  | Inventories |

Inventories consist of thefollowing (inthousands):

|                          |  |                   |        |                  |  |        |        |        |  |  |
|--------------------------|--|-------------------|--------|------------------|--|--------|--------|--------|--|--|
|                     |  | September30, 2004 |        | December 31,2003 |
|                     |  |              |   |             |  |   |   |   |
| Finishedgoods            |  | $                 | 2,933  |             |  | $      | 2,464  |   |
| Work-in-process          |  |              | 279    |             |  |   | 302    |   |
| Componentparts           |  |              | 4,893  |             |  |   | 2,048  |   |
| Spare parts andsupplies  |  |              | 1,226  |             |  |   | 1,539  |   |
| Goods purchasedforresale |  |              | 4,982  |             |  |   | 5,441  |   |
| TotalInventories         |  | $                 | 14,313 |             |  | $      | 11,794 |   |
|                          |

|          |               |
|----------|---------------|
| 5.  | Long-TermDebt |

Long-term debt, including current maturities, consists ofthe following (inthousands):

|                                                  |  |                   |         |                   |  |        |         |        |  |  |
|--------------------------------------------------|--|-------------------|---------|-------------------|--|--------|---------|--------|--|--|
|                                             |  | September30, 2004 |         | December 31, 2003 |
| Amended andRestated CreditAgreement              |  | $                 | 126,897 |              |  | $      | — |   |
| 12.50%Senior Notes Due2009                       |  |              | 100,434 |              |  |   | — |   |
| PriorCredit Agreement:                           |  |              |    |              |  |   |    |   |
| RevolvingFacility                                |  |              | — |              |  |   | 99,200  |   |
| TermFacility                                     |  |              | — |              |  |   | 151,792 |   |
| 9 5/8%Senior Subordinated Discount Notes Due2006 |  |              | 65,151  |              |  |   | 65,353  |   |
| Notes payable toaffiliate                        |  |              | 11,384  |              |  |   | 21,401  |   |
| Other(including capital leaseobligations)        |  |              | 6,361   |              |  |   | 1,928   |   |
|                                             |  |              | 310,227 |              |  |   | 339,674 |   |
| Less:Currentmaturities                           |  |              | 8,692   |              |  |   | 5,885   |   |
| TotalLong-Term Debt                              |  | $                 | 301,535 |              |  | $      | 333,789 |   |
|                                                  |

9

----

PANAVISIONINC.

NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

|          |                            |
|----------|----------------------------|
| 5.  | Long-TermDebt  (Continued) |

The 9 5/8% Noteswere issued at a discount representing a yield to maturity of9 5/8%. There were no periodic or interestpayments through February 1, 2002. Thereafter, they bear interest at arate of 9 5/8% per annum, payable semi-annuallyon February 1 and August 1 of each year, commencing August 1, 2002.

On August 13, 2003, MacAndrews & Forbes agreed to amend anexisting line of credit provided to the Company to increase the amountavailable for borrowing from $4.0 million to $10.0 million and extendthe maturity date to August 31, 2006 (as amended, the"MacAndrews Line"). In connection with anamendment to the Company's Prior Credit Agreement (as definedbelow), on November 12, 2003, MacAndrews & Forbes agreed to providea second revolving line of credit (the "Second MacAndrewsLine") in the amount of $10.0 million at a rate equal to50 basis points above the rate provided for in the revolving facilitypursuant to the Prior Credit Agreement and a maturity of April 15,2004. As described below, in connection with the January 2004Refinancing (as defined below), (i) amounts outstanding under theMacAndrews Line were retired in exchange for shares of Series DPreferred Stock, and (ii) MacAndrews & Forbes increased the amountof the Second MacAndrews Line to $20.0 million and extended thematurity to April 16, 2009. As of September 30, 2004, the Company haddrawn approximately $11.4 million against the Second MacAndrewsline.

On June 4, 1998, the Company entered into a creditagreement with a syndicate of lenders (as subsequently amended onSeptember 30, 1998, June 30, 1999, March 15, 2002, June 14, 2002,September  30, 2002, March 25, 2003 and November 12, 2003, the"Prior Credit Agreement"). TheCompany's obligations under the Prior Credit Agreement weresecured by substantially all of the Company's assets. The PriorCredit Agreement was comprised of two facilities, the Term Facility andthe Revolving Facility. As of December 31, 2003, amounts outstandingunder the Prior Credit Agreement were $151.8 million and $99.2 millionfor the Term Facility and Revolving Facility, respectively. Asdescribed below, the Prior Credit Agreement was replaced with theAmended and Restated Credit Agreement pursuant to the January 2004Refinancing.

On January 16, 2004, the Company consummated aseries of transactions to refinance its indebtedness under the PriorCredit Agreement (the "January 2004Refinancing"). As part of the January 2004 Refinancing,the Company sold, in a private placement, $104.2 million of seniorsecured notes (the "Senior Notes") bearinginterest at a rate of 12.50%, payable quarterly, with a maturitydate of January 16, 2009. The Senior Notes were sold at an originalissue discount of approximately 4% for an aggregate purchaseprice of $100.0 million. The Senior Notes are secured by asecond-priority lien on substantially all of the Company'sassets. The indenture pursuant to which the Senior Notes were issued(the "2004 Indenture") requires that, amongother provisions, the Company achieve certain EBITDA levels and abideby certain other restrictive covenants, including limitations onindebtedness, liens, disposition of assets, and certain restrictedpayments including dividends to stockholders. Upon certain events ofdefault under the 2004 Indenture, the Senior Notes will bear interestat 2.5% above the rate otherwise applicable.

Also as partof the January 2004 Refinancing, the Company issued to PX Holding215,274 shares of Series  D Preferred Stock in exchangefor (a) 159,644 shares of Series  C Preferred Stock heldby PX Holding (together with approximately $13.2 million of accumulateddividends thereon); (b) $23.0 million in cash; (c) the retirement ofall principal and interest (an aggregate of $10,180,930) owed as ofJanuary  16, 2004 under the MacAndrews Line; (d) 33.3shares of common stock of PANY Rental Inc. ("PANYRental"), having a fair market value of $0.7 million (suchthat, as of January 16, 2004, the Company owned 100% of theoutstanding shares of PANY Rental); (e) the retirement of all amounts(consisting of $630,780 in principal and $82,913 in accrued and unpaidinterest) owed by PANY Rental to PX Holding pursuant to a certainpromissory note held by PX Holding; and (f) the retirement of allamounts (consisting of $7.8 million in principal and unpaid interest)owed to Mafco Holdings under a certain promissory note in the principalamount of $6.7 million, dated July 1, 2002, issued by the Company to M& F Worldwide and 

10

----

PANAVISIONINC.

NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

|          |                            |
|----------|----------------------------|
| 5.  | Long-TermDebt  (Continued) |

subsequently acquired by Mafco Holdings. TheCompany also issued to PX Holding 1,381,690 shares of SeriesE Preferred Stock in exchange for 1,381,690 shares ofSeries  A Preferred Stock. As a result of the January2004 Refinancing transactions, all of the outstanding shares ofSeries  A and Series  C Preferred Stockwere transferred to the Company and a Certificate of Elimination wasfiled for each series. In addition, MacAndrews & Forbes increasedthe amount of the Second MacAndrews Line to $20.0  million andextended the maturity to April 16, 2009.

The Company usedproceeds from the sale of the Senior Notes and the issuance of Series DPreferred Stock to reduce the indebtedness under the Prior CreditAgreement by $115.4 million and replaced the Prior Credit Agreementwith an Amended and Restated Credit Agreement (the"Amended Credit Agreement") with the lendersunder the Prior Credit Agreement. The Amended Credit Agreement providesfor a single term loan facility in the principal amount of $135.6million repayable in quarterly installments with a final maturity ofJanuary 12, 2007, except that the term facility shall be due onSeptember 5, 2005 if any of the 9 5/8%Notes remain outstanding on that date. The Company is consideringvarious alternatives with respect to the repayment or refinancing ofthe 9 5/8% Notes, although no decisionhas been made as yet. While there can be no assurance, the Companyexpects that the 9 5/8% Notes will berefinanced or otherwise repaid by September 1, 2005. The term facilitybears interest at either the ABR or Eurodollar Rate (as defined in theAmended Credit Agreement) plus a margin of 5.25% in the case ofABR loans or 6.25% in the case of Eurodollar Loans. The termfacility under the Amended Credit Agreement is secured on substantiallythe same basis as indebtedness under the Prior Credit Agreement. Inconnection with the Amended Credit Agreement, the Company paid fees tolenders and professional advisors of approximately $3.5 million,including an original issue discount fee of approximately $2.0 million.Approximately $3.1 million of the fees paid were expensed in 2004.

Under the Amended Credit Agreement, the Company is required to repay$5.0 million in principal during 2004 in payments of $1.25 million dueat the end of each quarter, whereas under the Prior Credit Agreementthe Company would have been required to make principal payments ofapproximately $221.1 million in 2004. In addition, the Amended CreditAgreement revised certain financial tests and other restrictivecovenants set forth in the Prior Credit Agreement, including requiredEBITDA (as defined), limitations on indebtedness, and other provisions.As defined in the Amended Credit Agreement and 2004 Indenture, EBITDAincludes adjustments for certain severance expenses, refinancingexpense, foreign exchange gain or loss, and other non-cash charges. Asof September 30, 2004, the Company was in compliance with the covenantsset forth in the Amended Credit Agreement. As of September 30, 2004,$133.1 million was outstanding under the Amended Credit Agreement.

