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UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.20549

FORM10-K

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|--------|------------------------------------------------------------------------------------|
|   | ANNUAL REPORT PURSUANTTO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the fiscal year ended December31,2005

OR

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|--------|----------------------------------------------------------------------------------------|
|   | TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934 |

For the transition periodfrom      to                 Commission file number:001-12391

PANAVISION INC.(Exactname of Registrant as specified in itscharter)

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

Registrant's telephonenumber including area code:(818)316-1000

Securities registered pursuant to Section12(b) of the Act: None

Securities registered pursuantto Section 12(g) of the Act:

|                    |  |                                          |  |  |  |  |
|--------------------|--|------------------------------------------|--|--|--|--|
| Titleof each class |  | Name of each exchange on whichregistered |
| CommonStock        |  | None                                     |
|                    |

Indicate by check mark if theregistrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. Yes             No

Indicate by check mark if the registrant is not requiredto file reports pursuant to Section 13 or Section 15(d) of the Act. Yes            No 

Indicate by check markwhether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes             No 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-Kis not contained herein, and will not be contained, to the best ofregistrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. 

Indicate by check markwhether the registrant is a large accelerated filer, accelerated fileror non-accelerated filer. See definition of ‘‘acceleratedfiler’’ and ‘‘large acceleratedfiler’’ in Rule 12b-2 of the Securities Exchange Act of1934.

Large accelerated filer  Accelerated filer  Non-accelerated filer

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

The aggregate market valueof the voting and non-voting common stock held by non-affiliates of theRegistrant (based on the closing price for the Common Stock on the OTCBulletin Board on such date) on June  30,  2005 (the lastbusiness day of the registrant’s most recently completed secondfiscal quarter) was approximately $5.9  million. As ofMarch  22,  2006, there were 39,380,729 shares ofPanavision Inc. Common Stock outstanding.

DOCUMENTSINCORPORATED BY REFERENCE

Portions of the Registrant’s2006 definitive proxy statement, to be issued in connection with theannual meeting of stockholders, are incorporated by reference in PartIII of this Form10-K.

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PANAVISIONINC.INDEX TO ANNUAL REPORT ON FORM 10-KFor the YearEnded December  31,2005

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|---------|--|------------------------------------------------------------------------------------------------------------------|--------|--------|----|---------|--|--------|--------|--------|--|--|--|--|
|    |  |                                                                                                             |        | Page   |    |    |
|    |  | PARTI                                                                                                            |
| Item1   |  | Business                                                                                                         |        |   | 1  |    |  |   |   |   |
| Item1A  |  | Risk Factors                                                                                                     |        |   | 7  |    |  |   |   |   |
| Item1B  |  | Unresolved Staff Comments                                                                                        |        |   | 12 |    |  |   |   |   |
| Item2   |  | Properties                                                                                                       |        |   | 12 |    |  |   |   |   |
| Item 3  |  | LegalProceedings                                                                                                 |        |   | 14 |    |  |   |   |   |
| Item 4  |  | Submission ofMatters to a Vote of SecurityHolders                                                                |        |   | 14 |    |  |   |   |   |
| PARTII  |  |                                                                                                             |   |   |
| Item5   |  | Market for Registrant’s Common Equity, RelatedStockholder Matters and Issuer Purchases of EquitySecurities |        |   | 14 |    |  |   |   |   |
| Item 6  |  | SelectedFinancial Data                                                                                           |        |   | 15 |    |  |   |   |   |
| Item7   |  | Management’s Discussion and Analysis of FinancialCondition and Results of Operations                       |        |   | 16 |    |  |   |   |   |
| Item7A  |  | Quantitative and Qualitative Disclosures About MarketRisk                                                        |        |   | 36 |    |  |   |   |   |
| Item 8  |  | Financial Statementsand Supplementary Data                                                                       |        |   | 36 |    |  |   |   |   |
| Item9   |  | Changes in and Disagreements With Accountants on Accountingand Financial Disclosure                              |        |   | 37 |    |  |   |   |   |
| Item9A  |  | Controls and Procedures                                                                                          |        |   | 37 |    |  |   |   |   |
| Item9B  |  | OtherInformation                                                                                                 |        |   | 37 |    |  |   |   |   |
| PARTIII |  |                                                                                                             |   |   |
| Item 10 |  | Directors and ExecutiveOfficers of the Registrant                                                                |        |   |    | *  |  |   |   |   |
| Item11  |  | Executive Compensation                                                                                           |        |   |    | *  |  |   |   |   |
| Item12  |  | Security Ownership of Certain Beneficial Owners andManagement and Related StockholderMatters                     |        |   |    | *  |  |   |   |   |
| Item 13 |  | CertainRelationships and RelatedTransactions                                                                     |        |   |    | *  |  |   |   |   |
| Item 14 |  | PrincipalAccounting Fees andServices                                                                             |        |   |    | *  |  |   |   |   |
| PARTIV  |  |                                                                                                             |   |   |
| Item 15 |  | Exhibits and FinancialStatementSchedules                                                                         |        |   | 40 |    |  |   |   |   |
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| * | Incorporatedby reference from the Panavision Inc. 2006 ProxyStatement. |

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PART I

Item1.    Business

Business Overview

In the document thatfollows, unless the context requires otherwise, the terms‘‘Panavision,’’ the‘‘Company,’’‘‘we,’’‘‘our,’’‘‘ours’’ and‘‘us’’ refer to Panavision Inc. and itssubsidiaries. We are the leading designer, manufacturer and supplier ofhigh precision camera systems, comprising cameras, lenses andaccessories for the motion picture, television series and televisioncommercial markets in North America, Europe and the Asia Pacificregion. Our camera systems have been widely used in the filming ofmajor motion pictures over the last 30 years, including the recent boxoffice hits Crash, The Chronicles of Narnia: The Lion, the Witch andthe Wardrobe, Batman Begins, Memoirs of a Geisha, and Good Nightand Good Luck. Since 1990, 13 of the Oscars® forBest Cinematography have been awarded to a cinematographer who used ourcameras and lenses to make their award-winning film. We are also aleading supplier of camera equipment to U.S. prime time episodic or‘‘series’’ network and cable televisionproductions, such as Lost, Desperate Housewives, Prison Break,24 and CSI.

In addition to manufacturing andrenting camera systems, we also have rental operations providinglighting, lighting grip, power generation, distribution and relatedtransportation equipment, cranes and remote camera heads. Theseoperations include Lee Lighting, the largest lighting rental company inthe United Kingdom, as well as other owned-and-operated(‘‘O&O’’) facilities in New York,Texas, Australia and New Zealand. Recently, Lee Lighting supplied thelighting needs of such major films as Harry Potter and the Goblet ofFire, Charlie and the Chocolate Factory, and Batman Begins.Our Lee Filters operation manufactures and sells lighting filters, gelsand other color-correction and diffusion filters. We also sell variousconsumables, such as film stock, light bulbs, and gaffer tape, tocustomers from several of our rental offices.

Panavision wasincorporated in Delaware in 1990. Predecessors of Panavision have beenengaged in the design and manufacturing of cinematography equipmentsince 1954. Our principal executive offices are located at 6219 De SotoAvenue, Woodland Hills, California, 91367, telephone (818)316-1000.

Camera Rental Operations

We supplycinematographic equipment, including film and high definition digitalcameras, lenses and accessories, cranes and remote camera heads to ourcustomers on a project-by-project basis. We have an extensive rentalinventory of proprietary cameras and lenses, as well as non-Panavisionmanufactured equipment and accessories. We rent our equipment through anetwork of O&O rental facilities located throughout North America,Europe and the Asia Pacific region and through independent distributorslocated around the world who are well trained in the use of Panavisionequipment and are supported by our technical staff. The Company doesnot sell its proprietary camera systems or optics other than those soldby Panavision Federal Systems, LLC. (See ‘‘—Salesand Other Operations’’).

For the fiscal years 2005,2004 and 2003 our camera rental operations accounted for approximately63%, 61%, and 62%, respectively, of total rentalrevenue and sales. For financial information as to our operations indifferent geographical areas, see Note 14 of the Notes to ConsolidatedFinancial Statements of Panavision included elsewhere in this Form10-K.

The demand for cinematographic equipment is driven by thenumber, budget, complexity and length of feature films, televisionprograms and commercials being produced. The size of a rental packageof equipment and length of rental period are directly correlated withthese factors. Increases in the number of cable channels and otherprogramming outlets and in demand for original programming also drivethe increased use of camera systems. The camera rental operations servethree primary markets: feature films, episodic television andcommercials.

Feature Films

Feature filmscomprise two categories: major studio features and independentfeatures. Major studio features are typically large-budget productionsrequiring a greater range and volume of camera and 

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lighting equipment, thus providing greaterrevenue potential for us. The average major studio feature film rentalis for 10 to 12 weeks. The potential revenue from feature films isdependent on the number, location and types of productions filmed inany given year. The geographic location of major features can benomadic due to ever-changing regional tax incentives and creativeconsiderations. We have been the market leader for many years in themajor feature film segment due to both the performance of ourproprietary equipment and to the service capabilities of our worldwidenetwork of O&O facilities and independent distributors. We provideequipment to the majority of major studio feature film productionsworldwide.

Episodic Television

Theepisodic or ‘‘series’’ television market inNorth America is comprised primarily of one-hour dramas and half-hoursituation comedies, which are aired in both prime and non-prime timeslots. These programs are broadcast on the major television networks aswell as on cable networks. The average half-hour situation comedyseries generates 22 weeks of billing per year. The average one-hourdrama series generates 33 weeks of billing per year. We have been themarket leader for a number of years in the prime time segment,supplying equipment to the majority of U.S. prime time network seriesshot on film. In addition, we have become the leading supplier of highdefinition digital camera equipment for use in television situationcomedies, a market that has developed over the last several years. Webelieve we will continue to be a strong supplier to this market as wecontinue to offer customized equipment designed for televisionproduction, which we believe provides both economic and qualitativebenefits to our customers.

In Europe and the Asia Pacificmarkets, the television segment is characterized by lower budgetproductions than the U.S. that do not generate as many billing weeks onaverage.

Commercials

Although theproduction of a commercial generally lasts for only one to seven days,daily rental rates for camera systems are equal to or higher thanfeature film rental rates and represent a significant part of thecamera equipment rental market worldwide. Many of the creativeprofessionals involved in the filming of commercials seek todistinguish their products by using innovative techniques requiringtechnologically advanced equipment—the ability to achieve aunique ‘‘look’’ — which we believecan, in many cases, be achieved best by using our products. Currently,our presence in this market is relatively small. By pursuingopportunities to expand our presence in the television commercialmarket, we believe we can develop brand loyalty for our products andestablish beneficial long-term relationships with directors andcinematographers, many of whom begin their careers filming televisioncommercials before moving into either television or feature films.

Camera and Lens Manufacturing and Assembly

We are the onlyprovider of camera packages with an integrated design that providescustomers with compatible products available on a worldwide basis. Eachcamera package rented for a project is comprised of a number of camerasystems, each of which includes a camera, lenses and accessories. Eachcamera’s rental price includes a variety of accessories such aseyepieces, viewfinders, cables and brackets.

FilmCameras

There are two basic types of motion picturecameras, Synchronous or ‘‘Sync-sound,’’ andMit Out Sound (MOS). Sync-sound cameras are used to shoot pictureswhile recording sound. MOS cameras are used primarily to shoothigh-speed footage and special effects and are often used oncommercials and as backup cameras in situations where sound is notbeing recorded. Panavision’s inventory consists of bothSync-sound and MOS cameras with various features and at a range ofprices. While the majority of the Sync-sound cameras are 35mm cameras,Panavision also has 16mm cameras, which are used primarily to filmepisodic television shows, and 65mm cameras, which are used primarilyto film special effects and special venue presentations.Panavision’s film capture cameras include theMillennium® XL and XL2 series as well as the Platinumand GII series.

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The Company’s inventory alsoincludes a number of non-Panavision cameras that are used to supplementits product line. This allows Panavision to compete with independentrenters of cinematography equipment on the same level and with the sameequipment. The Company’s competitors, on the other hand, do nothave the corresponding ability to purchase Panavisionequipment.

High Definition CameraSystems

Panavision offers a complete HD digital camerasystem, the HD-F900, comprised of a modified version of Sony's24P CineAltaTM high definition digital camera coupled withspecially designed Primo Digital® lenses and otheraccessories. The Primo Digital® lenses representsignificant technological breakthroughs, providing extremely highperformance.

The Genesis® camera, launchedcommercially in 2005, is a collaborative effort with Sony that combineshigh performance electronic imaging with Panavision’scine-optics. The camera provides film quality video capture. TheGenesis® system was developed by a team of Panavisionand Sony engineers over four years and contains a one-inch CCD sensor,which allows the camera to utilize all focal lengths of the Panavisionspherical 35mm lenses, a form factor similar to film cameras, and theability to record from one to 50 frames per second. Whereas the primarymarket for HD-F900 is the half-hour episodic television market, theGenesis® system is used mainly by cinematographers inthe feature film market and one-hour episodes (i.e., television),although it has also proven attractive for commercials. Recent featurefilms using Genesis® include Superman Returns,Click, Flyboys, Apocalypto, and Scary Movie 4. Televisionshows using Genesis® include Conviction andWhat About Brian.

Film Lenses

Wedevelop, design and manufacture prime (fixed focal length) and zoomlenses, the most critical component affecting picture quality and animportant consideration for the filmmaker. For many years, we havespecialized in anamorphic lenses, which are used for the wide-screenmovie format. We have also created a line of advanced spherical lensesfor the non-wide screen format, producing Panavision'sproprietary Primo® Prime and PrimoZoom®lenses.

Accessories

In order to providecustomers with a fully integrated camera system, we frequentlyintroduce new camera accessories and offer an extensive range ofproducts requested by and developed in conjunction with filmmakers.Examples of accessories include eyepieces, viewfinders, specialtycables and brackets.

RemoteSystems

Through Panavision Remote Systems LLC, awholly-owned subsidiary of Panavision, and other rental operations, werent cranes and remote heads to a broad range of productions.

Wemanufacture cameras, lenses, and accessories designed by our in-houseresearch and development staff at our 150,000 square foot corporateheadquarters and manufacturing facility located near Hollywood inWoodland Hills, California. We develop and design all the criticalcomponents for our film camera systems, including the camera movementand lens. While we manufacture most of the components internally,certain components and subassembly work, including glass grinding, lenselement polishing and die casting, are outsourced to selectedsuppliers. Since certain components, particularly the lens element,require long lead times, precise production schedules are critical.Inventory levels are determined based on input from marketing,operations and the independent distributor network. We also purchasedigital cameras, some of which we then modify and outfit in ourfacility. The transition to digital cameras has required and willcontinue to require a change in the mix of our vendors. Following theassembly process, each camera system is rigorously tested to achievethe high standard of performance that customers expect from Panavision.The procurement, manufacturing and assembly process for our digital andfilm camera systems takes several months.

Lighting RentalOperations

In addition to manufacturing and renting camerasystems, we also have rental operations providing lighting, lightinggrip, and power generation, distribution and transportation equipmentused in the 

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production of feature films, televisionprograms, commercials, outside broadcasts and other events. Ourextensive inventory of lighting equipment enables various lightingoperations to service several projects with large-scale equipment andpersonnel requirements concurrently.

These operations includeLee Lighting, the largest lighting rental operation in the UnitedKingdom. Lee Lighting maintains the largest rental asset base oflampheads and other lighting equipment, transport, mobile generatorsand power distribution equipment in the United Kingdom. Lee Lightingoperates lighting rental operations in London, Bristol and Manchester,England and Glasgow, Scotland, each of which has its own rentalinventories. Lee Lighting is also able to service select projectsoutside of the United Kingdom. In addition, Lee Lighting maintainsrental bases at Pinewood and Shepperton Studios, the two largest studiocomplexes in the United Kingdom for the production of feature films.Lee Lighting is the only lighting company in the United Kingdom thatsupplies its own electricians in connection with the rental of itsequipment, a sizable field force of gaffers and electricians who workexclusively with the Company. This service force is on call 24 hours aday, seven days a week, and is supplemented by freelance labor whenrequired. We also have built overseas lighting rental operations inAustralia and New Zealand which have provided the lighting equipmentfor such recent films as King Kong and Superman Returns.

Our O&O lighting facilities in New York and Texas areoperated by PANY Rental Inc. ("PANY Rental")and TFN Lighting Corp., respectively, each wholly-owned subsidiaries ofPanavision.

For the fiscal years ended 2005, 2004 and 2003, ourlighting rental operations accounted for approximately 19%,20%, and 20%, respectively, of total rental revenue andsales. For financial information as to our operations in differentgeographical areas, see Note 14 of the Notes to the ConsolidatedFinancial Statements of Panavision included elsewhere in this Form10-K.

Sales and Other Operations

Panavision manufacturesand sells lighting filters and gels for the motion picture, television,live theater and other industries through our Lee Filters operations.The majority of Lee Filters’ business is the sale of filters orgels used by lighting directors to control or correct lightingconditions during productions. Lighting filter distribution is handledprimarily through a network of third-party dealers who have beenselected because of their specific knowledge of the filters market intheir respective countries. In the United Kingdom and United States,Lee Filters sells directly to end users and rental houses as well as todistributors and dealers.

In addition, we sell variousconsumable products such as film stock, light bulbs and gaffer tape,and other related products which are used in all types of productions,from many of our facilities around the world. In the Asia Pacificregion, we also sell prosumer non-proprietary camera and lightingequipment.