Principally to provide a mechanism for the reinvestment of theproceeds of the EFILM Sale, as described below, on August 11, 2004, theCompany and the other parties to the Amended Credit Agreement enteredinto an amendment and waiver to the Amended Credit Agreement("First Amendment and Waiver"). To provide asimilar mechanism for the reinvestment of the proceeds of the EFILMSale under the 2004 Indenture, on August 11, 2004, the Company andWilmington Trust Company, as Trustee, entered into a supplementalindenture ("Supplemental Indenture"). OnSeptember  30, 2004, in accordance with the terms of the AmendedCredit Agreement and the 2004 Indenture, upon repayment of $1.3 millionto Federal Financial Credit Inc., PANY Rental and TFN Lighting Corp.(each subsidiaries of the Company) became guarantors under those debtinstruments.

On September 16, 2004, the Company purchased fromSony Electronics, Inc. ("Sony"), a 49%interest in DHD Ventures, LLC ("DHD"), makingDHD a wholly-owned subsidiary of the Company. Following thisacquisition, DHD was converted to a limited partnership, DHD Ventures,LP, the limited 

11

----

PANAVISIONINC.

NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

|          |                            |
|----------|----------------------------|
| 5.  | Long-TermDebt  (Continued) |

partner of which is the Company and thegeneral partner is DHD Holdings, Inc. DHD Ventures, LP and DHDHoldings, Inc. both became guarantors under the Amended CreditAgreement and the 2004 Indenture on September 30, 2004.

As aresult of the refinancing, in accordance with Statement of FinancialAccounting Standards ("SFAS") No. 6,"Classification of Short-Term Obligations Expected to beRefinanced" ("SFAS 6"), theCompany reclassified $246.0 million of the refinanced debt to long-termdebt as of December 31, 2003.

|          |                             |
|----------|-----------------------------|
| 6.  | PreferredStock Transactions |

In connection with a March 2003 amendment tothe Prior Credit Agreement, all the Series  B Preferred Stock wascontributed back to the Company and 102,220 shares of Series  CPreferred Stock were issued. The Series  C Preferred Stock wasnon-voting; had a liquidation preference of $1,000 per share plusaccrued and unpaid dividends; and entitled the holder to cumulativedividends at a rate of 10% per annum regardless of whetherdeclared or earned. In addition, the Series  C Preferred Stockwas subject to redemption in certain circumstances upon a change ofcontrol.

On January 16, 2004, as part of the January 2004Refinancing, the Company issued to PX Holding 215,274 shares of newSeries  D Preferred Stock. The Series  D Preferred Stock isnon-voting, has a liquidation preference of $1,000 per share plusaccrued and unpaid dividends, and entitles the holder to cumulativedividends at a rate of 10% per annum regardless of whetherdeclared or earned. Additionally, the Series  D Preferred Stockis subject to redemption in certain circumstances upon a change ofcontrol. The Company also issued to PX Holding 1,381,690 shares ofSeries  E Preferred Stock in exchange for 1,381,690 shares ofSeries  A Preferred Stock. The Series  E Preferred Stock isentitled to one vote per share, voting together with the Common Stockas a single class, has a liquidation preference of $1.00 per share plusaccrued and unpaid dividends, and has the same dividend rights as theSeries  A Preferred Stock, described below.

TheSeries  A Preferred Stock was voting and was entitled tonon-cumulative dividends at a rate of $0.05 per share per annumpayable, if declared, quarterly on each March  31, June30, September  30 and December 31. In addition, the SeriesA Preferred Stock had also participated pro rata on a share-for-sharebasis with the common stock, par value $0.01 per share, of the Company("Common Stock") with respect to anydividends declared or paid on the Common Stock.

As a result ofthe January 2004 Refinancing transactions, all of the outstandingshares of Series  A and Series  C Preferred Stock weretransferred to the Company.

|          |                         |
|----------|-------------------------|
| 7.  | Discontinued Operations |

In August 2004, the Company disposed of its 80% interest inEFILM. Accordingly, both EFILM and its holding company, LPPI, LLC, arepresented as discontinued operations in the condensed consolidatedfinancial statements and the accompanyingnotes.

12

----

PANAVISIONINC.

NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

|          |                                      |
|----------|--------------------------------------|
| 7.  | Discontinued Operations  (Continued) |

Revenue and income from discontinuedoperations for the three-month and nine-month periods ended September30, 2004 and 2003 were as follows (inthousands):

|                                 |  |                                |       |                               |  |      |       |         |  |   |        |        |  |   |        |         |  |  |
|---------------------------------|--|--------------------------------|-------|-------------------------------|--|------|-------|---------|--|---|--------|--------|--|---|--------|---------|--|--|
|                            |  | ThreeMonths EndedSeptember 30, |       | Nine Months EndedSeptember30, |
|                            |  | 2004                           |       | 2003                          |  | 2004 |       | 2003    |
| Revenue                         |  | $                              | 2,636 |                          |  | $    | 4,725 |    |  | $ | 15,488 |   |  | $ | 11,345 |    |
| Income(loss) before incometaxes |  | $                              | 328   |                          |  | $    | (336  | )  |  | $ | 1,177  |   |  | $ | (2,069 | )  |
|                                 |

|          |                            |
|----------|----------------------------|
| 8.  | NetIncome (Loss) Per Share |

For the three-month and nine-monthperiods ended September 30, 2004 and 2003, the basic and diluted pershare data is based on the weighted-average number of common shares anddilutive potential common shares outstanding during the period.Potential common shares, consisting of outstanding stock options andwarrants, are not included in the diluted income (loss) per sharecalculation since they areantidilutive.

13

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

8.    NetIncome (Loss) Per Share (continued)

The following table setsforth the computation for basic and diluted earnings per share (inthousands, except per shareinformation):

|                                                                                     |  |                                 |         |                               |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------------------------------------------|--|---------------------------------|---------|-------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                |  | ThreeMonths Ended September 30, |         | Nine Months EndedSeptember30, |
|                                                                                |  | 2004                            |         | 2003                          |  | 2004   |         | 2003    |
| Numerator:                                                                          |  |                            |    |                          |  |   |    |    |  |   |    |    |  |   |    |    |
| Netincome (loss) from continuingoperations                                          |  | $                               | 4,870   |                          |  | $      | (2,171  | )  |  | $      | (17,409 | )  |  | $      | (12,152 | )  |
| Accreteddividends on Redeemable Series B PreferredStock                             |  |                            | — |                          |  |   | — |    |  |   | — |    |  |   | (1,319  | )  |
| SeriesC Preferred Stock accumulateddividend                                         |  |                            | — |                          |  |   | (4,095  | )  |  |   | (765    | )  |  |   | (8,268  | )  |
| SeriesD Preferred Stock accumulated dividend                                        |  |                            | (5,631  | )                        |  |   | — |    |  |   | (15,610 | )  |  |   | — |    |
| Numerators for basic and diluted loss per share attributable to commonstockholders: |  |
| Net loss from continuingoperations                                                  |  |                            | (761    | )                        |  |   | (6,266  | )  |  |   | (33,784 | )  |  |   | (21,739 | )  |
| Netincome (loss) from discontinuedoperations                                        |  |                            | 10,384  |                          |  |   | (205    | )  |  |   | 11,149  |    |  |   | (1,260  | )  |
| Netincome (loss) per share                                                          |  | $                               | 9,623   |                          |  | $      | (6,471  | )  |  | $      | (22,635 | )  |  | $      | (22,999 | )  |
|                                                                                     |

|                                                                                        |  |                                 |         |                               |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------------------------------------------------|--|---------------------------------|---------|-------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                   |  | ThreeMonths Ended September 30, |         | Nine Months EndedSeptember30, |
|                                                                                   |  | 2004                            |         | 2003                          |  | 2004   |         | 2003    |
| Denominator:                                                                           |  |                            |    |                          |  |   |    |    |  |   |    |    |  |   |    |    |
| Denominatorfor basic income (loss) per share – weighted averageshares            |  |                            | 8,770   |                          |  |   | 8,770   |    |  |   | 8,770   |    |  |   | 8,770   |    |
| Effectof dilutive securities – stock options andwarrants                         |  |                            | — |                          |  |   | — |    |  |   | — |    |  |   | — |    |
| Denominatorfor diluted income (loss) per share – adjusted weighted averageshares |  |                            | 8,770   |                          |  |   | 8,770   |    |  |   | 8,770   |    |  |   | 8,770   |    |
| Basicincome (loss) pershare:                                                           |  |                            |    |                          |  |   |    |    |  |   |    |    |  |   |    |    |
| Continuingoperations                                                                   |  | $                               | (0.09   | )                        |  | $      | (0.72   | )  |  | $      | (3.85   | )  |  | $      | (2.48   | )  |
| Discontinuedoperations                                                                 |  |                            | 1.19    |                          |  |   | (0.02   | )  |  |   | 1.27    |    |  |   | (0.14   | )  |
| Basicincome (loss) pershare                                                            |  | $                               | 1.10    |                          |  | $      | (0.74   | )  |  | $      | (2.58   | )  |  | $      | (2.62   | )  |
| Dilutedincome (loss) pershare:                                                         |  |                            |    |                          |  |   |    |    |  |   |    |    |  |   |    |    |
| Continuingoperations                                                                   |  | $                               | (0.09   | )                        |  | $      | (0.72   | )  |  | $      | (3.85   | )  |  | $      | (2.48   | )  |
| Discontinuedoperations                                                                 |  |                            | 1.19    |                          |  |   | (0.02   | )  |  |   | 1.27    |    |  |   | (0.14   | )  |
| Dilutedincome (loss) per share                                                         |  | $                               | 1.10    |                          |  | $      | (0.74   | )  |  | $      | (2.58   | )  |  | $      | (2.62   | )  |
|                                                                                        |

14

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

9.    Comprehensive Income (Loss)

Components of accumulated other comprehensive income (loss) are asfollows (inthousands):

|                                       |  |                                |        |                              |  |        |        |         |  |        |        |         |  |        |         |         |  |  |
|---------------------------------------|--|--------------------------------|--------|------------------------------|--|--------|--------|---------|--|--------|--------|---------|--|--------|---------|---------|--|--|
|                                  |  | ThreeMonthsEnded September 30, |        | Nine MonthsEndedSeptember30, |
|                                  |  | 2004                           |        | 2003                         |  | 2004   |        | 2003    |
| Net income(loss)                      |  | $                              | 15,254 |                         |  | $      | (2,376 | )  |  | $      | (6,260 | )  |  | $      | (13,412 | )  |
| Foreigncurrency translationadjustment |  |                           | 2,123  |                         |  |   | 336    |    |  |   | (318   | )  |  |   | 5,987   |    |
| Totalcomprehensive income(loss)       |  | $                              | 17,377 |                         |  | $      | (2,040 | )  |  | $      | (6,578 | )  |  | $      | (7,425  | )  |
|                                       |

10.    OtherIncome (Expense), Net

The components of Other income (expense),net for the three-month and nine-month periods ended September 30, 2004and 2003 are as follows (inthousands):

|                                           |  |                                |         |                               |  |        |         |         |  |        |       |         |  |        |         |         |  |  |
|-------------------------------------------|--|--------------------------------|---------|-------------------------------|--|--------|---------|---------|--|--------|-------|---------|--|--------|---------|---------|--|--|
|                                      |  | ThreeMonthsEnded September 30, |         | Nine Months EndedSeptember30, |
|                                      |  | 2004                           |         | 2003                          |  | 2004   |         | 2003    |
| Netgain on sales of property andequipment |  | $                              | 226     |                          |  | $      | (70     | )  |  | $      | 2,050 |    |  | $      | 170     |    |
| Minorityinterestincome                    |  |                           | — |                          |  |   | 139     |    |  |   | 18    |    |  |   | 204     |    |
| Earnings(loss) of equityaffiliates        |  |                           | 30      |                          |  |   | 174     |    |  |   | (72   | )  |  |   | (16     | )  |
| Insurancesettlements                      |  |                           | 1,065   |                          |  |   | 39      |    |  |   | 1,065 |    |  |   | 763     |    |
| Feesfrom relatedparty                     |  |                           | 315     |                          |  |   | — |    |  |   | 315   |    |  |   | — |    |
| Other                                     |  |                           | 89      |                          |  |   | 153     |    |  |   | 90    |    |  |   | 1       |    |
| Totalother income, net                    |  | $                              | 1,725   |                          |  | $      | 435     |    |  | $      | 3,466 |    |  | $      | 1,122   |    |
|                                           |

11.    Stock-BasedBenefits

The Company follows the provisions of SFAS No. 123,"Accounting for Stock-Based Compensation"("SFAS 123"), which permits the Company tocontinue to follow the intrinsic value method set forth in AccountingPrinciples Board Opinion No. 25, "Accounting for StockIssued to Employees" ("APB 25"),but disclose the pro forma effects on net income (loss) had the fairvalue of the options been expensed. 

In December 2002, the FASBissued SFAS No. 148, "Accounting for Stock-BasedCompensation-Transition and Disclosure"("SFAS 148"), which amends SFAS 123. SFAS 148provides alternative methods of transition for a voluntary change tothe fair value based method of accounting for stock-based employeecompensation. In addition, SFAS 148 amends the disclosure requirementsof SFAS 123 to require more prominent and more frequent disclosures infinancial statements about the effects of stock-based compensation. TheCompany has complied with the disclosure requirements of SFAS 148. Hadthe Company applied the fair value recognition provision of SFAS 123 tostock-based employee compensation, there would have been no effect onreported net loss or net loss per share for the three-month and nine-month periods ended September 30, 2004 and 2003.

12.    Segment Information

The Company has one reportablesegment, the rental of camera systems, lighting systems and otherequipment and the sales of related products (Rental and Sales). TheCompany's activities are conducted through owned-and-operatedfacilities and the Company's network of independent distributorsin a number of geographic locations, principally the United States andthe United Kingdom.

13.    Acquisition of Minority Interestin PANY Rental, Inc.

On May 30, 2003, the Company purchased anadditional 1/3 interest in PANY Rental for a combined purchase price of$333,000, increasing the Company's ownership interest from a 1/3interest to a 2/3 

15

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

interest. As a result of this increasedownership interest, the Company consolidated the financial position andresults of operations of PANY Rental in the accompanying consolidatedfinancial statements, the effects of which were immaterial. Inaddition, on May 30, 2003, PX Holding purchased the remaining 1/3interest in PANY Rental for a purchase price of $700,000 and purchaseda promissory note payable by PANY Rental with a principal amount plusaccrued interest of approximately $700,000. The purchase price for thispromissory note plus accrued interest was approximately $700,000.

As discussed in Note 5 to the Condensed Consolidated FinancialStatements, as part of the January 2004 Refinancing, the Company issuedto PX Holding 215,274 shares of Series D Preferred Stock in exchangefor, among other items, the remaining 1/3 interest in PANY Rental. As aresult, as of January 16, 2004, the Company owned 100% of theoutstanding shares of PANY Rental.

PANY Rental holds anexclusive license to rent the Company's camera systems in the NewYork market and a license to use the Panavision trademark in connectionwith the rental of camera systems and related equipment tocustomers.

14.    Recent Acquisitions

On September16, 2004, the Company purchased from Sony Electronics, Inc.("Sony"), a 49% interest in DHDVentures, LLC ("DHD") for a cash purchaseprice of $4.4 million, making DHD a wholly-owned subsidiary of theCompany. As a result, the Company has consolidated the financialposition and results of operations of DHD in the accompanyingconsolidated financial statements from the date of purchase. Theeffects of the consolidation were immaterial for the period.

OnAugust 13, 2004, the Company purchased, through one of its wholly-ownedsubsidiaries, 100% of the share capital of Technovision Francefor a cash purchase price of approximately $3.4 million. Technovisionis a film equipment rental company located in Paris, France. Theeffects of the purchase were immaterial for the period.

Theallocation of the purchase price of each acquisition is preliminary asof September 30, 2004. The allocation will be finalized by the secondquarter 2005.

15.    Change in Estimated Asset RetirementObligations

Upon the initial adoption of SFAS No. 143,"Accounting for Asset RetirementObligations", the Company estimated its liability forasset retirement obligations to be zero. After completing a recentfacilities rationalization review, the Company revised its estimate forleasehold restoration costs upward to approximately $1.3 million. Theimpact of the revision on net income from continuing operations for thethree-month and nine-month periods ended September 30, 2004, wasapproximately $80,000, less than $0.01 per common share, basic anddiluted.

Changes in estimated asset retirement obligations forthe three months ended September 30, 2004 are as follows (inthousands):

|                           |  |        |         |        |  |  |
|---------------------------|--|--------|---------|--------|--|--|
| BalanceJune 30,2004       |  | $      | — |   |
| Revision ofestimate       |  |   | 1,303   |   |
| Accretionexpense          |  |   | 36      |   |
| Balance,September 30,2004 |  | $      | 1,339   |   |
|                           |

16

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

Item 2.    Management'sDiscussion and Analysis of Financial Condition and Results ofOperations

Overview

The Company's revenue isderived from three sources: (i) camera rental operations, (ii) lightingrental operations, and (iii) sales and other revenue. Revenue fromcamera rental operations consists of the rental of camera systems,lenses and accessories to the motion picture and television industriesthrough a network of rental offices located throughout North America,Europe and the Asia Pacific region.

The Company's lightingrental operations generate revenue through the rental of lighting,lighting grip, transportation and distribution equipment, as well asmobile generators, which are all used in the production of featurefilms, television programs, commercials and other events. The Companyowns and operates lighting rental facilities in the United States,United Kingdom and Australia. Revenue generated by Lee Lighting, theCompany's lighting rental facility located in the United Kingdom,generates the majority of the Company's lighting rentaloperations revenue.

Sales and other revenue is comprised of: (i)the manufacture and sale of lighting filters through Lee Filters in theUnited Kingdom and the United States; and (ii) sales of variousconsumable products, such as film stock, light bulbs and gaffer tape,which are used in all types of productions.

The Companyconsiders revenue from international business to be that revenue whichis generated from the rental of its equipment by productions that arelocated at production sites outside of the United States.

InAugust, 2004 the Company sold its 80% interest in EFILM, LLC("EFILM"). As a result of the sale, EFILM andits holding company, LPPI, LLC, have been reported as discontinuedoperations in the Condensed Consolidated Financial Statements andaccompanying Notes presented herein.

This section should be readin conjunction with the Consolidated Financial Statements andaccompanying Notes included in the Company's Annual Report onForm 10-K/A for the year ended December 31, 2003 and the CriticalAccounting Policies as disclosed under Item 7 in the Company'sAnnual Report on Form 10-K/A for the year ended December 31, 2003.

Results of Operations

The following discussion and analysisincludes the Company's consolidated results of operations for2004 as compared to 2003.