Through its wholly-owned subsidiary, PanavisionFederal Systems LLC, Panavision offers imaging and optics solutions togovernment clients and their suppliers. This business is currently inthe start-up phase.

For the fiscal years 2005, 2004 and 2003, oursales and other operations accounted for approximately 18%,19%, and 18%, respectively, of total rental revenue andsales. For financial information as to our operations in differentgeographical areas, see Note 14 of the Notes to the ConsolidatedFinancial Statements of Panavision included elsewhere in this Form10-K.

Competition

The market for high-precisioncinematography equipment is highly competitive, primarily driven bytechnology, customer service and price. As a manufacturer ofcinematography equipment, we have one primary competitor, Arri Inc.,based in Munich, Germany. Arri’s cinematography equipmentbusiness manufactures cameras and certain accessories (excludinglenses), primarily for sale to rental houses and individuals. Arri Inc.has rental facilities in a number of markets but does not have anowned-and-operated global rental distribution network. Our primarycompetitors in the lens manufacturing business are Zeiss and CookeOptics Limited, who are also the primary suppliers of lenses to ourrental competitors. Because we manufacture lenses, cameras, and a fullrange of accessories that are 

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cross-compatible, have close relationshipswith filmmakers, global distribution and in-house opto-mechanicaldesign and manufacturing capabilities, we believe that we are betterable to develop the innovative camera systems demanded by ourcustomers.

Our inventory also includes a number ofnon-Panavision cameras that are used to supplement our product line.Due to our ability to purchase non-Panavision cameras, we can meetparticular production needs for such equipment which allows us tocompete with independent renters of cinematography equipment on thesame level and with the same equipment. Our competitors, on the otherhand, do not have the corresponding ability to purchase Panavisionequipment, as our equipment is not available to rental companies otherthan ourselves and our independent distributors.

As a renter ofcinematography equipment, we compete with numerous rental facilities,which generally purchase their equipment from other manufacturers andthen rent that equipment to their customers. While the overall rentalbusiness is price competitive and subject to discounting, we havechosen to compete primarily on the basis of our large inventory base,technologically advanced proprietary products, broad product line,extensive sales and marketing force and commitment to customer service.We believe that, as both the manufacturer and rental house, we are ableto respond to many user requests on shorter notice and more effectivelythan our rental competitors.

In addition to our existingcompetitors, we may encounter competition from new competitors, as wellas from new types of equipment, such as high definition digitalcameras. We believe our Genesis® camera has atechnological advantage such that it does not currently have directcompetitors. Competition for the Genesis® camera maycome from existing or new film or digital camera manufacturers. Webelieve that Arri and DALSA are both working on developing digitalcameras with film-like quality with the goal of competing in the samemarket as Genesis®.

Although we believe that weare well positioned to capitalize on potential growth in the digitalcapture market, both independently and through a series of agreementswith Sony, the high definition digital capture market is relatively newand we cannot predict whether or how quickly the rental market for highdefinition digital cameras will grow or what effect that market willhave on our film camera business. See ‘‘RiskFactors’’ in Item 1A.

Our lighting rentaloperations service the motion picture, television and commercialsindustries, including studio programs, outside broadcasts, andcommercials. These markets require a similar range of lightingproductions and related support equipment; however, feature films andepisodic television programs generally require larger equipmentpackages than commercials. The composition of equipment packages isfrequently determined by the director or cinematographer, who maydesire a specific type of image or lighting effect. Although ourworldwide inventory of lighting equipment is extensive, lightingequipment is a commodity largely undifferentiated by proprietarytechnology and, as such, the lighting rental market is highly pricecompetitive. Additionally, because film and television productions tendto rent lighting equipment from rental agencies in the territorieswhere the productions are filmed, the rental revenue generated from ourlighting rental operations depends on the number of feature films,television programs and commercials being filmed in the areas near ouroperations.

Research and Product Development

Ourresearch and development group is comprised of mechanical, software,electronic and optical engineers, draftsmen and machinists. Theresearch and development group has a dedicated machine shop thatmanufactures prototype equipment. These internal capabilities enable usto develop proprietary technology in collaboration with filmmakers toaddress their unique requirements. We have long been a leader in theresearch and development of film camera lenses. Since the firstPanavision lens was introduced in 1957, we have introduced manyinnovative spherical and anamorphic lenses, including thePRIMO® series, which won ACADEMYAWARDS® in 1990, 1991 and 1998 for Scientific andTechnical Achievement. In 2000, Panavision launched a new series ofspecially designed Primo Digital® lenses for use withthe Sony 24P CineAltaTM digital camera. These lenses are amongthe most sophisticated and highest performing lenses Panavision hasever produced. We also have a specialized team whose focus is andexperience is advanced digital imaging technology.

Research anddevelopment expense for the years ended December  31,2005, 2004, and 2003 was $5.2  million, $5.6  million, and$4.5  million, respectively.

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Intellectual Property

We rely on acombination of patents, licensing arrangements, trade names,trademarks, service marks, trade secrets, know-how and proprietarytechnology to protect our intellectual property rights. We own or havebeen assigned or licensed domestic and foreign patents and patentapplications relating to our cameras, lenses and accessories, includingthe patent for our compound zoom technology granted in late 2005. Thistechnology is currently incorporated in our 300X compound zoom lens. Wealso own or have been assigned several domestic and foreign trademarkor service mark registrations including PANAVISION®,GENESIS® PANAFLEX®,PANAHEAD®, PANALITE®,PANASTAR®, PRIMO®, PRIMOZOOM®, PRIMO MACRO ZOOM®,PRIMO-L®, PRIMO DIGITAL®,MILLENNIUM® and ULTRAVIEW® amongothers which, collectively, are material to ourbusiness.

Customers

No one customer accounted for morethan 10% of the Company’s consolidated net revenues forthe years ended December  31,  2005, 2004, and2003.

Environmental Matters

Panavision is subject toforeign, federal, state and local environmental laws and regulationsrelating to the use, storage, handling, generation, transportation,emission, discharge, disposal and remediation of hazardous andnon-hazardous substances, materials and wastes. We are also subject tolaws and regulations relating to worker health and safety. We believethat our operations are in substantial compliance with all applicableenvironmental and health and safety laws. Although no material capitalor operating expenditures relating to environmental controls or otherenvironmental matters are currently anticipated, there can be noassurance that we will not incur costs in the future relating toenvironmental matters that would have an adverse effect on our businessor financial condition.

Employees

As of December31,  2005, we had 1,211 full-time employees, consisting of 525employees based in North America, 557 employees based in Europe, and129 employees based in the Asia Pacific region. PANY Rental is a partyto collective bargaining agreements with two local affiliates of theInternational Brotherhood of Teamsters, which together coverapproximately 22 employees. We believe that relationships with ouremployees are good.

Seasonality

Panavision’srevenues are subject to seasonal fluctuations. In North America,episodic television programs typically cease filming in the secondquarter for several months, and then resume production in August.Feature film production activity typically reaches its peak in thethird and fourth quarters. Additionally, the Company’s capitalinvestment tends to occur in the first half of the year in order todeploy the equipment to meet customer needs.

Availability ofCertain Documents Concerning the Company

Copies of our annualreports on Form 10-K, our quarterly reports on Form 10-Q, our currentreports on Form 8-K, proxy statements, reports under Section 16 of theExchange Act and any amendment to any of these documents, as well ascurrent versions of the following documents are available, withoutcharge, on our website, www.panavision.com (under the heading‘‘Investor Relations’’) and upon request tothe Secretary, Panavision Inc., 6219 De Soto Avenue, Woodland Hills,California91367:

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|  | •  | Panavision’sCode of Business Conduct, which includes its Code of Financial Ethicsfor Senior FinancialOfficers. |

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|  | •  | The chartersfor all standing committees of Panavision’s Board of Directors,namely its Audit, Compensation and Nominating/GovernanceCommittees. |

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|  | •  | Panavision’sCorporate Governance Guidelines. |

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|  | •  | TheNominating/Governance Committee’s criteria for the nomination ofcandidates to the Board of Directors. |

‘‘AcademyAwards®’’ and‘‘Oscars®’’ areregistered trademarks of the Academy of Motion Picture Arts andSciences. ‘‘CineAltaTM’’ is aregistered trademark of Sony.

Additional information required byItem 1 of Part I is incorporated by reference to Item 6—SelectedFinancial Data.

Item 1A.    RiskFactors

Our substantial indebtedness could affectour operations and flexibility.

We have a substantialamount of outstanding indebtedness. As of December  31,2005, our total indebtedness was approximately $325  million,excluding approximately $65  million of indebtedness pursuant tothe 9 5/8% Notes that were redeemed onJanuary  3,  2006. As of the close of the March  2006Refinancing on March 30, 2006, our total indebtedness, includingredeemable preferred stock, was $370.0 million. Our substantialindebtedness could have important consequences. For example, itcould:

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|  | •  | require us todedicate a substantial portion of our cash flow from operations topayments on our indebtedness, thereby reducing the availability of ourcash flow for other general corporatepurposes; |

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|  | •  | limit ourability to fund future working capital, capital expenditures, researchand development, acquisitions, investments and other general corporaterequirements; and |

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|  | •  | limitour flexibility in responding to changes in our business and theindustry in which we operate. |

Furthermore, our interest expensecould increase if interest rates increase, because all of our debtunder the Senior Secured Credit Agreement bears interest at floatingrates, although the Company plans to enter into hedging arrangementswith respect to certain of its interest rate risk during 2006.

Our ability to service our debt and meet our cash requirementsdepends on many factors.

We currently anticipate thatoperating cash flow and the Revolver (see"Management's Discussion and Analysis of FinancialCondition and Results of Operations—Long-Term Debt")will be sufficient to cover our operating and capital spendingrequirements for 2006. However, if we do not generate sufficient cashflow from our operations or have funds available for borrowing underour credit facilities, we would be required to adopt one or morealternatives. For example, we could be requiredto:

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|  | •  | reduce or delaycapital spending, including spending required for the transition todigital imagecapture; |

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|  | •  | restructure ourindebtedness; |

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|  | •  | seek capitalcontributions or loans from our affiliates;and/or |

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|--|--------------|--------------------------------------|
|  | •  | issue and sell ourequity securities. |

If we are required to take any of theseactions, it could have an adverse effect on our business, financialcondition and results of operations. In addition, we cannot assure youthat we would be able to take any of these actions, that these actionswould enable us to continue to satisfy our capital requirements or thatthese actions would be permitted under the terms of our various debtinstruments then in effect.

Restrictions and covenants indebt agreements may limit our ability to take certain actions and ourfailure to comply with these covenants and restrictions, whether or notcaused by events beyond our control, could result in an event ofdefault which could materially and adversely affect our operatingresults and financial condition.

The Senior Secured CreditAgreement contains a number of significant restrictions and covenantsthat limit our ability and our subsidiaries' ability, among otherthings, to:

7

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|  |              |              |
|--|--------------|--------------|
|  | •  | borrowmoney; |

|  |              |                                                           |
|--|--------------|-----------------------------------------------------------|
|  | •  | use assets assecurity in other borrowings ortransactions; |

|  |              |                                         |
|--|--------------|-----------------------------------------|
|  | •  | paydividends on stock or purchasestock; |

|  |              |                           |
|--|--------------|---------------------------|
|  | •  | make capitalexpenditures; |

|  |              |             |
|--|--------------|-------------|
|  | •  | sellassets; |

|  |              |                                                    |
|--|--------------|----------------------------------------------------|
|  | •  | enter into certaintransactions with affiliates;and |

|  |              |                                          |
|--|--------------|------------------------------------------|
|  | •  | make certaininvestments or acquisitions. |

In addition, these instruments alsorequire us to maintain certain financial ratios and meet certain tests,including minimum interest coverage and maximum leverage ratios andminimum levels of EBITDA (as defined in such instruments), and restrictour ability and the ability of our subsidiaries to make capitalexpenditures.

Events beyond our control, such as prevailingeconomic conditions and changes in the competitive environment, couldimpair our operating performance, which could affect our ability andthat of our subsidiaries to comply with the terms of our debtinstruments. From time to time we have been unable to comply withcertain covenants in our debt instruments and have had to seek theapproval of our lenders to amend those instruments (see‘‘Management's Discussion and Analysis of FinancialCondition and Results of Operations—Long TermDebt’’). Although our lenders have accommodated us todate, we cannot assure you that they will continue to do so in thefuture. We cannot assure you that we and our subsidiaries will be ableto comply with the provisions of our respective debt instruments.Breaching any of these covenants or restrictions or the failure tocomply with our obligations after the lapse of any applicable graceperiods could result in a default under the applicable debtinstruments. If there were an event of default, holders of suchdefaulted debt could cause all amounts borrowed under these instrumentsto be due and payable immediately. We cannot assure you that our assetsor cash flow or that of our subsidiaries would be sufficient to fullyrepay borrowings under the outstanding debt instruments, either uponmaturity or if accelerated upon an event of default or that we would beable to refinance or restructure the payments on such debt. Inaddition, any event of default or declaration of acceleration under onedebt instrument could also result in an event of default under one ormore of our or our subsidiaries' other debt instruments. See‘‘—Our substantial indebtedness could affect ouroperations and flexibility.’’

Wedepend on the feature film, series television program and televisioncommercial markets.

Our operations are dependent on thefeature film industry, including, in particular, the number of majorstudio feature films, which tend to use larger camera packages than thefeature films made by independent producers. We are also dependent onthe number of series television programs and television commercialsproduced. A significant reduction in the total number of feature films,particularly major studio or large-budget action films, seriestelevision programs and television commercials produced, could have amaterial adverse impact on our operations. In addition, a reduction inthe average equipment rental package size could have an adverse affecton our revenues for each such project, and in turn, an adverse affecton our results of operations. Further, the rental revenue generatedfrom our lighting rental operations depends on the number of featurefilms, television programs and commercials produced, as well as thelocation of such production activity (while we have a global network ofcamera rental offices and independent distributors, we have a smallernumber of lighting operations and film and television productions tendto rent lighting equipment from rental agencies in the territorieswhere the productions are filmed).

Labor disruptions in theseindustries could also adversely affect our operations. In NorthAmerica, the Writers Guild of America, the Screen Actors Guild andother organizations periodically enter into negotiations with the majormotion picture studios for the renewal of their respective collectivebargaining agreements. These negotiations occasionally have resulted instrikes or other work stoppages. Labor disruptions due to suchnegotiations could significantly reduce production activities. Labordisruptions in our international territories, arising from local laborissues, could also occur. Such disruptions could have an adverse effecton our operating results and cash flow.

8

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In addition, feature film and televisionproduction is in part reliant on the availability of tax and otherincentives from government organizations. These incentives change fromtime to time and any elimination or adverse change in availability ofincentives can lead to a reduction in production activity which couldhave an adverse effect on our operating results and cashflow.

Responding to the rapid geographic shift of ourcustomers, particularly feature film productions, creates operationalchallenges and failure to successfully respond to such challenges mayadversely affect results of operations.

Although we have inplace a broad network of camera rental offices and distributors, thereare often rapid and significant shifts in production activity betweendifferent states, countries and continents from year to year inresponse to changes in local tax incentives, currency fluctuations,labor market conditions, location preferences and other factors.Responding to these trends often requires the relocation of significantamounts of equipment, the establishment of new operations, or resizingexisting operations, all of which may involve significant additionalexpense. If we are unable to respond to these geographic changesefficiently or effectively, we may lose certain productions tocompetitors which would have an adverse effect on our results ofoperations.

The markets for our products are highlycompetitive.

The market for our cinematography equipment ishighly competitive, primarily driven by technology, customer serviceand price. As a manufacturer of camera equipment, our primarycompetitor is Arri Inc. Our primary competitors in the lensmanufacturing business are Zeiss and Cooke Optics Limited, who are alsothe primary suppliers of lenses to our rental competitors. As a renterof camera and lighting equipment, we compete with numerous rentalhouses, which purchase equipment from other manufacturers and then rentthat equipment to their customers. In addition, in recent years Arrihas also been expanding its own rental operations. Although fragmented,the lighting rental market is also highly competitive and driven byprice. There can be no assurance that we will be able to continue todevelop, manufacture and market our camera and lighting productssuccessfully against existing or new competitors.

As we continueto see our industry transition from film to digital image capture, weare likely to see a number of new technological competitors that mayinclude existing or new film or digital camera manufacturers and othercompanies that have a history of technological innovation in thedigital arena. The digital camera rental market may be highlycompetitive and there can be no assurance that we will be as successfulin capturing the market share in the digital camera rental market as wehave been in the traditional camera rental market, or that the revenueand cash flows generated from the rental of digital cameras willcompare favorably to the levels we experience in the traditional camerarental market. A number of these new competitors have significantlygreater research and development resources and financial resources thanus and we cannot assure that we will be able to effectively compete orachieve successful alliances with these companies.

Themotion picture and television industries are subject to changes intechnology, industry standards, customer requirements and productofferings.

The motion picture and television industries aresubject to technological change, evolving industry standards, changingcustomer requirements including artistic preferences and trends, andimprovements in and expansion of product offerings. The choice of imagecapture equipment is very often driven by artistic preferences ofparticular cinematographers that may change over time. Predicting thetrend of such preferences is difficult, particularly with respect tonew technologies such as digital image capture. Our ability toanticipate and adapt to all of these changes will be significantfactors in our ability to remain a leader in the manufacturing andrental of cinematography equipment. Keeping pace with technologicaladvancements is an important part of our ability to compete. There canbe no assurance that products or technologies developed by others willnot render our products or technologies noncompetitive or obsolete orthat we will be able to develop new products to meet the changes anddemands in our industry. Further, some existing products for which wecurrently have exclusivity, such as a camera similar to theGenesis® camera, may become available to competitorsand this may have an adverse affect on our ability to competeeffectively and, in turn, on our results ofoperations.

9

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One of the most significant changes weare likely to encounter over the next several years is the emergingdemand for digital image capture. In addition to the potentialcompetitive pressures in this new market discussed above, thetransition poses other significant challenges for us. It is difficultfor us to anticipate the rate at which our customers will want to movefrom traditional film equipment to digital equipment, and which of ourcustomers will want to make that transition. If the transition todigital image capture occurs more rapidly than we anticipate, it willcreate pressure for additional capital expenditures and increasedexpenses in addition to technological challenges and we cannot assurethat we will be able to make such investments or respond rapidly enoughto meet the change in demand. If our competitors are able to anticipateand respond to the pace of transition to digital image capture moreeffectively than us, it will adversely affect our results ofoperations.

Our business and competitive position depends, inpart, on our ability to protect and exploit our new and existingintellectual property rights.

We rely on a combination ofpatents, licensing arrangements, trade names, trade and service marks,proprietary know-how and technology and trade secrets to protect ourintellectual property rights. We own or have been assigned or licenseddomestic and foreign patents and patent applications relating to ourcameras, lenses and accessories. We also own or have been assignedseveral domestic and foreign trademark or service mark registrationswhich, collectively, are material to our business. The success of ourbusiness operations and competitive position within our industrydepends, in part, on our continued ability to obtain intellectualproperty rights for our new products. Our existing intellectualproperty rights may not provide commercially meaningful protectionagainst competitors. Our manufacturing competitors may challenge ourpatents or independently develop similar products that could result inan interference proceeding in the U.S. Patent Trademark Office or alegal action. Enforcing our rights under these circumstances may bedifficult, costly and time consuming. Our manufacturing competitors mayalso be able to design around our patents or develop unique productsproviding technology similar to our products. In addition, our abilityto use our patent rights, as well as our ability to obtain new patentrights, may be more limited in certain markets outside of the UnitedStates because the protections available in other jurisdictions may notbe as extensive as those available domestically.

Wemay not be successful in implementing strategies for futuregrowth.

If we fail to successfully implement strategies forfuture growth, including developing and manufacturing technologicallysuperior cameras, lenses and accessories, we may not be able to grow orremain competitive. We have recently introduced, and plan in the futureto introduce, new products in the markets in which we compete; however,demand for our new products may not materialize. In addition, as partof our strategy for growth, we may plan from time to time to pursuestrategic acquisitions, which will be dependent upon a number offactors, including our ability to identify acceptable acquisitioncandidates, consummate acquisitions on favorable terms, successfullyintegrate acquired assets and obtain financing to support our growth.We may not be successful in acquiring additional assets, and anyacquisitions that we do consummate may not produce the anticipatedbenefits or may have adverse effects on our business and operatingresults.

Our business may suffer if we do notattract and retain existing and additional highly skilledpersonnel.

Our business may suffer if we do not attract andretain additional highly skilled personnel. To meet our planned growth,we believe that our future success will depend upon our ability toretain our existing personnel and to hire, train and retain new, highlyskilled personnel, particularly in the areas of research anddevelopment, engineering, equipment service and finance. Competitionfor quality personnel in each of these areas is intense, particularlywith respect to all areas relating to digital image capture expertise.We cannot be sure that we will be successful in hiring, assimilating orretaining the necessary personnel, and our failure to do so could havean adverse affect on our operating results.

We aredependent upon key suppliers.

We use outside vendors forthe manufacture of certain components used in our products, such as thegrinding, manufacture and polishing of certain camera lens elements. Wecurrently obtain the glass we use 

10

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to manufacture our camera lenses frompredominantly one vendor, Raytheon Corporation, and Sony is the vendorof the majority of our digital image capture camera inventory. Wegenerally do not have supply contracts with our outside vendors. If wewere to lose one or more of such vendors, or if we were otherwiseunable to obtain such components on terms that are favorable to us, itcould disrupt our business in a manner that leads to an adverse effecton our results of operations.

We are subject to theeffects of foreign currency fluctuations and social, political andeconomic risks affecting foreign operations.

In 2003, 2004and 2005, approximately 59%, 60% and 61% of ourrevenue, respectively, was generated outside of the United States. Weconsider revenue generated outside of the United States to be revenuederived from the rental and sale of products for productions that arefilmed outside United States. We expect that international operationswill continue to account for a significant portion of our revenue infuture periods. As of December  31,  2005 and as of theclose of the March  2006 Refinancing, all but $9.4  millionand $9.2 million, respectively, of our indebtedness comprisedobligations denominated in United States dollars, and we expect this tocontinue to be the case. The results of operations of our internationalsubsidiaries are translated from international currencies to UnitedStates dollars. Therefore, our results of operations are affected byfluctuations in exchange rates between such currencies. In addition toforeign exchange risk, international operations are subject to a numberof special risks, including trade barriers, exchange controls, nationaland regional labor strikes, political risks and risk of increases induties, taxes and governmental royalties, as well as changes in lawsand policies governing operations of foreign-based companies. Inaddition, earnings of foreign subsidiaries and intercompany paymentsare subject to foreign income tax rules that may reduce cash flowavailable to meet required certain of our debt service and otherobligations of Panavision.

We depend on our facilityin California.

Our sole camera and lens manufacturingfacility is located in Woodland Hills, California. It is also ourlargest warehousing and camera rental facility. Since we are dependenton this manufacturing, warehousing and rental facility, a disruption ofour operations at this facility could have an adverse effect on ourbusiness, financial condition and results of operations. Suchdisruption could result from various factors including human error, anatural disaster such as an earthquake, fire or flood, or a terroristattack.

We do not own the real estate for any of ourprincipal facilities. Accordingly our business is highly dependent uponthe ability to renew existing leases or locate new leaseholdpremises.

As we do not own the real estate on which any ofour principal facilities, including Woodland Hills, California, arelocated throughout the world, we depend on our ability to renewexisting leases as they expire or to locate suitable alternatelocations. Many of our operations are located in markets where there issignificant competition for appropriate commercial real estate, thatmay make it difficult, or more expensive, to renew existing leases orto obtain suitable alternate locations, if necessary. In addition, ifit becomes necessary to relocate existing facilities it may causesignificant disruption to our operations. Failure to effectively managethese real estate challenges may have an adverse affect on ouroperations and, accordingly, our results of operations.

Weare developing new information systems and if we are unsuccessful inthe development and implementation of such systems, it could interruptour operations and adversely affect our ability to run ourbusiness.

In conjunction with an external consultingcompany, we are in the process of developing a new information systemthat, if successful, is expected to provide significant improvements tothe core functions of our rental operations, asset management, andrelated financial functions. The development of this system for globaldeployment will require a significant commitment of time from employeesacross a broad range of functions, which may distract our employeesfrom the successful performance of their existing functions. Given thatthis system is being custom built for our operations, the developmentof this system poses a number of challenges including managing a largefleet of physical assets located in numerous locations around theworld, accounting for local regulatory and practical differences in our

11

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operations around the world, makingnecessary changes to our existing work practices to adapt to the newsystems and training our personnel on the new systems. Accordingly, wemay not be successful in developing and implementing this new system.Failure to smoothly and successfully develop and implement this systemcould interrupt our operations and adversely impact our ability to runthe business. 

If our internal control overfinancial reporting does not comply with the requirements of theSarbanes-Oxley Act of 2002, our business may be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 requirescompanies to comprehensively evaluate their internal control overfinancial reporting. To comply with this statute, we will be requiredto document and test our internal control over financial reporting; ourmanagement will be required to assess and issue a report concerning ourinternal control over financial reporting; and our independentregistered public accounting firm will be required to attest to andreport on management's assessment. Reporting on our compliancewith Section 404 of the Sarbanes-Oxley Act will first be required inconnection with the filing of our Annual Report on Form 10-K for thefiscal year ending December  31,  2007. The standards thatmust be met for management to assess our internal control overfinancial reporting are new and require significant investment of time,money and other resources, documentation and testing. If our internalcontrol over financial reporting does not comply with the requirementsof the Sarbanes-Oxley Act of 2002, our business may be adverselyaffected.

We are controlled by MacAndrews & ForbesHoldings Inc. (‘‘MacAndrews & ForbesHoldings’’).

MacAndrews & Forbes Holdingsindirectly owns approximately 96.3% of our common stock.MacAndrews & Forbes Holdings is therefore able to direct andcontrol our policies and those of our subsidiaries, including withrespect to mergers, sales of assets and similar transactions. Shares ofcommon stock of intermediate holding companies may from time to time bepledged to secure obligations of MacAndrews & Forbes Holdings orits affiliates. A foreclosure upon any such shares could constitute achange of control and event of default, which would permit our lendersto accelerate our Senior Secured Credit Facility. We may not havesufficient funds at the time of the change of control to repay in fullthe borrowings under our Senior Secured Credit Facility.

Ouroperating results have been and may continue to be subject to seasonalfluctuations.

Our revenue and net income are subject toseasonal fluctuations. For example, in North America, episodictelevision programs typically cease filming in the second quarter forseveral months, and typically resume production in August. Feature filmactivity typically reaches its peak in the third and fourth quarters.These seasonal factors may lead to fluctuations in our quarterlyoperating results.

Item 1B.    Unresolved StaffComments

None.

Item2.    Properties

Panavision’s headquarters andprincipal camera and lens manufacturing facility are located at its150,000 square-foot facility in Woodland Hills, California. Our othersignificant manufacturing facility is the Lee Filters facility locatedin Andover, England. We conduct our operations through rental officesowned and operated by us as well as through independent distributors.All principal facilities are leased, although we do own one smallfacility in Glasgow, Scotland. The table below summarizes the worldwidepresence of our O&O offices. In addition, Panavision may from timeto time service its customers at other locations asneeded.

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|                                |  |               |        |                |  |           |        |        |  |        |        |        |  |  |
|--------------------------------|--|---------------|--------|----------------|--|-----------|--------|--------|--|--------|--------|--------|--|--|
| Owned& Operated Facilities |  | Camera Rental |        | LightingRental |  | Filters * |
| NorthAmerica                   |  |          |   |           |  |      |   |   |  |   |   |   |
| WoodlandHills,California       |  | X             |        |           |  |      |
| Hollywood,California           |  | X             |        |           |  |      |
| Burbank,California             |  |          |        |           |  | X         |
| Dallas,Texas                   |  | X             |        | X              |  |      |
| NewYork, NewYork               |  | X             |        | X              |  |      |
| NewOrleans, Louisiana          |  | X             |        | X              |  |      |
| Orlando,Florida                |  | X             |        |           |  |      |
| Toronto,Canada                 |  | X             |        |           |  |      |
| Calgary,Canada                 |  | X             |        |           |  |      |
| Halifax,Canada                 |  | X             |        |           |  |      |
| Vancouver,Canada               |  | X             |        |           |  |      |
| Europe                         |  |          |        |           |  |      |
| London,England                 |  | X             |        | X              |  |      |
| Andover,England                |  |          |        |           |  | X         |
| Manchester,England             |  | X             |        | X              |  |      |
| Bristol,England                |  |          |        | X              |  |      |
| Glasgow,Scotland               |  |          |        | X              |  |      |
| Dublin,Ireland                 |  | X             |        |           |  |      |
| Paris,France                   |  | X             |        | X              |  |      |
| Marseilles,France              |  | X             |        |           |  |      |
| Prague,CzechRepublic           |  | X             |        |           |  |      |
| Warsaw,Poland                  |  | X             |        |           |  |      |
| AsiaPacific                    |  |          |        |           |  |      |
| Sydney,Australia               |  | X             |        | X              |  |      |
| Melbourne,Australia            |  | X             |        | X              |  |      |
| Queensland,Australia           |  | X             |        | X              |  |      |
| Auckland,NewZealand            |  | X             |        |           |  |      |
| Wellington,NewZealand          |  | X             |        | X              |  |      |
|                                |

|  |
|--|
|  |  |
|  |

|   |                                                                                                                           |
|---|---------------------------------------------------------------------------------------------------------------------------|
| * | Primaryfilters distribution facilities. Filters and other consumables areavailable from numerous rental locations aswell. |

Panavision camera equipment and accessoriesare also available through a worldwide network of independentdistributors in the followinglocations:

|                        |  |                        |  |                             |  |  |  |  |  |  |
|------------------------|--|------------------------|--|-----------------------------|--|--|--|--|--|--|
| Americas               |  | Europe/Africa          |  | AsiaPacific                 |
| Montreal,Quebec,Canada |  | Rome,Italy             |  | Beijing,China               |
| Mexico City, Mexico    |  | Milan,Italy            |  | Guangzhou, China            |
| Sao Paulo,Brazil       |  | Madrid, Spain          |  | Shanghai,China              |
| Rio de Janeiro, Brazil |  | Budapest,Hungary       |  | Kowloon, Hong Kong          |
|                   |  | Lisbon,Portugal        |  | Kuala Lumpur,Malaysia       |
|                   |  | Capetown, South Africa |  | Singapore, Singapore        |
|                   |  | Gauteng, SouthAfrica   |  | Bangkok,Thailand            |
|                   |  |                   |  | Tokyo, Japan(2)             |
|                   |  |                   |  | Osaka,Japan                 |
|                   |  |                   |  | Muntinlupa City,Philippines |
|                   |  |                   |  | Chennai,India               |
|                        |

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Item 3.    LegalProceedings

Panavision is not engaged in any legal proceedingother than ordinary routine litigation incidental to its business.Currently, Panavision is not involved in any legal proceeding that itexpects to have a material effect on its financial condition, resultsof operations, or business.

Item 4. Submission of Mattersto a Vote of Security Holders

No matter was submitted to a voteof security holders during the fourth quarter of 2005.

PARTII

|               |                                                                                                            |
|---------------|------------------------------------------------------------------------------------------------------------|
| Item 5.  | Market for Registrant'sCommon Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities |

Until August  5,  2002, PanavisionCommon Stock was listed on the New York Stock Exchange(‘‘NYSE’’) under the symbol‘‘PVI’’. After failing to meet certaincontinued listing criteria of the NYSE, the Company’s stockceased trading on the exchange and now trades over the counter underthe symbol ‘‘PVIS.OB’’.

As ofMarch  21,  2006, there were 79 registered holders ofrecord of Panavision CommonStock.

|               |  |                   |        |        |  |        |        |        |  |  |
|---------------|--|-------------------|--------|--------|--|--------|--------|--------|--|--|
|          |  | StockSalesPrices* |
|          |  | High              |        | Low    |
| 2005          |  |              |   |   |  |   |   |   |
| FirstQuarter  |  | $                 | 6.25   |   |  | $      | 5.50   |   |
| SecondQuarter |  |              | 6.25   |   |  |   | 4.50   |   |
| ThirdQuarter  |  |              | 4.50   |   |  |   | 3.75   |   |
| FourthQuarter |  |              | 6.00   |   |  |   | 3.75   |   |
| 2004          |  |              |   |   |  |   |   |   |
| FirstQuarter  |  | $                 | 6.00   |   |  | $      | 4.80   |   |
| SecondQuarter |  |              | 6.00   |   |  |   | 3.25   |   |
| ThirdQuarter  |  |              | 6.75   |   |  |   | 5.75   |   |
| FourthQuarter |  |              | 7.00   |   |  |   | 5.95   |   |
|               |

|  |
|--|
|  |  |
|  |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| * | SinceAugust  5,  2002, our Common Stock has traded over thecounter under the ticker symbol‘‘PVIS.OB’’. As such, stock information inthis table represents over-the-counter market quotations that reflectinter-dealer prices, without retail mark-up, mark-down or commissionsand may not necessarily represent actual transactions. The tradingmarket for our Common Stock may at times be relatively illiquid due tolow trading volume. |

We have never paid a cash dividend onour Common Stock and do not anticipate paying any cash dividend on ourCommon Stock in the foreseeable future. The current policy of our Boardof Directors is to retain earnings to finance the operations andexpansion of our business. In addition, our Amended and Restated CreditAgreement restricted, and our Senior Secured Credit Agreement restrictsour ability to pay dividends to our stockholders (see Item 7,‘‘Management’s Discussion and Analysis ofFinancial Condition and Results of Operations’’ and Note12 of Notes to the Consolidated Financial Statements of theCompany).