Quarter Ended September 30,2004 Compared to Quarter Ended September 30, 2003

CameraRentalOperations

|                |  |                                 |        |                    |  |        |        |         |  |        |        |        |  |        |        |         |  |  |
|----------------|--|---------------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands)  |  | Three Months EndedSeptember 30, |        | Increase(Decrease) |
|           |  | 2004                            |        | 2003               |  |   |        | %       |
| Rentalrevenue  |  | $                               | 33,238 |               |  | $      | 30,695 |    |  | $      | 2,543  |   |  |   | 8.3    | %  |
| Costof rentals |  |                            | 17,805 |               |  |   | 16,208 |    |  |   | 1,597  |   |  |   | 9.9    | %  |
| Grossmargin    |  | $                               | 15,433 |               |  | $      | 14,487 |    |  | $      | 946    |   |  |   | 6.5    | %  |
| Cost%          |  |                            | 53.6   | %             |  |   | 52.8   | %  |  |   |   |   |  |   |   |    |
|                |

Camerarental revenues increases of $1.9 million in Europe and $1.0 million inthe United States were partially offset by a $1.5 million decline inCanada. The increases in Europe and the U.S. were due primarily tohigher revenues from motion picture features. The decline in Canada wasdue to significant 

17

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

weakness in motion picture features andtelevision series, particularly in eastern Canada. The remainder of theincrease in rental revenue was due principally to the positivetranslation effect of foreign exchange rate changes of approximately$1.2 million resulting from the decline of the U.S. dollar againstforeign currencies.

In the aggregate, the rate of increase incost of rentals slightly outpaced the increase in revenue. Grossmargins increased in the U.S. while holding relatively flat in Europeand Asia Pacific. However, competitive pressures in the weak Canadianmarket resulted in an overall decline in consolidated gross margin.Cost increases included a write-off of obsolete inventory ofapproximately $0.4 million. The effect of foreign exchange rate changeson local costs of foreign operations increased the cost of rentals byapproximately $0.7 million.

Lighting RentalOperations

|                |  |                                 |        |                    |  |        |        |         |  |        |        |         |  |        |        |          |  |  |
|----------------|--|---------------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|---------|--|--------|--------|----------|--|--|
| (inthousands)  |  | Three Months EndedSeptember 30, |        | Increase(Decrease) |
|           |  | 2004                            |        | 2003               |  |   |        | %       |
| Rentalrevenue  |  | $                               | 10,960 |               |  | $      | 11,399 |    |  | $      | (439   | )  |  |   | (3.9   | )%  |
| Costof rentals |  |                            | 9,240  |               |  |   | 9,727  |    |  |   | (487   | )  |  |   | (5.0   | )%  |
| Gross margin   |  | $                               | 1,720  |               |  | $      | 1,672  |    |  | $      | 48     |    |  |   | 2.9    | %   |
| Cost%          |  |                            | 84.3   | %             |  |   | 85.3   | %  |  |   |   |    |  |   |   |     |
|                |

Theprimary factors causing the decrease in lighting rental revenueincluded a decrease in motion picture features activity at Lee Lightingin the United Kingdom of $1.3 million partially offset by an increasedue to the effect of foreign exchange rate changes on revenues frominternational operations of approximately $0.9 million resulting fromthe decline of the U.S. dollar against foreign currencies. Increasedlighting revenues in the Asia Pacific region were offset by the absenceof revenue from Canadian lighting operations sold in May 2004. Cost oflighting rentals declined approximately $1.1 million due to the declinein lighting rental revenues at Lee Lighting and the absence of costsfrom Canada, partially offset by an increase due to the effect offoreign exchange rate changes on revenues from international operationsof approximately $0.7 million. In Asia Pacific, the increase in cost oflighting rentals was proportionally less than the lighting revenueincrease, resulting in the decline in the cost percentage compared tothe same period of 2003.

Sales and Other

|               |  |                                 |       |                    |  |        |       |         |  |        |        |        |  |        |        |         |  |  |
|---------------|--|---------------------------------|-------|--------------------|--|--------|-------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands) |  | Three Months EndedSeptember 30, |       | Increase(Decrease) |
|          |  | 2004                            |       | 2003               |  |   |       | %       |
| Sales         |  | $                               | 9,820 |               |  | $      | 8,127 |    |  | $      | 1,693  |   |  |   | 20.8   | %  |
| Cost of sales |  |                            | 5,714 |               |  |   | 4,525 |    |  |   | 1,189  |   |  |   | 26.3   | %  |
| Grossmargin   |  | $                               | 4,106 |               |  | $      | 3,602 |    |  | $      | 504    |   |  |   | 14.0   | %  |
| Cost%         |  |                            | 58.2  | %             |  |   | 55.7  | %  |  |   |   |   |  |   |   |    |
|               |

Thereare three primary factors underlying the increase in sales and other:the positive effect of foreign exchange rate changes on revenues ofapproximately $0.8 million resulting from the decline of the U.S.dollar against foreign currencies; an increase in the Asia Pacificregion of $0.5 million; and an increase in Europe of $0.3 million. Costincreases with respect to foreign exchange rates of $0.5 million andAsia Pacific of $0.3 million were generally in line with the revenueincreases, however, cost increases in Europe reduced the gross marginbecause of higher raw material costs.

18

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

OperatingCosts

|                                   |  |                                 |        |                    |  |        |        |        |  |        |       |        |  |        |      |         |  |  |
|-----------------------------------|--|---------------------------------|--------|--------------------|--|--------|--------|--------|--|--------|-------|--------|--|--------|------|---------|--|--|
| (inthousands)                     |  | Three Months EndedSeptember 30, |        | Increase(Decrease) |
|                              |  | 2004                            |        | 2003               |  |   |        | %      |
| Selling,general andadministrative |  | $                               | 15,238 |               |  | $      | 13,729 |   |  | $      | 1,509 |   |  |   | 11.0 | %  |
| Researchanddevelopment            |  |                            | 1,370  |               |  |   | 1,152  |   |  |   | 218   |   |  |   | 18.9 | %  |
|                                   |

Selling,general and administrative expenses("SG&A") increased due to higher sellingand distribution costs of approximately $1.0 million and higheradministrative expenses of $0.5 million. Approximately $0.7 million ofthe total increase was attributable to foreign exchange rate changes,with the balance of the increase due to selling and distribution costincreases, primarily in domestic operations. Research and developmentexpenses increased because of the Company's strategy to expandnew product development efforts.

Interest, Taxes andOther

|                      |  |                                 |        |                        |  |        |        |         |  |        |       |         |  |  |  |  |  |  |
|----------------------|--|---------------------------------|--------|------------------------|--|--------|--------|---------|--|--------|-------|---------|--|--|--|--|--|--|
| (inthousands)        |  | Three Months EndedSeptember 30, |        | Favorable(Unfavorable) |  |
|                 |  | 2004                            |        | 2003                   |  | Change |        |
| Interestexpense      |  | $                               | (8,013 | )                 |  | $      | (7,155 | )  |  | $      | (858  | )  |  |
| Interestincome       |  |                            | 31     |                   |  |   | 75     |    |  |   | (44   | )  |  |
| Foreignexchange loss |  |                            | (562   | )                 |  |   | (192   | )  |  |   | (370  | )  |  |
| Other income,net     |  |                            | 1,725  |                   |  |   | 435    |    |  |   | 1,290 |    |  |
| Incometaxbenefit     |  |                            | 7,093  |                   |  |   | 1,335  |    |  |   | 5,758 |    |  |
|                      |

Theincrease in net interest expense primarily reflects higher effectiveinterest rates in 2004, partially offset by lower debt balancescompared to the comparable quarter of the prior year. The lower debtbalances result from the January 2004 Refinancing (defined below in"Long-Term Debt"), an additional principalpayment of $5 million with part of the proceeds from the EFILM Sale(defined below in "Long-Term Debt"), as wellas payments of scheduled amortization.

Other income, netincreased principally due to a $1.0 million gain related to aninsurance settlement for fire-damaged equipment and relatedloss-of-hire claim along with $0.3 million in trademark royalties andmanagement fees from Panavison Imaging, LLC and Panavision SVI, LLC,both subsidiaries of Mafco Holdings, the Company's parent.

For the quarter ended September 30, 2004, the Company recorded a$7.1 million tax benefit from continuing operations comprising threeitems: a $1.1 million benefit related to domestic tax losses; a foreigntax benefit of $1.4 million related primarily to a change in estimatedfull-year income from foreign operations; and a reversal of thedeferred tax valuation allowance of $4.6 million. As a result of theEFILM Sale described below, the Company estimates it will be able toutilize Net Operating Loss (NOL) carryforwards to offset the gain onsale of EFILM, resulting in a downward revision of the allowanceagainst deferred tax assets, subject to preparation and filing of the2004 tax return. See Note 6 to Consolidated Financial Statementsincluded in the Form 10-K/A for a discussion of the Company's TaxSharing Agreements.

Under applicable Internal Revenue Serviceregulations, as a result of the M&F Settlement (defined in Note 1of Notes to Condensed Consolidated Financial Statements included inthis Quarterly Report on Form 10-Q), the Company may not join in filinga consolidated federal income tax return with either Mafco Holdings orthe Company's subsidiaries until May 2006 without consent fromthe Internal Revenue Service. Accordingly, from the effective date ofthe M&F Settlement of December 3, 2002, the Company will fileseparate federal income tax returns for the Company and incorporatedsubsidiaries. The 

19

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

Company does not believe that deconsolidationof its federal income tax returns will have a material adverse effecton the Company's business or financial condition.