14

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Item 6.    Selected FinancialData

The following selected financial data has been derivedfrom our Consolidated Financial Statements. The information set forthbelow is not necessarily indicative of results of future operations,and should be read in conjunction with Item 7,‘‘Management’s Discussion and Analysis ofFinancial Condition and Results of Operations’’ and theConsolidated Financial Statements and related Notes thereto includedelsewhere in this Form10-K.

|                                                                       |  |                        |         |                                      |  |                                   |         |          |  |                                |         |                         |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|-----------------------------------------------------------------------|--|------------------------|---------|--------------------------------------|--|-----------------------------------|---------|----------|--|--------------------------------|---------|-------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                  |  |                   |         |                                 |  |                              |         |     |  | Yearended December 31, 2001(2) |
|                                                                  |  |                   |         |                                 |  |                              |         |     |  | Pre-M&FPurchase(1)         |         | Post-M&FPurchase(1) |
|                                                                  |  | Yearended December 31, |         | Period FromJanuary 1toApril 19, 2001 |  | Period fromApril 20toDec. 31,2001 |
|                                                                  |  | 2005(2)                |         | 2004 (2)                             |  | 2003 (2)                          |         | 2002 (2) |
| Statement of OperationsData:                                          |  |                   |    |                                 |  |                              |    |     |  |                           |    |                    |  |   |    |    |  |   |    |    |  |   |    |    |
| Camerarental                                                          |  | $                      | 147,281 |                                 |  | $                                 | 127,188 |     |  | $                              | 118,787 |                    |  | $      | 122,223 |    |  | $      | 45,660  |    |  | $      | 78,978  |    |
| Lightingrental                                                        |  |                   | 44,110  |                                 |  |                              | 41,701  |     |  |                           | 38,886  |                    |  |   | 32,844  |    |  |   | 9,629   |    |  |   | 22,118  |    |
| Salesandother                                                         |  |                   | 41,910  |                                 |  |                              | 38,175  |     |  |                           | 33,467  |                    |  |   | 31,212  |    |  |   | 10,520  |    |  |   | 20,451  |    |
| Totalrevenue                                                          |  |                   | 233,301 |                                 |  |                              | 207,064 |     |  |                           | 191,140 |                    |  |   | 186,279 |    |  |   | 65,809  |    |  |   | 121,547 |    |
| Costof camerarental                                                   |  |                   | 78,651  |                                 |  |                              | 67,818  |     |  |                           | 58,380  |                    |  |   | 59,709  |    |  |   | 17,272  |    |  |   | 38,675  |    |
| Costof lightingrental                                                 |  |                   | 33,789  |                                 |  |                              | 33,867  |     |  |                           | 32,108  |                    |  |   | 26,241  |    |  |   | 7,933   |    |  |   | 17,612  |    |
| Costof sales andother                                                 |  |                   | 24,710  |                                 |  |                              | 22,472  |     |  |                           | 19,657  |                    |  |   | 17,351  |    |  |   | 5,816   |    |  |   | 11,756  |    |
| Totalcost ofrevenue                                                   |  |                   | 137,150 |                                 |  |                              | 124,157 |     |  |                           | 110,145 |                    |  |   | 103,301 |    |  |   | 31,021  |    |  |   | 68,043  |    |
| Grossmargin                                                           |  |                   | 96,151  |                                 |  |                              | 82,907  |     |  |                           | 80,995  |                    |  |   | 82,978  |    |  |   | 34,788  |    |  |   | 53,504  |    |
| Selling,general andadministrative                                     |  |                   | 77,534  |                                 |  |                              | 72,338  |     |  |                           | 68,804  |                    |  |   | 52,994  |    |  |   | 17,557  |    |  |   | 42,522  |    |
| Researchand developmentexpenses                                       |  |                   | 5,219   |                                 |  |                              | 5,641   |     |  |                           | 4,510   |                    |  |   | 4,158   |    |  |   | 1,737   |    |  |   | 2,960   |    |
| Operatingincome                                                       |  |                   | 13,398  |                                 |  |                              | 4,928   |     |  |                           | 7,681   |                    |  |   | 25,826  |    |  |   | 15,494  |    |  |   | 8,022   |    |
| Netinterestexpense                                                    |  |                   | (36,012 | )                               |  |                              | (31,762 | )   |  |                           | (29,655 | )                  |  |   | (34,522 | )  |  |   | (15,019 | )  |  |   | (28,436 | )  |
| Refinancingexpense                                                    |  |                   | (262    | )                               |  |                              | (6,191  | )   |  |                           | (1,505  | )                  |  |   | (4,523  | )  |  |   | — |    |  |   | — |    |
| Netotherincome                                                        |  |                   | 65      |                                 |  |                              | 4,362   |     |  |                           | 1,263   |                    |  |   | 2,406   |    |  |   | 48      |    |  |   | 594     |    |
| Lossfrom continuing operations before incometaxes                     |  |                   | (22,811 | )                               |  |                              | (28,663 | )   |  |                           | (22,216 | )                  |  |   | (10,813 | )  |  |   | 523     |    |  |   | (19,820 | )  |
| Incometax benefit(provision)                                          |  |                   | (873    | )                               |  |                              | 7,463   |     |  |                           | 5,693   |                    |  |   | 2,464   |    |  |   | (1,011  | )  |  |   | 6,429   |    |
| Netloss from continuingoperations                                     |  |                   | (23,684 | )                               |  |                              | (21,200 | )   |  |                           | (16,523 | )                  |  |   | (8,349  | )  |  |   | (488    | )  |  |   | (13,391 | )  |
| Discontinuedoperations:                                               |  |                   |    |                                 |  |                              |    |     |  |                           |    |                    |  |   |    |    |  |   |    |    |  |   |    |    |
| Income(loss) from EFILM(3)                                            |  |                   | — |                                 |  |                              | 715     |     |  |                           | (1,233  | )                  |  |   | (2,730  | )  |  |   | — |    |  |   | (134    | )  |
| Gainon disposal of EFILM(4)                                           |  |                   | — |                                 |  |                              | 10,330  |     |  |                           | — |                    |  |   | — |    |  |   | — |    |  |   | — |    |
| Netincome (loss) from discontinuedoperations                          |  |                   | — |                                 |  |                              | 11,045  |     |  |                           | (1,233  | )                  |  |   | (2,730  | )  |  |   | — |    |  |   | (134    | )  |
| Netloss                                                               |  | $                      | (23,684 | )                               |  | $                                 | (10,155 | )   |  | $                              | (17,756 | )                  |  | $      | (11,079 | )  |  | $      | (488    | )  |  | $      | (13,525 | )  |
| Netloss per share from continuing operations – basic anddiluted |  | $                      | (0.60   | )                               |  | $                                 | (3.21   | )   |  | $                              | (3.46   | )                  |  | $      | (1.28   | )  |  | $      | (0.06   | )  |  | $      | (1.53   | )  |
| Netloss per share – basicand diluted                       |  | $                      | (0.60   | )                               |  | $                                 | (2.34   | )   |  | $                              | (3.60   | )                  |  | $      | (1.59   | )  |  | $      | (0.06   | )  |  | $      | (1.54   | )  |
| Sharesused in computation – basic anddiluted                    |  |                   | 39,381  |                                 |  |                              | 12,617  |     |  |                           | 8,770   |                    |  |   | 8,770   |    |  |   | 8,770   |    |  |   | 8,770   |    |
|                                                                       |

|  |
|--|
|  |  |
|  |

|     |                                                        |
|-----|--------------------------------------------------------|
| (1) | SeeNote 2 of Notes to Consolidated FinancialStatements |

|     |                                                                                    |
|-----|------------------------------------------------------------------------------------|
| (2) | See Note 1 of Notes toConsolidated Financial Statements regardingreclassifications |

|     |                                                                                                                                                                                                       |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Net income taxbenefit (provision) of $0, $(462), $721, $1,681 and $82, for the yearsended December  31,  2005, 2004, 2003, and 2002, and theperiod from April  20 to December  31,  2001,respectively |

|     |                              |
|-----|------------------------------|
| (4) | Net of income taxes of$6,682 |

15

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Item 6.    Selected Financial Data(continued)

|                              |  |                   |         |                  |  |                 |         |                  |  |                 |         |        |  |        |         |        |  |        |         |        |  |  |
|------------------------------|--|-------------------|---------|------------------|--|-----------------|---------|------------------|--|-----------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                         |  | December31,2005** |         | December 31,2004 |  | December31,2003 |         | December 31,2002 |  | December31,2001 |
| Balance SheetData:           |  |              |    |             |  |            |    |             |  |            |    |   |  |   |    |   |  |   |    |   |
| Depositfor redemption ofdebt |  | $                 | 67,477  |             |  | $               | — |             |  | $               | — |   |  | $      | — |   |  | $      | — |   |
| Totalassets                  |  |              | 677,323 |             |  |            | 620,660 |             |  |            | 611,546 |   |  |   | 614,411 |   |  |   | 596,429 |   |
| Totalcurrentliabilities      |  |              | 125,174 |             |  |            | 46,310  |             |  |            | 40,326  |   |  |   | 56,074  |   |  |   | 46,942  |   |
| Long-termdebt*               |  |              | 307,727 |             |  |            | 299,894 |             |  |            | 333,789 |   |  |   | 467,397 |   |  |   | 448,623 |   |
| Stockholders’equity    |  |              | 216,338 |             |  |            | 242,932 |             |  |            | 204,670 |   |  |   | 72,129  |   |  |   | 775,325 |   |
|                              |

|  |
|--|
|  |  |
|  |

|   |                                                                               |
|---|-------------------------------------------------------------------------------|
| * | Includesredeemable Series B Preferred Stock as of December  31,2002 and 2001. |

|    |                                                                                                                                                                                                                                                                                                                                                                                                                  |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** | On January3,  2006, the 9 5/8% Notes (included ascurrent liabilities at December  31,  2005) were redeemed,along with accrued interest thereon, with the funds depositedfor that purpose. See Item 7 ‘‘Management’sDiscussion and Analysis of Financial Condition and Results ofOperations’’ and Notes 12 and 23 of Notes to ConsolidatedFinancial Statements of the Company. |

Item7.    Management's Discussion and Analysis of FinancialCondition and Results of Operations

The following should be readin conjunction with the Consolidated Financial Statements of Panavisionand the Notes thereto included elsewhere in this Form 10-K. Except forthe historical information contained in this Annual Report on Form10-K, this Annual Report on Form 10-K, including the followingdiscussion, contains ‘‘forward-lookingstatements’’ that involve risks and uncertainties. See‘‘Forward-Looking Statements’’ and Item 1A.‘‘Risk Factors.’’

Overview

Weare the leading designer, manufacturer, and supplier of high precisioncamera systems for the motion picture, television series and televisioncommercial markets in North America, Europe and the Asia PacificRegion. The products we rent include film and digital cameras, lenses,and accessories; lighting equipment; and cranes and remote devices usedin those markets. We provide technical support services to ourcustomers around the world in conjunction with theses activities. Wesell the filters and other consumable items used by our customers. Inaddition, the Company continues to serve markets covering music videos,corporate programming, documentaries and other professional productionmarkets that utilize our services and equipment.

Our revenuehistorically has fluctuated on a quarterly basis with revenues in thesecond half of each fiscal year typically higher than the first half,due, in part, to North American television production activity duringthat period. At the same time, our annual investment in new equipmentusually occurs early in the year to ensure that our inventory isappropriate to meet the needs of our customers over the entire year. Webelieve this trend of seasonality of revenue and capital spending islikely to continue in the future.

We believe that maintenanceand growth of our business requires continued technological innovation,engineering excellence, and a commitment to delivering high-qualityproducts and services to our customers and partners. We are alsoincreasing our focus on emerging geographic markets through newindependent distributor relationships and through newowned-and-operated (‘‘O&O’’) offices.In addition, we continue to develop innovative camera, optics and otherequipment and tools to enhance the creative experience and productivityof our customers. We also continue to invest in research anddevelopment of existing businesses, such as digital imaging technology,that we believe will become increasingly significant to our business incoming years. We believe that digital imaging, including theGenesis® camera, will become an important part of ourbusiness in the future and has the potential to deliver significantworkflow improvements to customers.

Worldwide production factorshave a strong correlation to business and consumer demand for ourservice offerings. We expect that general production trends will remainstable or experience slight improvement in fiscal year 2006 as comparedto fiscal year 2005.

In 2006, we remain focused on execution inkey areas of our business, responding effectively to customer needs,and continue to focus internally on product excellence, businessefficacy, and accountability across the Company. We believe that keymarket opportunities include: strengthening our core 

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camera and lighting rental business throughgeographic expansion, selective strategic acquisitions, and selectiveequipment upgrades; expanding our innovative portfolio of products byoffering extensions of our technologies targeted towards specificcustomer needs, either as new products or as higher-value versions ofexisting products; and growth of our Federal Systems business, whichoffers imaging and optics solutions to government clients and theirsuppliers. We will also continue to remain focused on achievingimprovements in operating efficiencies.

Summary of 2005Results

We experienced significant revenue growth in camerarental of $20.1  million to $147.3  million in 2005 from$127.2  million in 2004 and increases in revenue from ourlighting and other businesses as well. In general, the revenue growthwas attributable to an increase in episodic television production,feature film production and the introduction of theGenesis® camera in 2005. Gross margin in 2005increased $13.2  million to $96.2  million, as comparedwith $82.9  million in 2004. The increase was driven by higherproduction volume and larger camera packages, the effect of variousacquisitions, and favorable foreign currency translation, partiallyoffset by higher costs of camera rentals.

Net loss fromcontinuing operations before income taxes in 2005 decreased $5.9million to $22.8  million, as compared with $28.7  millionin 2004. The improvement in net loss for 2005, as compared with 2004,reflected an increase in gross margin and lower refinancing costspartially offset by higher selling, general and administrative costs(‘‘SG&A’’) and interest expense.

Overview of Financing Activities

In January2006, the Company redeemed all of its outstanding9 5/8% Senior Subordinated Discount Notes Due2006 (‘‘9 5/8%Notes’’) with borrowings under the Senior SubordinatedTerm Loan (the ‘‘PX Term Loan Agreement’’)from PX Holding Corporation (‘‘PXHolding’’), our majority shareholder. Further, in Marchof 2006, the Company completed a substantial refinancing of itsexisting long-term debt. In that refinancing, the Company was able toreduce its expected cost of borrowing, raise additional capital to fundcapital spending requirements including the implementation of itsstrategy related to digital image capture, strengthen its balance sheetthrough the issuance of preferred stock to PX Holding in exchange forthe retirement of outstanding borrowings under the PX Term LoanAgreement and lengthen the maturity of its long-term debt. (See‘‘—Liquidity and CapitalResources—Long-Term Debt—March  2006Refinancing’’ and Note 23 of Notes to the ConsolidatedFinancial Statements of the Company.)

Results ofOperations

Our revenue is derived from three sources: (i) camerarental operations, (ii) lighting rental operations, and (iii) sales andother revenue. Revenue from camera rental operations consists of therental of cameras, lenses and accessories to the motion picture andtelevision industries through a network of owned and operated rentaloffices located throughout North America, Europe and the Asia Pacificregion, and through a network of independent distributors responsiblefor the rental of our equipment in locations not served by our rentaloffices.

Our lighting rental operations generate revenue throughthe rental of lighting, lighting grip, transportation and distributionequipment, as well as mobile generators, which are all used in theproduction of feature films, television programs, commercials and otherevents. We own and operate lighting rental facilities in the UnitedStates, United Kingdom, Australia and New Zealand. Revenue generated byLee Lighting, our lighting rental facility located in the UnitedKingdom, generates the majority of our lighting rental operationsrevenue.

Sales and other revenue is comprised of: (i) themanufacture and sale of lighting filters through Lee Filters in theUnited Kingdom and the United States; (ii) sales of various consumableproducts, such as film stock, light bulbs and gaffer tape, which areused in all types of productions; (iii) sales of prosumernon-proprietary digital camera and lighting equipment in Australia; and(iv) sales by Panavision Federal Systems, LLC.

17

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We consider revenue from internationalbusiness to be that revenue which is generated from the rental of ourequipment and sales to productions that are located at production sitesoutside of the United States. Disclosure of revenues and long-livedassets by geographical region appears in Note 14 of the Notes toConsolidated Financial Statements.

We transact the majority ofour non-domestic business in the local currency(‘‘LC’’) of the office initiating thetransaction. When LC-denominated activity is converted into U.S.dollars (‘‘USD’’) for presentation in theConsolidated Financial Statements, the change in the value of LCsrelative to the USD has an impact on both the balance sheet and therevenues and costs analyzed below. While both rental revenues and costsof rental revenues in any given country will typically be affected inthe same manner, a change in gross margin can be amplified or mitigateddepending on the direction of foreign exchange rate changes.

During the past three years we entered into several transactionsthat affect comparability of the results of operations. In April2005, our subsidiary Panavision Europe Limited(‘‘PVE’’) entered into an operating leasearrangement with a related party, PX (UK) Limited (‘‘PX(UK)’’), a subsidiary of PX Holding Corporation(‘‘PX Holding’’), whereby PVE leasescertain camera and lighting equipment (the ‘‘PX (UK)Equipment’’) from PX (UK) in the United Kingdom. Inconjunction with the March  2006 Refinancing discussed below, PVEacquired the PX (UK) Equipment from PX (UK). See‘‘Management's Discussion and Analysis of FinancialCondition and Results of Operations—Long-TermDebt.’’

In May  2004, we sold our lightingassets in Canada, thereby exiting the lighting business in thatcountry. In August  2004, we sold our 80% membershipinterest in EFILM, LLC (‘‘EFILM’’), adigital post-production laboratory (‘‘EFILMSale’’). As a result of the EFILM sale, EFILM and itsholding company, LPPI, LLC, have been reported as discontinuedoperations in the Consolidated Financial Statements, the Notes toConsolidated Financial Statements, and in the discussion that follows.In August  2004, we also purchased Technovision France, a filmequipment rental company in Paris. Results of Technovision operationshave been consolidated effective August  14,2004.

In September, 2004, we purchased the outstanding 49%interest in DHD Ventures, LLC (‘‘DHD’’),making DHD our wholly-owned subsidiary, at which point we beganconsolidating DHD’s results of operations. Prior to thispurchase the DHD joint venture was reported using the equity method ofaccounting. Results of DHD operations have been consolidated effectiveSeptember  16,  2004. On December  29,  2004,we purchased all the film and video camera equipment of William F.White International Inc. (‘‘WFW’’) inCanada.

In May, 2003, we increased our ownership in PANY RentalInc. (‘‘PANY Rental’’) to 67% from33%, at which point we began consolidating PANY Rental’sresults of operations; prior to May  2003 we used the equitymethod of reporting for PANY Rental. As a result, the analyses thatfollow reflect the consolidation of PANY Rental for the 12 months ended2005 and 2004 but only eight months in 2003. As of January  2004,PANY Rental became a wholly-owned subsidiary ofPanavision.