Nine Months Ended September 30, 2004 Compared to Nine MonthsEnded September 30, 2003

Camera RentalOperations

|                |  |                                |        |                    |  |        |        |         |  |        |        |        |  |        |        |         |  |  |
|----------------|--|--------------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands)  |  | Nine Months EndedSeptember 30, |        | Increase(Decrease) |
|           |  | 2004                           |        | 2003               |  |   |        | %       |
| Rentalrevenue  |  | $                              | 90,837 |               |  | $      | 86,222 |    |  | $      | 4,615  |   |  |   | 5.4    | %  |
| Costof rentals |  |                           | 50,329 |               |  |   | 46,517 |    |  |   | 3,812  |   |  |   | 8.2    | %  |
| Grossmargin    |  | $                              | 40,508 |               |  | $      | 39,705 |    |  | $      | 803    |   |  |   | 2.0    | %  |
| Cost%          |  |                           | 55.4   | %             |  |   | 54.0   | %  |  |   |   |   |  |   |   |    |
|                |

Theprimary factors underlying the increase in camera rental revenue arethe positive translation effect of foreign exchange rate changes ofapproximately $4.3 million resulting from the decline of the U.S.dollar against foreign currencies and the inclusion of additionalrevenue of $0.8 million from PANY Rental Inc. ("PANYRental") as a result of the Company's consolidationof PANY Rental's results of operations for all nine months of the2004 period as compared with five months (May-September) in thecomparable 2003 period. In May 2003 the Company increased its ownershipin PANY Rental to 67%; prior to May 2003 the Company used theequity method to account for its then-33% interest in PANYRental. Camera rental revenue increases in European operations of $2.7million were more than offset by declines in Asia Pacific of $1.5million, in Canada of $0.9 million and in the U.S. of $0.8 million. Theincrease in Europe came primarily from major and independent motionpicture features, with a slight decline in U.K. television. The declinein Asia Pacific is due to a decrease in large-budget motion picturefeature production compared with the comparable 2003 period. Thedecline in Canada was due to significant weakness in motion picturefeatures and television series, particularly in eastern Canada. TheU.S. decline was due primarily to a decrease in agent revenues.

The external factors causing the increase in cost of rentals asrelated to the revenue above included the translation effect of foreignexchange rate changes of approximately $2.1 million and the inclusionof additional costs of $0.6 million from PANY Rental as a result of theCompany's consolidation of PANY Rental's results ofoperations for all nine months of the 2004 period as compared with fivemonths (May-September) in the comparable 2003 period as describedabove. Cost increases in the U.K. were less than the related revenueincreases for a positive impact on margin. However, cost increasesgreater than the proportional revenue increase or cost reductionssmaller than the related revenue decreases led to a reduced margincontribution in the U. S., Canada and Asia Pacific regions. Many ofthese additional costs, particularly in the U.S., related to higherpersonnel and other costs to enhance customer service consistent withthe Company's strategy.

Lighting RentalOperations

|                |  |                                |        |                    |  |        |        |         |  |        |        |        |  |        |        |         |  |  |
|----------------|--|--------------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands)  |  | Nine Months EndedSeptember 30, |        | Increase(Decrease) |
|           |  | 2004                           |        | 2003               |  |   |        | %       |
| Rentalrevenue  |  | $                              | 30,437 |               |  | $      | 27,663 |    |  | $      | 2,774  |   |  |   | 10.0   | %  |
| Costof rentals |  |                           | 27,221 |               |  |   | 25,242 |    |  |   | 1,979  |   |  |   | 7.8    | %  |
| Grossmargin    |  | $                              | 3,216  |               |  | $      | 2,421  |    |  | $      | 795    |   |  |   | 32.8   | %  |
| Cost%          |  |                           | 89.4   | %             |  |   | 91.2   | %  |  |   |   |   |  |   |   |    |
|                |

20

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

Lighting rental revenue was influenced byfactors including: a decrease at Lee Lighting in the United Kingdom of$3.3 million; the inclusion of additional revenue of $3.4 million fromPANY Rental as a result of the consolidation effect described above;and an increase due to the effect of foreign exchange rate changes onrevenues from international operations of approximately $2.9 millionresulting from the decline of the U.S. dollar against foreigncurrencies. Increases in lighting revenues from the Asia Pacific regionwere offset by the absence of revenue from Canadian lighting operationssold in May 2004. The decrease in revenue from Lee Lighting wasprimarily due to a $2.5 million decline in revenue from major andindependent motion picture features compared to 2003.

Theinclusion of PANY Rental costs because of the consolidation effectdescribed above increased cost of rentals by $2.1 million while effectof foreign exchange rate changes on costs from international operationsadded approximately $2.2 million. These increases were partially offsetby a $1.5 million decrease in cost of rentals at Lee Lighting relatedto the decline in rental revenues, the absence of Canadian costs of$0.5 million, and a decline in cost of rentals in the Asia Pacificregion of $0.3 million.

Sales andOther

|               |  |                                |        |                    |  |        |        |         |  |        |        |        |  |        |        |         |  |  |
|---------------|--|--------------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands) |  | Nine Months EndedSeptember 30, |        | Increase(Decrease) |
|          |  | 2004                           |        | 2003               |  |   |        | %       |
| Sales         |  | $                              | 28,773 |               |  | $      | 24,449 |    |  | $      | 4,324  |   |  |   | 17.7   | %  |
| Costof sales  |  |                           | 16,594 |               |  |   | 13,715 |    |  |   | 2,879  |   |  |   | 21.0   | %  |
| Grossmargin   |  | $                              | 12,179 |               |  | $      | 10,734 |    |  | $      | 1,445  |   |  |   | 13.5   | %  |
| Cost%         |  |                           | 57.7   | %             |  |   | 56.1   | %  |  |   |   |   |  |   |   |    |
|               |

Theprimary factors underlying the increase in sales and other revenueswere a positive effect of foreign exchange rate changes on revenues ofapproximately $3.1 million resulting from the decline of the U.S.dollar against foreign currencies and an increase from Lee Filtersoperations in the U.S. and U.K. of $0.7 million, along with smallerincreases of $0.3 million each from the U.S. and Asia Pacific. Costincreases with respect to foreign exchange rates of $1.9 million andthe U.S. of $0.2 million tracked the revenue increases; however costincreases of $0.8 million in Europe eroded the gross margin because ofhigher raw material costs.

OperatingCosts

|                                   |  |                                |        |                    |  |        |        |        |  |        |       |        |  |        |      |         |  |  |
|-----------------------------------|--|--------------------------------|--------|--------------------|--|--------|--------|--------|--|--------|-------|--------|--|--------|------|---------|--|--|
| (inthousands)                     |  | Nine Months EndedSeptember 30, |        | Increase(Decrease) |
|                              |  | 2004                           |        | 2003               |  |   |        | %      |
| Selling,general andadministrative |  | $                              | 47,766 |               |  | $      | 43,827 |   |  | $      | 3,939 |   |  |   | 9.0  | %  |
| Researchanddevelopment            |  |                           | 4,290  |               |  |   | 3,710  |   |  |   | 580   |   |  |   | 15.6 | %  |
|                                   |

Selling,general and administrative expenses("SG&A") increased due to additionalexpenses of $1.8 million as the result of the Company'sconsolidation effect of PANY Rental as discussed above, increases ofapproximately $2.7 million attributable to foreign exchange ratechanges resulting from the decline of the U.S. dollar against foreigncurrencies, and increased expenses due to higher infrastructure costs,the majority of which related to support of future growth initiatives.SG&A for the nine months ended September 30, 2003 included a $4.0million accrual for severance costs in connection with the departure ofthe Company's former Chief Executive Officer and Chief FinancialOfficer. Research and development expenses increased because of theCompany's strategy to expand new product development efforts.

21

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

Interest, Taxes andOther

|                      |  |                                |         |                        |  |        |         |         |  |        |        |         |  |  |  |  |  |  |
|----------------------|--|--------------------------------|---------|------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--|--|--|--|--|
| (inthousands)        |  | Nine Months EndedSeptember 30, |         | Favorable(Unfavorable) |  |
|                 |  | 2004                           |         | 2003                   |  | Change |         |
| Interestexpense      |  | $                              | (23,788 | )                 |  | $      | (22,541 | )  |  | $      | (1,247 | )  |  |
| Interestincome       |  |                           | 241     |                   |  |   | 260     |    |  |   | (19    | )  |  |
| Foreignexchange loss |  |                           | (77     | )                 |  |   | (944    | )  |  |   | 867    |    |  |
| Refinancingexpense   |  |                           | (6,525  | )                 |  |   | (1,549  | )  |  |   | (4,976 | )  |  |
| Otherincome, net     |  |                           | 3,466   |                   |  |   | 1,112   |    |  |   | 2,344  |    |  |
| Income taxbenefit    |  |                           | 5,427   |                   |  |   | 6,177   |    |  |   | (750   | )  |  |
|                      |

Theincrease in net interest expense primarily reflects higher effectiveinterest rates in 2004, offset in part by lower debt balances comparedto the prior quarter. The lower debt balances result from the March2003 contribution of $90.9 million principal amount of the9 5/8% Notes owned by Mafco Holdings in exchangefor equity and the January 2004 Refinancing, an additional principalpayment of $5 million with part of the proceeds from the EFILM Sale(defined below in "Long-Term Debt"), as wellas payments of scheduled amortization.

Other income, netincreased principally due to a $1.5 million gain on sale on thedisposition of property and equipment in May 2004, a $1.0 million gainrelated to an insurance settlement for fire-damaged equipment and arelated loss-of-hire claim along with $0.3 trademark royalties andmanagement fees from Panavision Imaging, LLC and Panavision SVI, LLC,both subsidiaries of Mafco Holdings, the Company's parent. Theprimary component for the nine months ended September 30, 2003 was a$0.7 million gain related to an insurance settlement for flood-damagedequipment.

For the nine months ended September 30, 2004 theCompany recorded a $5.4 million tax benefit from continuing operationscomprising three items: an $8.2 million benefit associated withdomestic tax losses; a $2.1 million provision relating to profitableforeign operations, based on application of the Company'seffective tax rate on full-year income and foreign taxes withheld atsource; and an increase to the valuation allowance against deferred taxassets of $0.7 million. See Note 6 to Consolidated Financial Statementsincluded in the Form 10-K/A for a discussion of the Company's TaxSharing Agreements.

Liquidity and Capital Resources

Nine Months Ended September 30, 2004

Thefollowing table sets forth certain information from the Company'scondensed consolidated statements of cash flows for the periodsindicated:

|                                   |  |                               |        |         |  |        |         |         |  |  |
|-----------------------------------|--|-------------------------------|--------|---------|--|--------|---------|---------|--|--|
| (inthousands)                     |  | Nine MonthsEnded September30, |
|                              |  | 2004                          |        | 2003    |
| **Netcash provided by (usedin):** |  |                          |   |    |  |   |    |    |
| Operatingactivities               |  | $                             | 809    |    |  | $      | 3,735   |    |
| Investingactivities               |  |                          | (4,807 | )  |  |   | (15,515 | )  |
| Financingactivities               |  |                          | 2,469  |    |  |   | 2,044   |    |
|                                   |

Cashprovided by operating activities for the nine months ended September30, 2004 totaled $0.8 million, comprising the net loss from continuingoperations of $17.4 million, increased by adjustments for depreciationand amortization of $29.8 million and dividends received from an equityinvestment of $1.1 million, and decreased by the net change inoperating assets and liabilities of $5.8 million and othermiscellaneous items of $6.9 million.

Cash used in investingactivities was $4.8 million comprising capital expenditures of $18.7million, cash payments for two acquisitions totaling $7.8 million, netproceeds from EFILM and other dispositions 

22

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

of $28.9 million, and proceeds fromcollection of notes receivable of $3.7 million. As a condition of theFirst Amendment and Waiver (discussed below under"Long-Term Debt"), proceeds from the EFILMSale are to be held in an escrow account restricted for specified uses(including acquisitions and certain capital expenditures). Therestricted cash balance increased to $10.9 million, which is alsoreflected as cash used in investing activities. The majority of thecapital expenditures were used to manufacture camera rental systems andaccessories.

Cash provided by financing activities was $2.5million, which comprised repayments of $251.0 million under the PriorCredit Agreement, repayments of other long-term debt (including capitalleases) of $11.3 million, deferred financing costs of $1.5 million,borrowings of $135.6 million under the Amended Credit Agreement(defined below in "Long-Term Debt"), theissuance of $100.0 million of Senior Notes (net of discount), a capitalcontribution from Mafco Holdings of $22.7 million, net of transactioncosts, and net borrowings under a line of credit provided by MafcoHoldings of $8.0 million.

Repayments of long-term debt duringthis period included (a) $1.0 million, representing the long-termportion of a total of $1.3 million repaid to Financial Federal CreditInc. by PANY Rental, pursuant to a loan entered into prior to theCompany's acquisition of PANY Rental; (b) $0.6 million inscheduled payments on capital leases; (c) $3.7 million in scheduledrepayments of term loans; and (d) an additional $5.0 million repaymentof term loans under the Amended Credit Agreement using part of theproceeds of the EFILM Sale (described below).

Cash provided byoperating activities for the nine months ended September 30, 2003,totaled $3.7 million, comprising the net loss from continuingoperations of $12.1 million, increased by adjustments for depreciationand amortization of $29.6 million, offset by a deferred income taxbenefit of $7.2 million, the net change in operating assets andliabilities of $5.2 million and other miscellaneous items totaling $1.4million. Cash used in investing activities was $15.5 million comprisingcapital expenditures of $17.0 million net of proceeds from dispositionsof $1.5 million. The majority of the capital expenditures were used tomanufacture camera rental systems and accessories.

Cash providedby financing activities was $2.0 million, which comprised repayments of$17.0 million under the Prior Credit Agreement, deferred financingcosts of $3.2 million, proceeds from the issuance of SeriesB Preferred Stock of $4.4 million, proceeds from the issuance ofSeries  C Preferred Stock of $9.8 million, net oftransaction costs, and net borrowings under a line of credit providedby Mafco Holdings of $7.5 million.

Long-TermDebt

The 9 5/8% Notes were issued at adiscount representing a yield to maturity of9 5/8%. There were no periodic or interestpayments through February 1, 2002. Thereafter, they bear interest at arate of 9 5/8% per annum, payablesemi-annually on February 1 and August 1 of each year, commencingAugust 1, 2002.

On August 13, 2003, MacAndrews & Forbesagreed to amend an existing line of credit provided to the Company toincrease the amount available for borrowing from $4.0 million to $10.0million and extend the maturity date to August 31, 2006 (as amended,the "MacAndrews Line"). In connection with anamendment to the Company's Prior Credit Agreement (as definedbelow), on November 12, 2003, MacAndrews & Forbes agreed to providea second revolving line of credit (the "Second MacAndrewsLine") in the amount of $10.0 million at a rate equal to50 basis points above the rate provided for in the revolving facilitypursuant to the Prior Credit Agreement and a maturity of April 15,2004. As described below, in connection with the January 2004Refinancing (as defined below), (i) amounts outstanding under theMacAndrews Line were retired in exchange for shares of new Series DCumulative Pay-in-Kind Preferred Stock, par value $0.01 per share (the"Series D Preferred Stock") and (ii)MacAndrews & Forbes increased the amount of the Second MacAndrewsLine to $20.0 million and extended the maturity to April 16, 2009. Asof September 30, 2004, the Company had availability under the SecondMacAndrews line of approximately $8.6 million.

23

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

On June 4, 1998, the Company entered intoa Credit Agreement with a syndicate of lenders (as subsequently amendedon September 30, 1998, June 30, 1999, March 15, 2002, June 14, 2002,September 30, 2002, March 25, 2003 and November 12, 2003, the"Prior Credit Agreement"). TheCompany's obligations under the Prior Credit Agreement weresecured by substantially all of the Company's assets. The PriorCredit Agreement comprised two facilities, the Term Facility and theRevolving Facility. As of December 31, 2003, amounts outstanding underthe Prior Credit Agreement were $151.8 million and $99.2 million forthe Term Facility and Revolving Facility, respectively. As describedbelow, the Prior Credit Agreement was replaced with the Amended andRestated Credit Agreement pursuant to the January 2004 Refinancing.

On January 16, 2004, the Company consummated a series oftransactions to refinance its indebtedness under the Prior CreditAgreement (the "January 2004 Refinancing").As part of the January 2004 Refinancing, the Company sold, in a privateplacement, $104.2 million of senior secured notes (the"Senior Notes") bearing interest at a rate of12.50%, payable quarterly, with a maturity date of January 16,2009. The Senior Notes were sold at an original issue discount ofapproximately 4% for an aggregate purchase price of $100.0million. The Senior Notes are secured by a second-priority lien onsubstantially all of the Company's assets. The indenture pursuantto which the Senior Notes were issued (the "2004Indenture") requires that, among other provisions, theCompany achieve certain EBITDA levels and abide by certain otherrestrictive covenants, including limitations on indebtedness, liens,disposition of assets, and certain restricted payments includingdividends to stockholders. Upon certain events of default under the2004 Indenture, the Senior Notes will bear interest at 2.5%above the rate otherwise applicable.

Also as part of the January2004 Refinancing, the Company issued to PX Holding 215,274 shares ofnew Series D Preferred Stock in exchange for (a) 159,644 shares ofSeries C Cumulative Pay-in-kind Preferred Stock, par value $0.01 pershare (the "Series C Preferred Stock"), ofthe Company, held by PX Holding (together with approximately $13.2million of accumulated dividends thereon); (b) $23.0 million in cash;(c) the retirement of all principal and interest (an aggregate of$10,180,930) owed as of January 16, 2004 under the MacAndrews Line; (d)33.3 shares of common stock of PANY Rental, Inc. ("PANYRental"), having a fair market value of $0.7 million (suchthat, as of January 16, 2004, the Company owned 100% of theoutstanding shares of PANY Rental); (e) the retirement of all amounts(consisting of $630,780 in principal and $82,913 in accrued and unpaidinterest) owed by PANY Rental to PX Holding pursuant to a certainpromissory note held by PX Holding; and (f) the retirement of allamounts (consisting of $7.8 million in principal and unpaid interest)owed to Mafco Holdings under a certain promissory note in the principalamount of $6.7 million, dated July 1, 2002, issued by the Company to M& F Worldwide and subsequently acquired by Mafco Holdings. TheSeries D Preferred Stock is non-voting, has a liquidation preference of$1,000 per share plus accrued and unpaid dividends, and entitles theholder to cumulative dividends at a rate of 10% per annumregardless of whether declared or earned. Additionally, the Series DPreferred Stock is subject to redemption in certain circumstances upona change of control. The Company also issued to PX Holding 1,381,690shares of new Series E Non-Cumulative Perpetual Participating PreferredStock, par value $0.01 per share, (the "Series E PreferredStock") in exchange for 1,381,690 shares of Series ANon-Cumulative Perpetual Participating Preferred Stock, par value $0.01per share (the "Series A Preferred Stock").The Series E Preferred Stock is entitled to one vote per share, votingtogether with the Common Stock as a single class, has a liquidationpreference of $1.00 per share plus accrued and unpaid dividends, andprovides for non-cumulative cash dividends at an annual rate of $0.05per share if declared by the Company. As a result of the January 2004Refinancing transactions, all of the outstanding shares of Series A andSeries C Preferred Stock were transferred to the Company. In addition,MacAndrews & Forbes increased the amount of the Second MacAndrewsLine to $20.0 million and extended the maturity to April 16, 2009.