Certain amounts in previously issued financialstatements have been reclassified to conform to the 2005 presentation.Additionally, the Company reviewed the components of its reported costof rentals and sales and determined that certain reclassifications wereappropriate to better reflect the operating costs related to revenues.Effective April  2005, freight charges, which had previously beenreported as SG&A costs, are now presented as cost of rentals andsales. Facilities-related costs, such as rents, utilities andmaintenance, which had previously been allocated, using variousmethodologies, to cost of rental assets produced, cost of camera andlighting rentals, cost of sales, SG&A and research and developmentexpenses, are now only allocated to cost of rental assets produced withthe remaining unallocated amount classified as SG&A. All priorperiods have been reclassified to conform to the currentclassification. The effect of the reclassification was to reduce costof sales, increase SG&A and reduce other line items in theCondensed Consolidated Statements of Operations as follows (inthousands):

18

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|                        |  |                            |        |          |  |       |       |        |  |   |      |         |  |  |
|------------------------|--|----------------------------|--------|----------|--|-------|-------|--------|--|---|------|---------|--|--|
|                   |  | Increase(Decrease)         |
| Year Ended December31, |  | Cost of Rentals &Sales |        | SG&A |  | Other |
| 2004                   |  | $                          | (6,125 | )   |  | $     | 6,459 |   |  | $ | (334 | )  |
| 2003                   |  | $                          | (6,410 | )   |  | $     | 6,975 |   |  | $ | (565 | )  |
|                        |

Thefollowing discussion and analysis includes our consolidated historicalresults of operations for the years 2005 compared to 2004 and 2004compared to 2003.

Year Ended December  31,2005 Compared to Year Ended December  31,2004

During 2005, the USD weakened compared to most majorforeign currencies of countries in which we do business. The followingtable presents the average exchange rates we used during 2005 and 2004for translating LC-denominated activity (US$: 1LC):

|                            |  |                          |  |                    |  |                          |  |        |  |                |  |  |  |  |  |  |  |  |  |  |  |  |
|----------------------------|--|--------------------------|--|--------------------|--|--------------------------|--|--------|--|----------------|--|--|--|--|--|--|--|--|--|--|--|--|
|                       |  | U.K. PoundSterling       |  | AustralianDollar   |  | NewZealandDollar         |  | Euro   |  | CanadianDollar |
| 2005                       |  | 1.8226    |  | 0.7635   |  | 0.7045    |  | 1.2486 |  | 0.8240    |
| 2004                       |  | 1.8254    |  | 0.7368   |  | 0.6626    |  | 1.2408 |  | 0.7690    |
| Increase(decrease) vs. US$ |  | (0.2)%    |  | 3.6%     |  | 6.3%      |  | 0.6%   |  | 7.2%      |
|                            |

Thesecurrency rate changes have had an impact on the amounts of rentalrevenues, costs of revenues, and operating costs translated from LCinto US$, although the impact in 2005 was less pronounced than inrecent previous years as the U.S. dollar strengthened against thesecurrencies during the later part of 2005. Management believes itprovides insight into operational performance to review the results ofoperations after taking into account the affect of exchange ratechanges on LC amounts translated into US$, and accordingly, in additionto discussing results of operations prior to giving effect to suchexchange rate changes we have included that information in thefollowing discussion.

Camera RentalOperations

|                |  |                        |         |                    |  |        |         |         |  |        |        |        |  |        |        |         |  |  |
|----------------|--|------------------------|---------|--------------------|--|--------|---------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands)  |  | Year Ended December31, |         | Increase(Decrease) |
|           |  | 2005                   |         | 2004               |  |   |         | %       |
| Rentalrevenue  |  | $                      | 147,281 |               |  | $      | 127,188 |    |  | $      | 20,093 |   |  |   | 15.8   | %  |
| Costof rentals |  |                   | 78,651  |               |  |   | 67,818  |    |  |   | 10,833 |   |  |   | 16.0   | %  |
| Margin         |  | $                      | 68,630  |               |  | $      | 59,370  |    |  | $      | 9,260  |   |  |   | 15.6   | %  |
| Cost%          |  |                   | 53.4    | %             |  |   | 53.3    | %  |  |   |   |   |  |   |   |    |
|                |

Themain factors underlying the increase in camera rental revenue wereadditional revenue from television and the purchase of the WFW assets,the leasing of the PX (UK) Equipment and the acquisitions ofTechnovision and DHD, along with increased revenue from commercials andfeature films and the positive translation effect of foreign exchangerate changes. After taking into account the effects of currencytranslation and the DHD acquisition described above, camera rentalrevenue increased approximately $16.0  million. Rental revenueincreased from television, feature films, commercials and other camerarevenue by approximately $8.9  million, $3.6  million,$2.4  million and $1.1  million, respectively. Theweakening of the US$, primarily against the Canadian dollar, increasedcamera rental revenue by approximately $2.6  million, and weestimate the impact of the DHD acquisition on camera rental revenueswas an increase of approximately $1.5  million. As the WFW andTechnovision assets and the PX(UK) Equipment have been integrated intoour respective regional operations, the impact of their utilizationcannot be accurately quantified but we believe it has been accretive torevenue.

As digital image capture technology becomes responsiblefor a larger part of our revenue, the Company benefits from increasedmargins on the rental of the Genesis® camera system.Higher margins are driven by more favorable pricing due, in part, tothe fact that through utilization of digital image capture ourcustomers are able to achieve cost savings in other elements of theproduction process. Deployment of the Genesis® camerahas assisted the Company in maintaining its gross margin on camerarentals despite the cost increases discussed below.

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The increase in television revenues tookplace primarily in the U.S., Europe and Canada, with the U.S.representing approximately half of the increase. Television revenues inthe U.S. increased as a result of an increase in the number of highproduction value one-hour dramas, an increase in original programmingfor cable networks and a recent increase in the number of scriptedtelevision productions relative to the reality programming that hadbecome increasingly popular over the last few years. Reality shows tendto be lower-budget productions that, as a general rule, are less likelyto use our cameras and lenses. Revenue from feature films increasedapproximately $3.6  million as a $1.1  million decline inrevenue from major feature films was more than offset by a $4.7million increase in revenue from independent films. The increase incamera rental revenue from commercials and other camera revenue was dueprimarily to the addition of the WFW assets in Canada.

On aregional basis, camera rental revenue from Canada increasedapproximately $11.7  million compared with the previous yearwhile camera revenue from U.S. operations, excluding the DHD impact,increased approximately $4.9  million. Outside of North America,European offices reflected a decline in camera rental revenue ofapproximately $0.6  million, while revenue from the Asia Pacificregion was essentially unchanged from 2004. The increase from Canadawas due to an overall increase in the level of production activity inthat country, an increase in Panavision’s portion of featurefilm activity, and the Company’s ability to service and acquirethat incremental activity with the WFW assets. The increase from U.S.operations was due primarily to television. In Europe, significantdeclines in feature films were nearly offset by increases in televisionand commercials, due in large part to the acquisition of Technovisionand the leasing of the PX (UK) Equipment. In the Asia Pacific region,increases in camera rental revenue from feature films essentiallyoffset declines in all other market segments.

Cost of camerarentals increased in part as a result of depreciation charge increasesof $4.2  million primarily related to the acquisitions of DHD,the WFW assets and Technovision. Other operating costs increased$5.9  million, primarily due to increases in payroll-relatedcosts, equipment subrentals (the cost of our having to rent additionalequipment not currently available in our inventory) and third-partycommissions of approximately $2.0  million, $1.8  millionand $2.1  million, respectively. Severance costs of $0.5million, reflecting personnel reductions to reduce fixed operatingcosts, also increased operating costs during the period. Theseincreases were offset by smaller decreases in various other expensecategories totaling $0.5  million. The commissions are directlyrelated to increased revenue from independent distributors and theleasing of the PX (UK) Equipment, while payroll and subrental costs arerelated to both increased rental activity and the recent acquisitionsof the WFW assets and Technovision. Cost of camera rentals increased$0.7  million due to the translation effect of foreign exchangerate changes.

Lighting Rental Operations

|                |  |                        |        |                    |  |        |        |         |  |        |        |         |  |        |        |         |  |  |
|----------------|--|------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|---------|--|--------|--------|---------|--|--|
| (inthousands)  |  | Year Ended December31, |        | Increase(Decrease) |
|           |  | 2005                   |        | 2004               |  |   |        | %       |
| Rentalrevenue  |  | $                      | 44,110 |               |  | $      | 41,701 |    |  | $      | 2,409  |    |  |   | 5.8    | %  |
| Costof rentals |  |                   | 33,789 |               |  |   | 33,867 |    |  |   | (78    | )  |  |   | 0.2    | %  |
| Margin         |  | $                      | 10,321 |               |  | $      | 7,834  |    |  | $      | 2,487  |    |  |   | 31.7   | %  |
| Cost%          |  |                   | 76.6   | %             |  |   | 81.2   | %  |  |   |   |    |  |   |   |    |
|                |

Aftertaking into account a $0.3  million increase from the positiveeffects of foreign currency rate changes, lighting rental revenueincreased $2.1  million. Lighting revenue from the Asia Pacificregion improved $2.7  million primarily due to an increase inmajor feature films in the region. In Europe, significant decline of$4.9  million in lighting rental revenues from major featurefilms in Europe was nearly offset by increases in revenues of$4.6  million from television, independent films and otherlighting projects. U.S. Lighting revenues increased $0.1million. In addition, 2004 results included approximately $0.4million of lighting revenues from Canada prior to the May  2004sale of all our lighting assets in that country.

Cost oflighting rentals declined $0.2  million compared with thecorresponding 2004 period after taking into account a $0.1million increase from the effect of foreign currency rate changes.Depreciation 

20

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charges and payroll costs declined$0.7  million and $0.5  million, respectively, whilefreight and repair & maintenance costs each increased $0.3million. Third party commissions increased $1.0  million, ofwhich approximately half was due to the leasing of the PX (UK)Equipment, but that increase was offset by a decrease in subrentalexpense of $0.6  million. The changes described above are alsodue to the absence in 2005 results of costs associated with theCanadian lighting operation, which operation was sold in 2004 and hadgenerated costs of lighting rentals of $0.5  million in 2004. Theimprovement in gross margin was due to an increase in major featurefilms in the Asia Pacific region partially offset by a decrease inmajor feature films in the United Kingdom. The Asia Pacific region hada higher profit margin than the United Kingdom primarily due to lowerlabor costs as a percentage of rental revenue.

Salesand Other

|                        |  |                        |        |                    |  |        |        |         |  |        |        |        |  |        |        |         |  |  |
|------------------------|--|------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands)          |  | Year Ended December31, |        | Increase(Decrease) |
|                   |  | 2005                   |        | 2004               |  |   |        | %       |
| Sales and otherrevenue |  | $                      | 41,910 |               |  | $      | 38,175 |    |  | $      | 3,735  |   |  |   | 9.8    | %  |
| Costof sales andother  |  |                   | 24,710 |               |  |   | 22,472 |    |  |   | 2,238  |   |  |   | 10.0   | %  |
| Margin                 |  | $                      | 17,200 |               |  | $      | 15,703 |    |  | $      | 1,497  |   |  |   | 9.5    | %  |
| Cost%                  |  |                   | 59.0   | %             |  |   | 58.9   | %  |  |   |   |   |  |   |   |    |
|                        |

Revenuesfrom Lee Filters, with operations in both the United Kingdom and UnitedStates, increased $3.3  million due primarily to severallarge-volume sales of special effects glasses that ended in the thirdquarter of 2005. Contract sales to the U.S. Government, a new activityduring 2005, added $0.8  million of revenue. These increases werepartially offset by net declines of $0.9  million, primarily inEurope due primarily to the overall decline in sales of accessories andconsumables complementary to major feature film activity. The positiveeffects of foreign currency rate changes increased sales and otherrevenue by $0.5  million.

Cost of sales and other increased$0.4  million from the positive effects of foreign currency ratechanges, with the remaining $1.8  million of the change primarilyrelated to the increase in Lee Filters revenues and the costs of thecontract sales to the U.S. Government.

OperatingCosts

|                                    |  |                        |        |                    |  |        |        |        |  |        |       |         |  |        |      |          |  |  |
|------------------------------------|--|------------------------|--------|--------------------|--|--------|--------|--------|--|--------|-------|---------|--|--------|------|----------|--|--|
| (inthousands)                      |  | Year Ended December31, |        | Increase(Decrease) |
|                               |  | 2005                   |        | 2004               |  |   |        | %      |
| Selling, general andadministrative |  | $                      | 77,534 |               |  | $      | 72,338 |   |  | $      | 5,196 |    |  |   | 7.2  | %   |
| Researchanddevelopment             |  |                   | 5,219  |               |  |   | 5,641  |   |  |   | (422  | )  |  |   | (7.5 | )%  |
|                                    |

$0.7million of the increase in SG&A expenses was the result of foreignexchange rate changes. After taking this item into account, SG&Aexpenses increased $4.5  million compared to the correspondingperiod of 2004. The majority of the increase in SG&A costs relatedto severance costs of approximately $2.9  million in connectionwith the departure of several senior employees and the consolidation ofthe U.S. finance function, including departures that were part of theCompany’s effort to reduce operating costs. The balance of theincrease related to additional SG&A expenses was associated withthe operations of Technovision and the WFW assets, primarily payrolland facilities-related costs.

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Interest, Taxes andOther

|                              |  |                        |         |                        |  |        |         |         |  |        |        |         |  |        |        |          |  |  |
|------------------------------|--|------------------------|---------|------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|----------|--|--|
| (inthousands)                |  | Year Ended December31, |         | Favorable(Unfavorable) |
|                         |  | 2005                   |         | 2004                   |  | Change |         | %       |
| Interestexpense              |  | $                      | (36,425 | )                 |  | $      | (32,284 | )  |  | $      | (4,141 | )  |  |   | (12.8  | )%  |
| Interestincome               |  |                   | 413     |                   |  |   | 522     |    |  |   | (109   | )  |  |   | (20.9  | )%  |
| Foreignexchange gain (loss)  |  |                   | (1,979  | )                 |  |   | 338     |    |  |   | (2,317 | )  |  |   | (685.5 | )%  |
| Refinancingexpense           |  |                   | (262    | )                 |  |   | (6,191  | )  |  |   | 5,929  |    |  |   | (95.8  | )%  |
| Otherincome, net             |  |                   | 2,044   |                   |  |   | 4,024   |    |  |   | (1,980 | )  |  |   | (49.2  | )%  |
| Incometax benefit(provision) |  |                   | (873    | )                 |  |   | 7,463   |    |  |   | (8,336 | )  |  |   | (111.7 | )%  |
|                              |

Theincrease in interest expense primarily reflected higher effectiveinterest rates during 2005 along with higher average debt balancescompared to the corresponding period of 2004. During 2004 and 2005slightly more than one-third of the Company’s indebtedness wastied to the 3-month LIBOR, which has increased approximately 200 basispoints during 2005. The higher average debt balances resulted from anincrease in borrowings, primarily capital leases and borrowings fromaffiliates, offset by scheduled principal payments of outstanding debt.Additionally, the Company borrowed approximately $65  million inDecember  2005 from an affiliate which was used to repay the9 5/8% Notes due February  1,  2006.(See ‘‘—Liquidity and CapitalResources—Long-Term Debt—PX Term Loan Agreementand—9 5/8% NotesRedemption’’ and Notes 12 and 23 of Notes to ConsolidatedFinancial Statements).

Foreign exchange activity resulted in alarger loss for the year ended December  31,  2005 ascompared with the year ended December  31,  2004. This wasprimarily due to the effects of the weakening of the USD againstforeign currencies on intercompany balances held in the United Statesthat are denominated in those foreign currencies.

Other income,net decreased due to a $1.5  million gain on the sale of Canadianlighting rental equipment that was recorded in May  2004 alongwith a lower amount of insurance settlement gains in 2005 compared with2004.

Refinancing expense of $6.2  million for the yearended December  31,  2004 reflected costs incurred inconnection with the Company’s January  2004 Refinancingand costs previously incurred in connection with the Company’sPrior Credit Agreement See ‘‘—Long-TermDebt’’). These costs represent lender and professionalfees incurred by the Company.

The income tax provision for theyear ended December  31,  2005 comprises income taxes onprofitable foreign operations and foreign taxes withheld in therelevant jurisdictions. The Company did not recognize any net benefitfrom current tax losses as uncertainty as to future utilizationresulted in an increase to the allowance against deferred tax assets inthe same amount as additional deferred tax assets generated. For theyear ended December  31,  2004 the Company was able torecognize a significant portion of the benefit of the 2004 loss as anoffset to the gain on sale of EFILM reflected in discontinuedoperations. See Note 7 to the Consolidated Financial Statements for adiscussion of the Company’s Tax Sharing Agreements.

Underapplicable Internal Revenue Service regulations, as a result of thesettlement, on December  3,  2002, of certain shareholderlitigation related to the 2001 purchase of shares of theCompany’s Common Stock from PX Holding Corporation by M&FWorldwide Corp. (the ‘‘M&FSettlement’’), the Company may not join in filing aconsolidated federal income tax return with either MacAndrews &Forbes Holdings or the Company’s subsidiaries until May2006 without consent from the Internal Revenue Service. Accordingly,since the December  3,  2002 effective date of the M&FSettlement, the Company files separate federal income tax returns forthe Company and separate returns for incorporated subsidiaries. TheCompany does not believe that the December  3,  2002deconsolidation of its federal income tax returns or the potentialre-consolidation of its returns in May  2006 has had or will havean adverse effect on the Company’s business or financialcondition. (See Note 23 of Notes to Consolidated FinancialStatements).