The Company used proceeds from the sale of the Senior Notes and theissuance of Series D Preferred Stock to reduce the indebtedness underthe Prior Credit Agreement by $115.4 million, and replaced the

24

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

Prior Credit Agreement with an Amended andRestated Credit Agreement (the "Amended CreditAgreement") with the lenders under the Prior CreditAgreement. The Amended Credit Agreement provides for a single term loanfacility in the principal amount of $135.6 million repayable inquarterly installments with a final maturity of January 12, 2007,except that the term facility shall be due on September 1, 2005 if anyof the 9 5/8% Notes remain outstanding on thatdate. The Company is considering various alternatives with respect tothe repayment or refinancing of the 9 5/8%Notes, although no decision has been made as yet. While there can be noassurance, the Company expects that the 9 5/8%Notes will be refinanced or otherwise repaid by September 1, 2005. Theterm facility bears interest at either the ABR or Eurodollar Rate (asdefined in the Amended Credit Agreement) plus a margin of 5.25%in the case of ABR loans or 6.25% in the case of EurodollarLoans. The term facility under the Amended Credit Agreement is securedon substantially the same basis as indebtedness under the Prior CreditAgreement. In connection with the Amended Credit Agreement, the Companypaid fees to lenders and professional advisors of approximately $3.5million, including an original issue discount fee of approximately $2.0million. Approximately $3.1 million of the fees paid were expensed in2004.

Under the Amended Credit Agreement, the Company isrequired to repay $5.0 million in principal in 2004, whereas under thePrior Credit Agreement the Company would have been required to makeprincipal payments of approximately $221.1 million in 2004. Inaddition, the Company repaid an additional $5.0 million under theAmended Credit Agreement with part of the proceeds from the sale ofEFILM, as described below. The Amended Credit Agreement revised certainfinancial tests and other restrictive covenants set forth in the PriorCredit Agreement, including required EBITDA (as defined), limitationson indebtedness, and other provisions. As defined in the Amended CreditAgreement and 2004 Indenture, EBITDA includes adjustments for severanceexpense, refinancing expense, foreign exchange gain or loss, and othernon-cash charges. As of September 30, 2004, the Company was incompliance with the covenants set forth in the Amended CreditAgreement. As of September 30, 2004, $126.9 million was outstandingunder the Amended Credit Agreement.

Principally to provide amechanism for the reinvestment of the proceeds of the EFILM Sale, asdescribed below, on August 11, 2004, the Company and the other partiesto the Amended Credit Agreement entered into an amendment and waiver tothe Amended Credit Agreement ("First Amendment andWaiver"). To provide a similar mechanism for thereinvestment of the proceeds of the EFILM Sale under the 2004Indenture, on August 11, 2004, the Company and Wilmington TrustCompany, as Trustee, entered into a supplemental indenture("Supplemental Indenture"). On September 30,2004, in accordance with the terms of the Amended Credit Agreement andthe 2004 Indenture, upon repayment of $1.3 million to Federal FinancialCredit Inc., PANY Rental and TFN Lighting Corp. (each subsidiaries ofthe Company) became guarantors under those debt instruments.

OnSeptember 16, 2004, the Company purchased from Sony Electronics, Inc.("Sony"), a 49% interest in DHDVentures, LLC ("DHD"), making DHD awholly-owned subsidiary of the Company. Following this acquisition, DHDwas converted to a limited partnership, DHD Ventures, LP, the limitedpartner of which is the Company and the general partner is DHDHoldings, Inc. DHD Ventures, LP and DHD Holdings, Inc. both becameguarantors under the Amended Credit Agreement and the 2004 Indenture onSeptember 30, 2004.

As a result of the January 2004 Refinancing,in accordance with Statement of Financial Accounting Standards No. 6,"Classification of Short-Term Obligations Expected to beRefinanced" ("SFAS 6"), theCompany reclassified $246.0 million of the refinanced debt to long-termdebt as of December 31, 2003.

Acquisition andDisposition Activity

On August 6, 2004, the Company sold its80% interest in EFILM to Deluxe Laboratories, Inc.("Deluxe"), the holder of the remaining20% interest in EFILM, for total consideration of $32.5 million,including $27.5 million in cash and a promissory note for $5 million(the "EFILM Sale"). Net cash 

25

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

proceeds received, after certain payments toprevious owners, were approximately $25.3 million. In addition to therepayment of $5.0 million of term loans under the Amended CreditAgreement, the Company redeployed part of the proceeds of the EFILMSale during the third quarter through (1) the acquisition ofTechnovision France, and (2) the acquisition of Sony ElectronicsInc.'s ("Sony") 49% interest inDHD Ventures, LLC, now DHD Ventures, L.P. ("DHDVentures"), such that DHD Ventures became a wholly-ownedsubsidiary of the Company. The Company will continue to assessstrategic opportunities to reinvest the remaining proceeds of the EFILMSale during the fourth quarter.

CapitalExpenditures

The Company intends to use cash provided byoperating activities and its revolving lines of credit to makeadditional capital expenditures primarily to manufacture camera systemsand accessories and purchase other rental equipment. The Companyrecently made a commitment of approximately $7 million to purchasedigital cameras over a period of approximately 18 months beginning inJanuary 2005.

Liquidity Requirements

Panavision is a holding company whose principal material asset isthe ownership interest in its subsidiaries. The Company'sprincipal business operations are conducted by its subsidiaries.Accordingly, the Company's source of cash to pay its obligationsis expected to be distributions with respect to its ownership interestsin its subsidiaries. There can be no assurance that its subsidiarieswill generate sufficient cash flow to pay dividends or distribute fundsto the Company or that applicable state or foreign law and contractualrestrictions, including negative covenants contained in the debtinstruments of such subsidiaries, will permit such dividends ordistributions.

Pursuant to the Amended Credit Agreement, thereis an increase in required EBITDA for the fourth quarter financialcovenants. Given lower-than-expected revenue for the year, the Companyis unable at this time to determine whether it will be able to meetthis increased covenant level. The Company is analyzing opportunitiesfor potential reinvestment of the remaining proceeds of the EFILM Saleand anticipates that additional EBITDA resulting from such reinvestmentduring the fourth quarter of 2004 should enable the Company to remainin compliance with its minimum EBITDA and other financial covenants. Inthe event that the Company is unable to meet its required covenants forthe period ending December 31, 2004, the Company would be required toseek waivers or amendments of such covenants in the Amended CreditAgreement. Although the lenders under the Amended Credit Agreement haveaccommodated the Company to date and the Company believes that thelenders will continue to do so, there can be no assurance that theywill continue to do so nor can there be any assurance that the Companycould successfully effect any alternate financing to replace theAmended Credit Agreement or other debt if repayment is accelerated.

Although there can be no assurance, and subject to the discussionabove, the Company expects that cash flows from operations, borrowingsunder the revolving line of credit, and cash equity contributions andadvances from affiliates will be sufficient to enable the Company tomeet its anticipated operating, capital spending and debt servicerequirements through at least the next twelve months. As of September30, 2004, the Company had availability under the Second MacAndrews lineof approximately $8.6 million.

Off-Balance SheetArrangements

The Company does not have any off-balance sheetfinancing arrangements.

Seasonality

The Company'srevenue and net income are subject to seasonal fluctuations. In NorthAmerica, episodic television programs cease filming in the secondquarter for several months, and typically resume production in July andAugust. Motion picture feature film production activity typicallyreaches its peak in the third and fourth quarters.

26

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

SFAS No. 142, "Goodwill andOther Intangible Assets"

The Company adopted SFASNo. 142 "Goodwill and Other IntangibleAssets," ("SFAS 142") on January1, 2002. SFAS 142 requires that goodwill and indefinite-livedintangible assets not be amortized but, instead, tested at leastannually for impairment while intangible assets that have finite usefullives continue to be amortized over their respective useful lives.

The Company performed an impairment test relating to its goodwilland tradename as of December 31, 2002 and December 31, 2003, and foundthat the fair values of its goodwill and tradename are in excess ofcarrying value.

In the absence of indicators that an earlierassessment would be required, the Company will perform its annualimpairment tests of goodwill and tradename during the fourth quarter offiscal 2004 in connection with the Company's planning efforts for2005. As the Company has not yet determined what the effects of thesetests will be on its earnings and financial position, these effects,which may have a material impact, will be reflected in the consolidatedfinancial statements for the year ending December 31, 2004.

Forward-Looking Statements

This quarterly report on Form10-Q for the quarter ended September 30, 2004, as well as certain ofthe Company's other public documents and statements and oralstatements, contain forward-looking statements that reflectmanagement's current assumptions and estimates of futureperformance and economic conditions. Such statements are made inreliance upon safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995. The Company cautions investors thatforward-looking statements are subject to risks and uncertainties thatmay cause actual results and future trends to differ materially fromthose projected, stated, or implied by the forward-looking statements.Further, the Company encourages investors to read the summary of itscritical accounting policies included in the Company's AnnualReport on Form 10-K/A for the year ended December 31, 2003.