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Year Ended December31,  2004 Compared to Year Ended December  31,2003

During 2004, the USD weakened compared to most majorforeign currencies of countries in which we do business. The followingtable presents the average exchange rates we used during 2004 and 2003in translating LC-denominated activity (USD: 1LC):

|                 |  |                                |  |                          |  |                          |  |        |  |                    |  |  |  |  |  |  |  |  |  |  |  |  |
|-----------------|--|--------------------------------|--|--------------------------|--|--------------------------|--|--------|--|--------------------|--|--|--|--|--|--|--|--|--|--|--|--|
|            |  | U.K. PoundSterling             |  | AustralianDollar         |  | NewZealandDollar         |  | Euro   |  | CanadianDollar     |
| 2004            |  | 1.8254     |  | 0.7368    |  | 0.6626    |  | 1.2408 |  | 0.7690   |
| 2003            |  | 1.6371     |  | 0.6529    |  | 0.5829    |  | 1.1334 |  | 0.7141   |
| Increasevs. USD |  | 11.5%      |  | 12.9%     |  | 13.7%     |  | 9.5%   |  | 7.7%     |
|                 |

Thesecurrency rate changes have had a significant impact on the amounts ofrental revenues, costs of revenues, and operating costs translated fromLC into USD, and in most cases were the most significant factor inchanges when comparing results for 2004 with2003.

Camera Rental Operations

|                |  |                        |         |                    |  |        |         |         |  |        |        |         |  |        |        |          |  |  |
|----------------|--|------------------------|---------|--------------------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|----------|--|--|
| (inthousands)  |  | Year Ended December31, |         | Increase(Decrease) |
|           |  | 2004                   |         | 2003               |  |   |         | %       |
| Rentalrevenue  |  | $                      | 127,188 |               |  | $      | 118,787 |    |  | $      | 8,401  |    |  |   | 7.1    | %   |
| Costof rentals |  |                   | 67,818  |               |  |   | 58,380  |    |  |   | 9,438  |    |  |   | 16.2   | %   |
| Margin         |  | $                      | 59,370  |               |  | $      | 60,407  |    |  | $      | (1,037 | )  |  |   | (1.7   | )%  |
| Cost%          |  |                   | 53.3    | %             |  |   | 49.1    | %  |  |   |   |    |  |   |   |     |
|                |

Theprimary factor underlying the increase in camera rental revenue was thepositive translation effect of foreign exchange rate changes ofapproximately $5.6  million. Also, the consolidation effect ofDHD and the acquisition of Technovision, as discussed above,contributed additional revenues of approximately $2.5  million in2004. The consolidation effect of PANY Rental was not significant onthe year-to-year rental revenue comparison because, prior toconsolidation, most of PANY Rental’s camera rental revenue wasincluded as a third-party agent. Excluding the effect of currency ratechanges and the acquisitions, camera rental revenue increasedapproximately $0.3  million. In the television market ourrevenues declined by about $2.0  million. We believe this declinewas caused primarily by the impact of‘‘reality’’ programming in the U.S., as ourcameras are typically not used on that type of show for budgetaryreasons. Offsetting this decline were increases in the commercialsmarket of approximately $1.0  million and an increase from thedeployment of several additional cranes.

Major feature filmproduction is a global activity and the level of activity in any givengeographic region can fluctuate from year to year. We estimate that thetotal number of major feature film starts was essentially unchangedfrom 2003 to 2004 and that our share of these total starts increasedslightly. For the feature film category, our O&O units capturedmore of this business in 2004 at the expense of our third-party agentsdue to the location of these productions and as a result, revenue fromfeature films was comparable year to year.

Similar to the changein revenues, the primary reasons for the increase in cost of camerarentals were the translation effect of foreign currency rate changesand the consolidation of acquired businesses. Approximately $3.0million of the increase was due to the translation effect andapproximately $1.6  million was due to the acquisition ofTechnovision and DHD. The consolidation impact of PANY Rental was notsignificant as the increase in camera costs was offset by a decrease inthird-party agent commissions. The balance of the change was due tocost increases throughout our O&O offices, with the largestincrease occurring in the U.S. Costs increased $4.2  milliondomestically, reflecting an increase to inventory reserves of$1.4  million for obsolete raw glass and other items, with thebalance due to higher cost of sub-rentals, and higher maintenance anddepreciation costs.

Excluding the positive effects of currencyrate changes of $2.6  million and $0.8  million from theacquisitions of Technovision and DHD, camera rental gross margindeclined approximately $4.4  million. 

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This decrease was primarily caused by the$1.4  million increase to inventory reserves and highersub-rental and maintenance costs throughout our O&O offices,partially offset by the $0.3  million net increase in camerarental revenue.

Lighting Rental Operations

|                |  |                        |        |                    |  |        |        |         |  |        |        |        |  |        |        |         |  |  |
|----------------|--|------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands)  |  | Year Ended December31, |        | Increase(Decrease) |
|           |  | 2004                   |        | 2003               |  |   |        | %       |
| Rentalrevenue  |  | $                      | 41,701 |               |  | $      | 38,886 |    |  | $      | 2,815  |   |  |   | 7.2    | %  |
| Costof rentals |  |                   | 33,867 |               |  |   | 32,108 |    |  |   | 1,759  |   |  |   | 5.5    | %  |
| Margin         |  | $                      | 7,834  |               |  | $      | 6,778  |    |  | $      | 1,056  |   |  |   | 15.6   | %  |
| Cost%          |  |                   | 81.2   | %             |  |   | 82.6   | %  |  |   |   |   |  |   |   |    |
|                |

Lightingrental revenue increased $3.7  million as compared to 2003 as theresult of the effect of foreign exchange rate changes on internationalrevenues. Excluding the currency effects, there were severalsignificant offsetting changes. The consolidation of PANY Rental fortwelve months of 2004 versus eight months in 2003 was the primaryfactor in a U.S. revenue increase of $2.4  million. In AsiaPacific, lighting contracts for several large-budget motion pictureproductions were the primary reason for revenue improvement of$2.0  million. These improvements were substantially offset by adecrease of $1.6  million due to the May  2004 sale ofCanadian lighting assets and a $3.7  million decrease in revenueat Lee Lighting in the U.K. that was primarily due to a decline inrevenue from major and independent motion pictures as compared with2003.

The cost of lighting rentals increased $3.2  millionas the result of foreign exchange rate changes on international costs.Excluding currency effects, U.S. lighting costs increased $1.7million, while internationally costs declined $1.8  million atLee Lighting and $1.3  million in Canada as result of thelighting asset sale. U.S. costs increased due to the consolidationeffect of PANY Rental discussed above and an increase in equipmentsub-rental and maintenance. At Lee Lighting in the U.K., the costdeclines were due primarily to lower sub-rental and labor costs relatedto the revenue decline. The overall improvement in gross margin as apercentage of revenues was due primarily to the Asia Pacific region,which had a higher profit margin than Lee Lighting primarily due tolower labor costs.

Sales and Other

|                        |  |                        |        |                    |  |        |        |         |  |        |        |        |  |        |        |         |  |  |
|------------------------|--|------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands)          |  | Year Ended December31, |        | Increase(Decrease) |
|                   |  | 2004                   |        | 2003               |  |   |        | %       |
| Sales and otherrevenue |  | $                      | 38,175 |               |  | $      | 33,467 |    |  | $      | 4,708  |   |  |   | 14.1   | %  |
| Costof sales andother  |  |                   | 22,472 |               |  |   | 19,657 |    |  |   | 2,815  |   |  |   | 14.3   | %  |
| Margin                 |  | $                      | 15,703 |               |  | $      | 13,810 |    |  | $      | 1,893  |   |  |   | 13.7   | %  |
| Cost%                  |  |                   | 58.9   | %             |  |   | 58.7   | %  |  |   |   |   |  |   |   |    |
|                        |

Theprimary factor underlying the increase in sales and other revenues wasa $3.7  million positive effect of foreign exchange rate changeson international revenues, which comprise over 90% of totalsales and other revenues. The majority of the remaining increase arosein Asia Pacific due to higher consumables sales related to severallarge-budget lighting contracts obtained in 2004.

The impact offoreign exchange rate changes on the cost of sales and other was$1.7  million. Cost increases in Europe, due primarily to higherraw material costs, comprised the majority of the remainingchange.

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Operating Costs

|                                    |  |                        |        |                    |  |        |        |        |  |        |       |        |  |        |      |         |  |  |
|------------------------------------|--|------------------------|--------|--------------------|--|--------|--------|--------|--|--------|-------|--------|--|--------|------|---------|--|--|
| (inthousands)                      |  | Year Ended December31, |        | Increase(Decrease) |
|                               |  | 2004                   |        | 2003               |  |   |        | %      |
| Selling, general andadministrative |  | $                      | 72,338 |               |  | $      | 68,804 |   |  | $      | 3,534 |   |  |   | 5.1  | %  |
| Researchanddevelopment             |  |                   | 5,641  |               |  |   | 4,510  |   |  |   | 1,131 |   |  |   | 25.1 | %  |
|                                    |

Theprimary factor underlying the change in‘‘SG&A’’ for the year endedDecember  31,  2004 was an increase of $3.4  milliondue to the effect of foreign exchange rate changes on internationalSG&A costs. The remaining increase of $0.1  million resultedfrom several offsetting factors. SG&A in 2003 included severanceexpense of $4.6  million in connection with the departure of theCompany’s former Chief Executive Officer, Chief FinancialOfficer, and President of US Operations. Excluding severance and theeffects of foreign currency rate changes, SG&A increasedapproximately $4.7  million. Costs related to the consolidationeffect of PANY Rental and the acquisition of Technovision increasedSG&A by approximately $2.1  million. Other costs in the U.S.increased by $1.8  million related to higher infrastructurecosts, the majority of which related to support of future growthinitiatives, such as the 300x compound zoom lens, and higherprofessional fees related to increased regulatory compliancerequirements. The majority of the balance occurred in Europe wherecosts increased $0.9  million. The principal reasons for theincrease in Europe were higher advertising, legal and bad debt expensesat Lee Filters and general wage inflation.

The increase inresearch and development expenses for the year ended December31,  2004 related to Panavision’s new product developmentefforts, such as the 300x compound zoom lens and theGenesis® digital camera.

Interest,Taxes and Other

|                             |  |                        |         |                        |  |        |         |         |  |        |        |         |  |        |        |          |  |  |
|-----------------------------|--|------------------------|---------|------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|----------|--|--|
| (inthousands)               |  | Year Ended December31, |         | Favorable(Unfavorable) |
|                        |  | 2004                   |         | 2003                   |  | Change |         | %       |
| Interestexpense             |  | $                      | (32,284 | )                 |  | $      | (30,011 | )  |  | $      | (2,273 | )  |  |   | (7.6   | )%  |
| Interestincome         |  |                   | 522     |                   |  |   | 356     |    |  |   | 166    |    |  |   | 46.6   | %   |
| Foreignexchange gain (loss) |  |                   | 338     |                   |  |   | (604    | )  |  |   | 942    |    |  |   | 156.0  | %   |
| Refinancingexpense          |  |                   | (6,191  | )                 |  |   | (1,505  | )  |  |   | (4,686 | )  |  |   | (311.4 | )%  |
| Otherincome, net            |  |                   | 4,024   |                   |  |   | 1,867   |    |  |   | 2,157  |    |  |   | 115.5  | %   |
| Incometaxbenefit            |  |                   | 7,463   |                   |  |   | 5,693   |    |  |   | 1,770  |    |  |   | 31.1   | %   |
|                        |  |                   |    |                   |  |   |    |    |  |   |   |    |  |   |   |     |
|                             |

Theincrease in interest expense primarily reflected higher effectiveinterest rates in 2004, offset in part by lower debt balances comparedto the prior year. The lower debt balances resulted from theMarch  2003 contribution of $90.9  million principal amountof the 9 5/8% Notes owned by MacAndrews &Forbes Holdings, formerly known as Mafco Holdings Inc., in exchange forequity, the January  2004 Refinancing (discussed below under‘‘Long-Term Debt’’), scheduled amortizationpayments as well as an additional principal payment of $5million with part of the proceeds from the EFILM Sale.

Refinancing expense for the year ended December  31,2004 principally reflected costs incurred in connection with theJanuary  2004 Refinancing. These costs represent primarilyprofessional fees incurred by the Company, including an original issuediscount fee of approximately $2.0  million. Refinancing expensefor the year ended December  31,  2003 reflects costsincurred in connection with our discontinued offering of secured notesin the summer of 2003. These costs represent primarily professionalfees incurred by the Company.

Other income, net was principallycomprised of a $2.5  million gain on sales of property andequipment, a $1.0  million gain related to an insurancesettlement for fire-damaged equipment and a related loss-of-hire claimalong with $0.4  million trademark royalties and management feesfrom Panavision Imaging, LLC and Panavision SVI, LLC, both subsidiariesof MacAndrews & Forbes 

25

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Holdings. The primary component for the yearended December  31,  2003 was a $1.0  million gain onsales of property and equipment and $0.7  million gain related toan insurance settlement for flood-damaged equipment. The reason for theincrease in gain on sales of property and equipment was a $1.5million gain on the May  2004 disposition of Canadian lightingassets.

The income tax benefit for the year 2004 increasedbecause of a greater pre-tax loss from continuing operations. TheCompany was able to recognize a significant portion of the benefit ofthe 2004 loss as an offset to the gain on sale of EFILM reflected indiscontinued operations. See Note 7 to Consolidated FinancialStatements included in the Form 10-K for a discussion of theCompany’s Tax Sharing Agreements.

Under applicableInternal Revenue Service regulations, as a result of the settlement, onDecember  3,  2002 of certain shareholder litigationrelated to the ‘‘M&F Settlement’’, theCompany may not join in filing a consolidated federal income tax returnwith either MacAndrews & Forbes Holdings or the Company’ssubsidiaries until May  2006 without consent from the InternalRevenue Service. Accordingly, since the December  3,  2002effective date of the M&F Settlement, the Company files separatefederal income tax returns for the Company and separate returns forincorporated subsidiaries. The Company does not believe that theDecember  3,  2002 deconsolidation of its federal incometax returns or the potential re-consolidation of its returns inMay  2006 has had or will have an adverse effect on theCompany’s business or financial condition.

CapitalExpenditures

The Company intends to use cash provided byoperating activities, its Revolver (defined below) and proceeds fromthe March  2006 Refinancing (defined and discussed below) to makeadditional capital expenditures primarily to manufacture and purchasedigital camera systems and accessories and purchase other rentalequipment. The Company also has spent and expects to spend asubstantial amount on the continued maintenance and upgrading of itsexisting inventory of cameras, optics and accessories. Consistent withthe Company’s view of the market and its related strategy, theCompany anticipates incurring a similar to slightly higher level ofcapital expenditures in 2006 as compared to 2005.

Liquidity andCapital Resources

The following table sets forth certaininformation from the Company’s Consolidated Statements of CashFlows for the years indicated (inthousands):

|                               |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|-------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                          |  | YearEnded December31, |
|                          |  | 2005                  |         | 2004    |  | 2003   |
| Netcash provided by (usedin): |  |                  |    |    |  |   |    |    |  |   |    |    |
| Operating activities          |  | $                     | 25,024  |    |  | $      | 8,683   |    |  | $      | 13,748  |    |
| Investingactivities           |  |                  | (29,150 | )  |  |   | (12,071 | )  |  |   | (19,883 | )  |
| Financingactivities      |  |                  | 6,952   |    |  |   | 3,087   |    |  |   | 277     |    |
|                               |

Cashprovided by operating activities for the year ended December31,  2005 totaled $25.0  million, comprised of the net lossof $23.7  million, increased by adjustments for depreciation andamortization of $43.1  million, amortization of deferredfinancing costs of $1.7  million and the net change in workingcapital (excluding cash) and other miscellaneous items totaling$8.0  million, reduced by the deferred income tax benefit of$2.7  million and gains on property dispositions of $1.4million. The primary reasons for the increase in cash provided byoperations as compared with the year ended December  31,2004 were the higher operating income in 2005 and net additions fromworking capital components in 2005 as opposed to net deductions in2004.

Cash used by investing activities for the year endedDecember  31,  2005 of $29.1  million included$32.8  million of capital expenditures, offset by $2.9million in proceeds received from dispositions of fixed assets, and$0.8  million collected on notes receivable. Cash used ininvesting activities for the year ended December  31,  2005was significantly higher than 2004 primarily because 2004 includedproceeds from the EFILM sale and collections of a note receivable thatwas also related to EFILM.

26

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Total net cash provided by financingactivities for the year ended December  31,  2005 was$7.0  million. Cash inflows from financing activities comprisedborrowings of $16.5  million under the Second MacAndrews Line (asdefined below), and $8.6  million of other long-term borrowings.Cash outflows from financing activities comprised repayments oflong-term debt of $13.0  million, repayments under the SecondMacAndrews Line of $1.9  million and payment of deferredfinancing costs of $0.6  million.

Cash provided byoperating activities for the year ended December  31,  2004totaled $8.7  million comprised of the net loss of $21.2million, increased by adjustments for depreciation and amortization of$40.5  million, the writeoff and amortization of deferredfinancing costs of $4.5  million, and dividends of $1.1million from our equity investment in DHD, and reduced by the deferredincome tax benefit of $8.2  million, gains on propertydispositions of $3.2  million and the net change in workingcapital (excluding cash) and other miscellaneous items totaling$4.8  million. The primary reasons for the decrease in cashprovided by operations as compared with the year ended December31,  2003 was an increase in net loss from continuing operationsand an increase in working capital used, primarily an increase ininventory for the manufacturing of our 300x zoom lens.

Cash usedby investing activities of $12.1  million for the year endedDecember  31,  2004 included $38.3  million ofcapital expenditures and cash payments for the DHD and Technovisionacquisitions totaling $7.8  million, offset by $25.3million in proceeds from the sale of EFILM, $5.0  million inproceeds received from dispositions of fixed assets, and $3.7million collected on notes receivable. Cash used in investingactivities for the year ended December  31,  2004 was lessthan that of the prior year primarily because of proceeds from theEFILM sale and collections of a note receivable that was also relatedto EFILM. Capital expenditures were approximately $13.6  millionhigher in 2004 as compared with 2003 primarily due to our purchase ofthe WFW camera inventory in Canada.

Net cash provided byfinancing activities for the year ended December  31,  2004was $3.1  million. Cash inflows from financing activities,primarily related to the January  2004 Refinancing, comprisedborrowings of $135.6  million under the Amended Credit Agreement,proceeds from the issuance of Senior Notes (as defined below) of$100.0  million, borrowings of $10.5  million under theSecond MacAndrews Line, and a capital contribution of $22.7million from MacAndrews & Forbes Holdings along with the sale of anote receivable to MacAndrews & Forbes Holdings. See‘‘Long-Term Debt’’ below for a discussionof the January  2004 Refinancing. Cash outflows from financingactivities comprised repayments of long-term debt of $264.3million, the majority of which related to the January  2004refinancing, repayments under the Second MacAndrews Line of $4.8million and payment of deferred financing costs of $1.6million.

Cash provided by operating activities for the yearended December  31,  2003 totaled $13.7  millioncomprised of the net loss of $16.5  million adjusted fordepreciation and amortization of $39.6  million offset by the netchange in working capital (excluding cash) and other miscellaneousitems totaling $9.4  million.

Total investing activitiesof $19.9  million for the year ended December  31,2003 included $22.3  million of capital expenditures, offset by$2.4  million in proceeds received from the disposition of fixedassets. The Company also purchased an additional  1/3ownership interest in PANY Rental in May  2003 (such that, as ofMay  2003, the Company owned a  2/3 interest inPANY Rental) that resulted in the consolidation of PANY Rental’sfinancial position and results of operations in the Company’saccompanying consolidated financial statements. The purchase pricetogether with additional payments relating to this transactionapproximated $0.6  million and were offset by a similar amount ofcash received upon consolidation as of January  2004, PANY Rentalbecame a wholly-owned subsidiary of Panavision. Capital expenditureswere primarily used to manufacture camera rental systems andaccessories.

Total net cash provided by financing activities forthe year ended December  31,  2003 was less than$0.3  million, which was comprised of borrowings of $14.5million under the MacAndrews Line and Second MacAndrews Line (asdefined below), repayments of $1.5  million under the MacAndrewsLine, notes payable to Deluxe Laboratories, Inc.(‘‘Deluxe’’) of $0.6  million,proceeds from the issuance of Series B Preferred Stock of $4.4million, and proceeds from the issuance of Series C Preferred Stock of$9.7  million, net of transaction costs, offset by repayment oflong-term debt of $23.3  million, and payment of deferredfinancing costs of $4.1  million.

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As of December  31,  2005,the Company had a line of credit ( the Second MacAndrews Line) totalingapproximately $32.0  million, under which $23.8  millionwas drawn, including accrued interest of $0.1  million. Asdescribed below under "—March 2006Refinancing," all amounts outstanding under the SecondMacAndrews Line were repaid and that line of credit was retired onMarch 30, 2006. As of March 30, 2006 Panavision had a revolving line ofcredit (the Revolver described below) of $35.0 million, of which $1.0million was drawn.

Although there can be no assurance, Panavisionexpects that cash flows from operations, borrowings under the Revolverand the Senior secured Credit Facility, cash equity contributions andadvances from affiliates will be sufficient to enable Panavision tomeet its anticipated operating, capital spending and debt servicerequirements through at least the next twelvemonths.

Off-Balance Sheet Arrangements

We do nothave any off-balance sheet arrangements.

Long-TermDebt

As described below under ‘‘—March 2006Refinancing,’’ all amounts outstanding under the Amendedand Restated Credit Agreement, the PX Term Loan, the Second MacAndrewsLine and the GE Term Loan and Security Agreement were repaid and all ofthe outstanding Senior Notes were redeemed as part of the March2006 Refinancing as described below.

MacAndrewsLines

On August  13,  2003, MacAndrews & ForbesInc., (formerly MacAndrews & Forbes Holdings Inc.) agreed to amendan existing line of credit provided to Panavision to increase theamount available for borrowing from $4.0  million to $10.0million and extend the maturity date to August  31,  2006(as amended, the ‘‘MacAndrews Line’’). Inconnection with an amendment to Panavision's Prior CreditAgreement (as defined below), on November  12,  2003,MacAndrews & Forbes Inc. agreed to provide a second revolving lineof credit (the ‘‘Second MacAndrews Line’’)in the amount of $10.0  million at a rate equal to 50 basispoints above the rate provided for in the revolving facility pursuantto the Prior Credit Agreement and a maturity date of April15,  2004. As described below, in connection with theJanuary  2004 Refinancing (as defined below), (i) amountsoutstanding under the MacAndrews Line were retired in exchange forshares of new Series D Cumulative Pay-in-Kind Preferred Stock, parvalue $0.01 per share (the ‘‘Series D PreferredStock’’) and (ii) MacAndrews & Forbes Inc. increasedthe amount of the Second MacAndrews Line to $20.0  million andextended the maturity date to April  16,  2009. OnMarch  30,  2005, the Second MacAndrews Line was amendedand restated to increase the amount to $32.0  million. Allamounts outstanding under the Second MacAndrews Line were repaid andthat line of credit was retired on March 30, 2006 as part of theMarch  2006 Refinancing as described below.

January  2004 Refinancing – 12.50% SeniorNotes Due 2009 and Amended and Restated Credit Agreement

OnJanuary  16,  2004, Panavision consummated a series oftransactions to refinance (the ‘‘January 2004Refinancing’’) its indebtedness under its then existingcredit agreement with a syndicate of lenders (the ‘‘PriorCredit Agreement’’). As part of the January  2004Refinancing, Panavision sold, in a private placement, $104.2million of senior secured notes (the ‘‘SeniorNotes’’) bearing interest at a rate of 12.50%,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$100.0  million. The Senior Notes were secured by asecond-priority lien on substantially all of the Company’sassets.

As part of the January  2004 Refinancing,Panavision issued to PX Holding 215,274 shares of new Series DPreferred Stock in exchange for (a) 159,644 shares of Series CCumulative Pay-in-kind Preferred Stock, par value $0.01 per share (the‘‘Series C Preferred Stock’’), ofPanavision, held by PX Holding (together with approximately$13.2  million of accumulated dividends thereon); (b)$23.0  million in cash; (c) the retirement of all principal andinterest (an aggregate of $10,180,930) owed as of January16,  2004 under the MacAndrews Line; (d) 33.3 shares of commonstock of PANY Rental Inc. (‘‘PANY Rental’’)

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having a fair market value of $0.7million (such that, as of January  16,  2004, Panavisionowned 100% of the outstanding shares of PANY Rental); (e) theretirement of all amounts (consisting of $630,780 in principal and$82,913 in accrued and unpaid interest) owed by PANY Rental to PXHolding pursuant to a certain promissory note held by PX Holding; and(f) the retirement of all amounts (consisting of $7.8  million inprincipal and unpaid interest) owed to MacAndrews & Forbes Holdingsunder a certain promissory note in the principal amount of $6.7million, dated July  1,  2002, issued by Panavision to M& F Worldwide Corp. and subsequently acquired by MacAndrews &Forbes Holdings. Panavision also issued to PX Holding 1,381,690 sharesof new Series E Non-Cumulative Perpetual Participating Preferred Stock,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 PreferredStock’’). As a result of the January  2004Refinancing transactions, all of the outstanding shares of Series A andSeries C Preferred Stock were transferred to Panavision. In addition,MacAndrews & Forbes Inc. increased the amount of the SecondMacAndrews Line to $20.0  million and extended the maturity dateto April  16,  2009.

Panavision used proceeds fromthe sale of the Senior Notes and the issuance of Series D PreferredStock to reduce the indebtedness under the Prior Credit Agreement by$115.4  million, and replaced the Prior Credit Agreement with anAmended and Restated Credit Agreement (the ‘‘Amended andRestated Credit Agreement’’) with the lenders under thePrior Credit Agreement. The term facility under the Amended andRestated Credit Agreement was secured on substantially the same basisas indebtedness under the Prior Credit Agreement.

In addition,the Amended and Restated Credit Agreement revised certain financialtests and other restrictive covenants set forth in the Prior CreditAgreement, including required EBITDA (as defined), limitations onindebtedness, and other provisions. As defined in the Amended andRestated Credit Agreement and 2004 Indenture, EBITDA includedadjustments for certain severance expenses, refinancing expenses,foreign exchange (gain) loss, and other non-cash charges. As compliancewith EBITDA levels was a material aspect of the Amended and RestatedCredit Agreement and the 2004 Indenture, the calculation of EBITDApursuant to these agreements for the year ended 2005 is set forthbelow, with the calculation for 2004 provided for comparative purposes(inmillions):

|                                   |  |                       |         |         |  |        |         |         |  |        |        |        |  |  |
|-----------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|--------|--------|--|--|
|                              |  | Yearended December31, |         |    |
|                              |  | 2005                  |         | 2004    |  |   |
| Netloss from continuingoperations |  | $                     | (23.7   | )  |  | $      | (21.2   | )  |  |   |   |   |
| Netinterest expense               |  |                  | 36.0    |    |  |   | 31.8    |    |  |   |   |   |
| Incometax provision (benefit)     |  |                  | 0.9     |    |  |   | (7.5    | )  |  |   |   |   |
| Depreciation andamortization      |  |                  | 43.1    |    |  |   | 40.5    |    |  |   |   |   |
| Severanceexpense                  |  |                  | 3.0     |    |  |   | — |    |  |   |   |   |
| Refinancing/amendmentexpenses     |  |                  | 0.3     |    |  |   | 6.2     |    |  |   |   |   |
| Foreignexchange (gain) loss       |  |                  | 2.0     |    |  |   | (0.3    | )  |  |   |   |   |
| Non-cash charges                  |  |                  | 1.0     |    |  |   | 2.3     |    |  |   |   |   |
| Assetpurchase/sale adjustments    |  |                  | — |    |  |   | 6.5     |    |  |   |   |   |
| EBITDA                            |  | $                     | 62.6    |    |  | $      | 58.3    |    |  |   |   |   |
|                                   |

Therequired level of EBITDA, as defined, for the years endedDecember  31,  2005 and 2004, respectively, was$58.0  million and $54.0  million pursuant to the Amendedand Restated Credit Agreement and $50.0  million for both yearspursuant to the 2004 Indenture. As defined in the Amended and RestatedCredit Agreement and 2004 Indenture, the above table reflects EBITDAfrom continuing operations. Certain amounts in previously issuedfinancial statements, including the presentation of EFILM, have beenexcluded from continuing operations.

Preferred StockExchange

On November  16,  2004, Panavisionissued 30,610,810 shares of common stock, par value $.01 per share(‘‘Common Stock’’), to PX Holding, inexchange for all Series D Preferred Stock and all Series E

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Preferred Stock held by PX Holding (the‘‘Exchange’’). The Exchange was completedpursuant to a letter agreement, dated November  16,  2004,between Panavision and PX Holding (the ‘‘LetterAgreement’’). (See Note 12 of Notes to ConsolidatedFinancial Statements.)

Amendments to Amended andRestated Credit Agreement and 2004 Indenture

The Amended andRestated Credit Agreement was amended in August  2004,November  2004 and December  2004 and the Company enteredinto supplemental indentures with respect to the 2004 Indenture inAugust  2004, September  2004 and December  2004. Fora description of these amendments and supplemental indentures, pleaserefer to our Annual Report on Form 10-K for the year endedDecember  31,  2004.

We entered into a FourthAmendment, dated as of March  30,  2005, to the Amended andRestated Credit Agreement and Fifth Supplemental Indenture, dated as ofMarch  30,  2005, with respect to the 2004 Indenture. Thisamendment and indenture supplement was entered into principally to (a)reduce required EBITDA levels, as provided in the Amended and RestatedCredit Agreement, to $52.0  million, $54.0  million,$54.0  million and $58.0  million for the twelve-monthperiods ended March  31,  2005, June  30,2005, September  30,  2005 and December  31,2005, respectively; (b) extend the date on which the term facilityunder the Amended and Restated Credit Agreement was due if the9 5/8% Notes remained outstanding fromSeptember  1,  2005 to December  1,  2005; (c)increase the limitation on capital expenditure, as defined in theAmended and Restated Credit Agreement, from $25.0  million to$37.5  million for the twelve-month period ended December31,  2005; and (d) permit the increase of the Second MacAndrewsLine to $32.0  million.

On November  14,  2005,we entered into a Fifth Amendment (the ‘‘FifthAmendment’’) to our Amended and Restated CreditAgreement. Prior to the Fifth Amendment, the Amended and RestatedCredit Agreement provided that the final maturity date of the termfacility under the Amended and Restated Credit Agreement was to beJanuary  12,  2007, except that the term facility was tobecome due and payable on December  1,  2005 if any of the9 5/8% Notes remained outstanding on that date.Pursuant to the Fifth Amendment, the lenders under the Amended andRestated Credit Agreement agreed to extend this December1,  2005 date to January  5,  2006, provided that, onor before December  1,  2005, Panavision was to (a) depositinto a designated account an amount not less than the principaloutstanding and accrued interest through the date of redemption of the9 5/8% Notes and (b) mail a notice of redemptionto the holders of the 9 5/8% Notes indicatingthat Panavision intends to redeem all outstanding9 5/8% Notes on or before January5,  2006.

9 5/8 NotesRedemption

The 9 5/8% Notes wereissued at a discount representing a yield to maturity of9 5/8%. There were no periodic or interestpayments through February  1,  2002. Thereafter, they boreinterest at a rate of 9 5/8% per annum, payablesemi-annually on February  1 and August  1 of each year,commencing August  1,  2002. The9 5/8% Notes were due February  1,2006, and were reflected as a component of current maturities as ofDecember  31,  2005.

On January  3,2006, Panavision completed the redemption of all $64,792,000 aggregateprincipal amount of the 9 5/8% Notes. Inaccordance with the notice of redemption mailed to holders onDecember  1,  2005, the redemption was completed when theredemption funds previously deposited with the trustee under theindenture governing the 9 5/8% Notes werereleased to the holders of the 9 5/8% Notes. Theaggregate redemption price for the 9 5/8% Noteswas $67,425,075, constituting an amount sufficient to repay theprincipal outstanding and accrued interest through the date ofredemption. The redemption was funded principally with the funds fromthe PX Term Loan Agreement, defined and describedbelow.

PX Term Loan Agreement

On December1,  2005, Panavision entered into the PX Term Loan Agreement(‘‘PX Term Loan Agreement’’) with PXHolding as lender. The PX Term Loan Agreement provided for, among otherthings, a $64,792,000 term loan from PX Holding to Panavision with amaturity date of December  31,  2007. The term loan boreinterest at a rate per annum equal to 9 5/8%,payable semi-annually on 

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February  1 and August  1 ofeach year, commencing February  1,  2006. All paymentobligations under the PX Term Loan Agreement were subordinated in rightof payment to the prior payment of Panavision's obligations underits existing Amended and Restated Credit Agreement and the 2004Indenture.

The PX Term Loan Agreement included certainrestrictive covenants substantially similar to those applicable to the9 5/8% Notes that limit, among other things, theincurrence of additional indebtedness, the payment of dividends orother distributions or the making of certain other restricted payments,the sale of assets of Panavision, certain transactions with affiliatesand certain mergers or consolidations or transfers of all orsubstantially all of Panavision's assets. The PX Term LoanAgreement also prohibited certain restrictions on distributions fromsubsidiaries. The PX Term Loan Agreement provided for events of defaultthat are substantially similar to the 9 5/8%Notes. Following the occurrence of an event of default, PX Holding wasable to accelerate all amounts outstanding under the term loan. Allamounts outstanding under the PX Term Loan Agreement were repaid andthe loan was retired on March  30,  2006 as part of theMarch  2006 Refinancing as described below.

GETerm Loan & Security Agreement

On June  14,2005, Panavision entered into a term loan and security agreement(‘‘GE Term Loan & Security Agreement’’)with General Electric Capital Corporation(‘‘GE’’) pursuant to which GE was to makeavailable to Panavision term loans in aggregate principal amount notexceeding $10  million and maturing September  14,2006 for the purchase of digital cameras and equipment.Panavision's obligations pursuant to the GE Term Loan &Security Agreement were guaranteed by MacAndrews & Forbes Holdingsand secured by a first priority security interest in the cameras andrelated equipment purchased with the proceeds of the term loans. Theamount outstanding under the GE Term Loan & Security Agreement asof December  31,  2005 was $6.6  million. All amountsoutstanding under the GE Term Loan & Security Agreement were repaidand the loan was retired in connection with the March  2006Refinancing on March 30, 2006 as described below.