Inaddition to factors described in the Company's Securities andExchange Commission filings and others, the following factors couldcause the Company's actual results to differ materially fromthose expressed in any forward-looking statements made by the Company:(a) a significant reduction in the number of feature film, commercialor series television productions; (b) competitive pressures arisingfrom changes in technology, customer requirements, price competitionand industry standards; (c) an increase in expenses related to newproduct initiatives and product development efforts; (d) unfavorableforeign currency fluctuations; (e) significant increases in interestrates; (f) lower-than-expected cash flows from operations; (g)difficulties or delays in developing and introducing new products orfailure of the Company's customers to accept new productofferings; (h) difficulties or delays in implementing improvements inoperating efficiencies; (i) the inability to secure capitalcontributions or loans from affiliates, refinance its indebtedness orsell its equity securities; or (j) failure to reinvest the remainingproceeds of the EFILM Sale as planned. The Company assumes noresponsibility to update the forward-looking statements contained inthis filing.

Item 3.    Quantitative and QualitativeDisclosures About Market Risk

The Company has exposure tomarket risk both as a result of changing interest rates and movementsin foreign currency exchange rates. The Company manages its exposure tothese market risks through its regular operating and financingactivities. Item 7A of the Company's Annual Report on Form 10-K/Afor the year ended December 31, 2003 presents quantitative andqualitative disclosures about market risk as of December 31, 2003. Asof September 30, 2004, there have been no material changes in theCompany's market risk since December 31, 2003.

27

----

PANAVISIONINC.    NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

Item 4.    Controls andProcedures

(a) Disclosure Controls and Procedures. TheCompany's management, with the participation of theCompany's Chief Executive Officer and Chief Financial Officer,has evaluated the effectiveness of the Company's disclosurecontrols and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) as of the end of the fiscal periodcovered by this Quarterly Report on Form 10-Q. Based upon suchevaluation, the Chief Executive Officer and Chief Financial Officerhave concluded that, as of the end of such period, the Company'sdisclosure controls and procedures are effective in recording,processing, summarizing and reporting, on a timely basis, informationrequired to be disclosed by the Company in the reports that it files orsubmits under the Exchange Act.

(b) Changes in Internal ControlOver Financial Reporting. There have not been any changes in theCompany's internal control over financial reporting (as such termis defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)during the fiscal period to which this Quarterly Report on Form 10-Qrelates that have materially affected, or are reasonably likely tomaterially affect, the Company's internal control over financialreporting.

28

----

PANAVISIONINC.

PART II – OTHERINFORMATION

Item 1.    LegalProceedings

No material legal proceedings are pending.

Item 2.    Unregistered Sales of Equity Securities and Use ofProceeds

None.

Item 3.    Defaults Upon SeniorSecurities

There were no events of default upon seniorsecurities during the quarter ended September 30, 2004.

As ofSeptember 30, 2004, the Company has accumulated approximately $15.6million of unpaid dividends on the Series D Preferred Stock with theagreement of the holders thereof. Dividends on the Series D PreferredStock are cumulative and payable, at the option of the Company, in cashand/or additional shares of Series D Preferred Stock.

Item4.    Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders duringthe quarter ended September 30, 2004.

Item 5.    OtherInformation

No additional information need be presented.

Item6.    Exhibits

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                            |  |  |  |  |
|-----|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| 3   |  | Certificateof Incorporation and By-Laws                                                                                                                                                                                                                                                                                                                                                                    |
| 3.1 |  | RestatedCertificate of Incorporation of the Company (incorporated herein byreference to the identically numbered exhibit to the Company'sQuarterly Report on Form 10-Q for the quarter ended March 31,1999).**                                                                                                                                                                                             |
| 3.2 |  | Restated By-Laws of the Company(incorporated herein by reference to the identically numbered exhibitto the Company's Quarterly Report on Form 10-Q for the quarterended March 31, 1999).**                                                                                                                                                                                                                 |
| 3.3 |  | Certificate ofthe Designations, Powers, Preferences and Rights of Series D CumulativePay-in-Kind Preferred Stock of Panavision Inc. (incorporated herein byreference to Exhibit 3.6 to the Company's Annual Report on Form10-K for the year ended December 31, 2003).**                                                                                                                                    |
| 3.4 |  | Certificate of the Designations, Powers,Preferences and Rights of Series E Non-Cumulative PerpetualParticipating Preferred Stock of Panavision Inc.(incorporated herein byreference to Exhibit 3.7 to the Company's Annual Report on Form10-K for the year ended December 31,2003).**                                                                                                                      |
| 4   |  | InstrumentsDefining the Rights of Security Holders, IncludingIndentures                                                                                                                                                                                                                                                                                                                                    |
| 4.1 |  | Indenture, dated as ofFebruary 11, 1998, between PX Escrow and The Bank of New York, asTrustee, relating to the Company's 9 5/8%Senior Subordinated Discount Notes Due 2006 (incorporated herein byreference from the identically numbered exhibit from theCompany's Registration Statement on Form S-1, Registration No.333-59363 file with the Securities and Exchange Commission on October8, 1998). ** |
|     |

29

----

PANAVISIONINC.

|      |  |                                                                                                                                                                                                                                                                                                                                                                               |  |  |  |  |
|------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| 4.2  |  | First SupplementalIndenture dates June 4, 1998, amoung PX Escrow, the Company and theTrustee, amending the Indenture identified at Exhibit 4.1 (incorporatedherein by reference from the identically numbered exhibit from theCompany's Registration Statement on Form S-1, Registration No.333-59363 file with the Securities and Exchange Commission on October8, 1998). ** |
| 4.3  |  | Amended and Restated SeniorSubordinated Line of Credit Agreement dated January 16, 2004, betweenPanavision Inc. and MacAndrews & Forbes Holdings Inc. (incorporatedherein by reference to Exhibit 4.16 to the Company's AnnualReport on Form 10-K for the year ended December 31,2003).**                                                                                 |
| 4.4  |  | Indenture, dated as of January16, 2004, between Panavision Inc. and Wilmington Trust Company, asTrustee, relating to the Company's 12.50% Senior SecuredNotes due 2009 (incorporated herein by reference to Exhibit 4.17 to theCompany's Annual Report on Form 10-K for the year ended December31, 2003).**                                                                   |
| 4.5  |  | Form of 12.50%Senior Secured Note due 2009 (incorporated herein by reference from toExhibit 4.17 to the Company's Annual Report on Form 10-K for theyear ended December 31, 2003).**                                                                                                                                                                                          |
| 4.6  |  | Amendedand Restated Credit Agreement, dated as of May 28, 1998, as amended andrestated as of January 16, 2004, among Panavision Inc., the severallenders named therein, and JP Morgan Chase Bank, as AdministrativeAgent (incorporated herein by reference to Exhibit 4.19 to theCompany's Annual Report on Form 10-K for the year ended December31, 2003).**                 |
| 4.7  |  | Letter Agreement dated asof January 16, 2004 between Mafco Holdings, Inc., MacAndrews &Forbes Holdings Inc., PX Holding Corporation and Panavision Inc.(incorporated herein by reference to Exhibit 4.20 to theCompany's Annual Report on Form 10-K for the year ended December31, 2003)**                                                                                |
| 4.8  |  | First Amendment and Waiver,dated as of August 11, 2004, with respect to the Amended and RestatedCredit Agreement, dated as of May 28, 1998, as amended and restated asof January 16, 2004, among Panavision Inc., the several lenders namedtherein, and JP Morgan Chase Bank, as Administrative Agent.*                                                                       |
| 4.9  |  | First Supplemental Indenture and Waiver, withrespect to Indenture, dated as of January 16, 2004, between PanavisionInc. and Wilmington Trust Company, as Trustee, relating to theCompany's 12.50% Senior Secured Notes due2009.*                                                                                                                                              |
| 31   |  | Section 302Certifications                                                                                                                                                                                                                                                                                                                                                     |
| 31.1 |  | Certification of RobertL. Beitcher, Chief Executive Officer, dated November 12,2004.*                                                                                                                                                                                                                                                                                         |
| 31.2 |  | Certification of Bobby G.Jenkins, Chief Financial Officer, dated November 12, 2004.*                                                                                                                                                                                                                                                                                          |
| 32   |  | Section 906Certifications                                                                                                                                                                                                                                                                                                                                                     |
| 32.1 |  | Certifications of RobertL. Beitcher, Chief Executive Officer, and Bobby G. Jenkins, ChiefFinancial Officer, dated November 12, 2004, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002 (furnishedherewith).                                                                                                              |
|      |

|  |                                         |
|--|-----------------------------------------|
|  | *    Filedherewith. |

|  |                    |
|--|--------------------|
|  | **Previouslyfiled. |

30

----

PANAVISION INC.

SIGNATURES

Pursuant to the requirements ofthe Securities Exchange Act of 1934, the Registrant has duly causedthis report to be signed on its behalf by the undersigned thereuntoduly authorized.

|  | PANAVISION INC. |
|--|-----------------|

|                                         |  |                                                                                               |  |  |  |  |
|-----------------------------------------|--|-----------------------------------------------------------------------------------------------|--|--|--|--|
| Date:   November12, 2004 |  | By:   /s/ ROBERT L. BEITCHER                                                   |
| ______________________________     |  | __________________________________                                                       |
|                                    |  | RobertL. BeitcherPresident andChief ExecutiveOfficer                                          |
|                                    |  | By:  /s/ BOBBY G.JENKINS                                                            |
|                                    |  | __________________________________                                                       |
|                                    |  | BobbyG. JenkinsExecutive Vice President,Chief FinancialOfficer andPrincipal AccountingOfficer |
|                                         |

31

----