Panavision hascertain cash obligations and other commercial commitments that willaffect its short- and long-term liquidity. As of December31,  2005, such obligations and commitments were as follows (inthousands):

|                                     |  |        |         |                       |  |           |         |           |  |              |         |        |  |        |         |        |  |        |         |        |  |  |
|-------------------------------------|--|--------|---------|-----------------------|--|-----------|---------|-----------|--|--------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                |  |   |         | Paymentsdue by Period |
| ContractualObligations              |  | Total  |         | Less than 1Year       |  | 1-3 years |         | 4-5 years |  | After 5years |
| Long-term debt (includinginterest). |  | $      | 459,660 |                  |  | $         | 113,693 |      |  | $            | 214,954 |   |  | $      | 131,013 |   |  | $      | — |   |
| Capitalleases                       |  |   | 9,189   |                  |  |      | 3,066   |      |  |         | 4,948   |   |  |   | 1,175   |   |  |   | — |   |
| Operatingleases                     |  |   | 32,408  |                  |  |      | 9,760   |      |  |         | 11,709  |   |  |   | 6,727   |   |  |   | 4,212   |   |
| Purchaseobligations                 |  |   | — |                  |  |      | — |      |  |         | — |   |  |   | — |   |  |   | — |   |
| Totalcontractual cash obligations   |  | $      | 501,257 |                  |  | $         | 126,519 |      |  | $            | 231,611 |   |  | $      | 138,915 |   |  | $      | 4,212   |   |
|                                     |

Thetable above does not give effect to the March  2006 Refinancing.Interest payments have been calculated based upon balances outstandingand interest rates in effect as of December  31,2005.

March  2006Refinancing

On March 30, 2006, Panavisionconsummated a series of transactions to refinance its indebtednessunder its Amended and Restated Credit Agreement, Senior Notes, PX TermLoan Agreement, Second MacAndrews Line and GE Term Loan & SecurityAgreement (the ‘‘March 2006 Refinancing’’).As part of the March 2006 Refinancing, Panavision entered into a$345.0  million Senior Secured Credit Facility with a syndicateof lenders (the ‘‘Senior Secured CreditFacility’’). The Senior Secured Credit Facility consistsof:

|  |              |                                                                                                                                                                                                                                                                                                                                                                  |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | First Lien Facility(‘‘First Lien Facility’’ and the governingagreement the ‘‘First Lien FacilityAgreement’’), comprising a First Lien Term Loan of$195.0  million (‘‘First Lien TermLoan’’) and a $35.0  million Revolving CreditFacility (the ‘‘Revolver’’);and |

|  |              |                                                                                                                                                                                    |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | $115.0  millionSecond Lien Term Loan (‘‘Second Lien TermLoan’’ and the governing agreement the‘‘Second Lien Term LoanAgreement’’). |

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In addition, as part of the March2006 Refinancing we paid $15.0 million in cash and issued 49,792 sharesof our Series F Cumulative Pay-In-Kind Mandatorily Redeemable PreferredStock (‘‘Series F Preferred Stock’’) to PXHolding in consideration of the retirement of the outstanding principalbalance under the PX Term Loan Agreement (approximately $64.8million as of March 30, 2006). The accrued interest on the PX Term LoanAgreement of $1.0 million as of March 30, 2006 was also paid withproceeds of the refinancing.

The total proceeds of theMarch  2006 Refinancing (including $1.0 million drawn under theRevolver at closing and the proceeds of the issuance of the Series FPreferred Stock) were $360.8 million and those proceeds were used bythe Company asfollows:

|  |              |                                                                                                                                                                                                             |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | $118.5million to repay the principal amount outstanding under the Amended andRestated Credit Facility and $0.6  million to repay outstandingaccrued interest under the Amended and Restated CreditFacility; |

|  |              |                                                                                                                                                           |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | $112.2million to redeem all outstanding Senior Notes, including pre-paymentpremiums, and $4.7  million of outstanding accrued interest onthe SeniorNotes; |

|  |              |                                                                                                                                                                        |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | $30.1million to repay the principal amount outstanding under the SecondMacAndrews Line and $0.9  million to repay outstanding interestunder the Second MacAndrewsLine; |

|  |              |                                                                                                                                                                                                                                                                        |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | $64.8  million(including proceeds of approximately $49.8 million from Series FPreferred Stock issuance) to repay the principal amount outstandingunder the PX Term Loan Agreement and $1.0  million to repayoutstanding accrued interest on the PX Term LoanAgreement; |

|  |              |                                                                                                                    |
|--|--------------|--------------------------------------------------------------------------------------------------------------------|
|  | •  | $4.6million to repay the principal and outstanding accrued interest underthe GE Term Loan & SecurityAgreement; |

|  |              |                                                                    |
|--|--------------|--------------------------------------------------------------------|
|  | •  | $7.0 million tofund the VFG Asset Acquisition, described below;and |

|  |              |                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------|
|  | •  | $4.9 million availablefor general corporate purposes and to fund general working capitalneeds. |

In connection with the March  2006 Refinancing,Panavision has paid or expects to pay fees to lenders under the SeniorSecured Credit Facility and professional advisors of approximately$11.5 million.

The First Lien Facility bears interest, at theoption of Panavision, at the Adjusted LIBO Rate (as defined in theFirst Lien Facility Agreement) plus a margin of 3.0% per annum(or if the Total Leverage Ratio (as defined in the First Lien FacilityAgreement) is less than 3.75 to 1.00, 2.75% per annum) or at theAlternate Base Rate (as defined in the First Lien Agreement) plus amargin of 3.0% per annum (or if the Total Leverage Ratio is lessthan 3.75 to 1.00, 1.75% per annum). The First Lien Facility issecured by a first priority lien on all property and assets ofPanavision Inc. and its domestic subsidiaries, including but notlimited to a pledge of 65% of the common stock of theirfirst-tier foreign subsidiaries. The collateral for the First LienFacility is substantially the same as was the case for the Amended andRestated Credit Agreement.

Panavision is required to makequarterly principal payments equal to 1% per annum of theoriginal outstanding balance of the First Lien Facility, with thebalance payable at maturity on March  30,  2011. Inaddition, the First Lien Credit Agreement includes certain financialcovenants and restrictions, including covenants and restrictionsrelating to indebtedness, liens, sales and leaseback transactions,investments, mergers and acquisitions, sales of assets, dividends andtransactions with affiliates of Panavision, each of which is subject tolimited exceptions. Additionally, the First Lien Facility Agreementcontains financial covenants limiting: (a) the amount of CapitalExpenditures (as defined in the First Lien Facility Agreement) ofPanavision and its subsidiaries, (b) Panavision's interestcoverage ratio (the ratio of Consolidated EBITDA to ConsolidatedInterest Expense, as each such term is defined in the First LienFacility Agreement), (c) Panavision's total leverage ratio (theratio of Total Debt to Consolidated EBITDA, as each such term isdefined in the First Lien Facility Agreement), and (d)Panavision's first lien leverage ratio (the ratio of First LienDebt to Consolidated EBITDA, as each such term is defined in the FirstLien Facility Agreement).

The Second Lien Term Loan bearsinterest, at the option of Panavision, at the adjusted LIBO Rate (asdefined in the Second Lien Term Loan Agreement) plus a margin of7.0% per annum or at the 

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Alternate Base Rate (as defined in theSecond Lien Term Loan Agreement) plus a margin of 6.0% perannum. The Second Lien Term Loan is secured by a second priority lienon all property and assets of Panavision Inc. and its domesticsubsidiaries, including but not limited to a pledge of 65% ofthe common stock of their first-tier foreign subsidiaries. Thecollateral for the Second Lien Term Loan is substantially the same aswas the case for the Senior Notes.

Panavision is not required tomake principal payments on the Second Lien Term Loan, with the balancepayable at maturity on March 30, 2012. In addition, the Second LienTerm Loan Agreement includes certain financial tests covenants andrestrictions, including covenants and restrictions relating toindebtedness, liens, sales and leaseback transactions, investments,mergers and acquisitions, sales of assets, dividends and transactionswith affiliates of Pananvision, each of which is subject to limitedexceptions. Additionally, the Second Lien Term Loan Agreement containsfinancial covenants limiting the amount of Capital Expenditures (asdefined in the Second Lien Term Loan Agreement) of Panavision and itssubsidiaries, and limiting Panavision's total leverage ratio (theratio of Total Debt to Consolidated EBITDA, as each such term isdefined in the Second Lien Term Loan Agreement).

The Series FPreferred Stock issued to PX Holding is non-voting, has a liquidationpreference of $1,000 per share plus accrued and unpaid dividends, andentitles holders to cumulative dividends at a rate of 12% perannum, compounded quarterly, regardless of whether declared or earned,payable in additional shares of Series F Preferred Stock on each March30. The Series F Preferred Stock is mandatorily redeemable on March 30,2016. Additionally, the Series F Preferred Stock is subject toredemption in certain circumstances upon a change of control.

Aspart of the March  2006 Refinancing, Panavision Europe acquiredcertain camera and lighting assets (‘‘PX (UK)Equipment’’) from PX (UK). The PX (UK) Equipment wasacquired by PX (UK) from VFG Hire Limited (in Administration)(‘‘VFG’’) in March  2005 and had beenmade available to Panavision Europe under a lease from PX (UK) sincethat time. The consideration paid to PX (UK) for these assets wasapproximately $7.0 million, which represents approximately the samepurchase price as that which PX (UK) paid to VFG (and lessors of thoseVFG Assets that were subject to capital leases) when PX (UK) acquiredthe VFG Assets in March  2005, including transactionexpenses.

Commitments and Contingencies

Panavisionperiodically records the estimated impacts of various conditions,situations or circumstances involving uncertain outcomes. These eventsare called ‘‘contingencies,’’ andPanavision’s accounting for such events is prescribed by SFASNo. 5, ‘‘Accounting forContingencies.’’

The accrual of a contingencyinvolves considerable judgment on the part of management. Panavisionuses its internal expertise, and outside experts (such as lawyers andtax specialists), as necessary, to help estimate the probability that aloss has been incurred and the amount (or range) of the loss.Panavision currently does not have any material contingencies that itbelieves require accrual or disclosure in its Consolidated FinancialStatements.

Seasonality

Panavision’s revenues aresubject to seasonal fluctuations. In North America, episodic televisionprograms cease filming in the second quarter for several months, andtypically resume production in August. Feature film production activitytypically reaches its peak in the third and fourth quarters.Additionally, the Company’s capital investment tends to occur inthe first half of the year in order to deploy the equipment to meetcustomer needs.

Impact of Inflation

Panavision’sresults of operations and financial condition are presented based uponhistorical cost. While it is difficult to measure accurately the impactof inflation due to the imprecise nature of the estimates required,Panavision believes that the effects of inflation, if any, on itsresults of operations and financial condition during the past threeyears have been minor.

Critical AccountingPolicies

Panavision reviews the accounting policies it uses inreporting its financial results on a regular basis. The preparation ofthese financial statements requires Panavision to make estimates andjudgments that 

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affect the reported amounts of assets,liabilities, revenues and expenses and related disclosure of contingentassets and liabilities. On an ongoing basis, Panavision evaluates itsestimates, including those related to accounts receivable, investments,rental assets, intangible assets, income taxes, contingencies andlitigation. Panavision bases its estimates on historical experience andon various other assumptions that are believed to be reasonable underthe circumstances. These estimates form the basis forPanavision's judgments about the carrying value of assets andliabilities that are not readily apparent from other sources. Resultsmay differ from these estimates if actual outcomes are different fromthe estimates on which Panavision based its assumptions. Theseestimates and judgments are reviewed by management on an ongoing basis.Panavision believes the following critical accounting policies affectits more significant judgments and estimates used in the preparation ofthe Consolidated Financial Statements of Panavision.

RevenueRecognition – Panavision recognizes revenue over the relatedequipment rental period using prices that are negotiated at the time ofrental. Revenue from product sales is recognized upon shipment.Panavision does not have a history of significant product returns orrevenue adjustments.

Allowance for Doubtful Accounts– Panavision maintains allowances for doubtful accounts forestimated losses resulting from the inability or unwillingness of itscustomers to make required payments. If the financial condition ofPanavision’s customers were to deteriorate, resulting in animpairment of their ability to make payments, additional allowances maybe required.

Inventory Allowance – Panavisionreviews its inventories for both obsolescence and quantities in excessof needs based upon usage and demand forecasts within a specific timehorizon and reserves are established accordingly.

IncomeTaxes – Panavision estimates its actual current taxliabilities together with temporary differences resulting fromdiffering treatment of items, such as net operating losses anddepreciation, for tax and accounting purposes. These temporarydifferences result in deferred tax assets and liabilities. Panavisionmust then assess the likelihood that its deferred tax assets will berecovered from future taxable income and to the extent Panavisionbelieves that recovery is not likely, it must establish a valuationallowance. At December  31,  2005, Panavision had a$14.8  million valuation allowance established against itsdeferred tax assets. To the extent Panavision establishes a valuationallowance or changes this allowance in a period, it must reflect thechange to the allowance within the tax provision in the consolidatedstatement of operations. Significant management judgment is required indetermining the provision for income taxes, deferred tax assets andliabilities and any valuation allowance recorded against its netdeferred tax assets.

Long-Lived Assets – Panavisionassesses the impairment of property, plant and equipment (comprisedprincipally of its rental assets), goodwill, and other identifiableintangibles whenever events or changes in circumstances indicate thatthe carrying value may not be recoverable. Some factors Panavisionconsiders important which could trigger an impairment review includethe following:

|  |              |                                                                                                   |
|--|--------------|---------------------------------------------------------------------------------------------------|
|  | •  | Significantunderperformance relative to expected historical or projected futureoperating results; |

|  |              |                                                                                                                               |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Significant changesin the manner of Panavision’s use of the acquired assets or thestrategy for its overall business;and |

|  |              |                                                  |
|--|--------------|--------------------------------------------------|
|  | •  | Significant negative industry oreconomic trends. |

Panavision determines whether the carrying valueof its long-lived assets may not be recoverable based upon theexistence of one or more of the above indicators of impairment.Panavision measures any impairment based on a projected discounted cashflow method using a discount rate determined by management to becommensurate with the risk inherent in its current business model. Inaccordance with Statement of Financial Accounting Standards No. 142,‘‘Goodwill and Other Intangible Assets,’’(‘‘SFAS 142’’), on January  1,2002 Panavision ceased to amortize goodwill and its trade name sinceboth are believed to have an indefinite life. In lieu of amortization,Panavision performs an annual review of its goodwill and trade name(more frequently if impairment indicators exist). If Panavisiondetermines at any point in the impairment review process that goodwillor its trade name has been impaired, Panavision would record animpairment charge in its consolidated statement ofoperations.

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Recent AccountingPronouncements

In November  2004, the Financial AccountingStandards Board (‘‘FASB’’) issued SFAS No.151, ‘‘Inventory Costs—an amendment of ARB No. 43,Chapter 4’’ (‘‘SFAS 151’’).SFAS 151 amends the existing guidance to clarify the accounting forabnormal amounts of idle facility expense, freight, handling costs andspoilage. Whereas existing guidance stated that under somecircumstances the amount of these items may be so abnormal as towarrant treatment as a current period expense, SFAS 151 requirestreatment as current period expense regardless of the‘‘so abnormal’’ criterion. SFAS 151 alsorequires the allocation of fixed production overheads be based on thenormal capacity of the production facilities. SFAS 151 will beeffective for Panavision’s 2006 fiscal year. We believe thatimplementation of SFAS 151 will not have a material impact on ourconsolidated financial position, results of operations or cashflows.

In December  2004, the FASB issued SFAS No. 153,‘‘Exchanges of Nonmonetary Assets—an amendment ofAPB No. 29’’ (‘‘SFAS 153’’).The existing guidance was based on the principle that exchanges ofnonmonetary assets should be based on the fair value of the assetsexchanged with certain exceptions. SFAS 153 amends existing guidance toeliminate the exception for nonmonetary exchanges of similar productiveassets and replaces it with a general exception for exchanges ofnonmonetary assets that do not have commercial substance. SFAS 153 willbe effective for Panavision’s 2006 fiscal year. As theprovisions of SFAS 153 are to be applied to prospective transactions,we cannot ascertain at this time whether implementation of SFAS 153will have any impact on our consolidated financial position, results ofoperations or cash flows.

In December  2004, the FASBissued revised SFAS No. 123R, ‘‘Share-BasedPayment’’(‘‘SFAS 123R’’). SFAS 123R setsaccounting requirements for ‘‘share-based’’compensation to employees and requires companies to recognize in theincome statement the grant-date fair value of stock options and otherequity-based compensation. SFAS No. 123R is effective ininterim or annual periods beginning after December 15, 2005. TheCompany currently discloses the effect on net (loss) income and (loss)earnings per share of the fair value recognition provisions ofSFAS No. 123, ‘‘Accounting for Stock-BasedCompensation.’’ The Company will be required to adoptSFAS 123R in its first quarter of fiscal 2006 and will implementusing the prospective method. We believe that implementation of SFAS123R will not have a material impact on our consolidated financialposition, results of operations, and cash flows.

Forward-LookingStatements

This annual report on Form 10-K for the year endedDecember  31,  2005, as well as certain ofPanavision’s other public written and oral disclosures, containforward-looking statements that reflect management’s currentassumptions and estimates of future performance and economicconditions. Such statements are made in reliance upon safe harborprovisions of the Private Securities Litigation Reform Act of 1995.Panavision cautions investors that forward-looking statements aresubject to risks and uncertainties that may cause actual results andfuture trends to differ materially from those projected, stated, orimplied by the forward-looking statements and investors are cautionednot to place undue reliance on forward-looking statements. Statementsother than statements of historical fact are forward-lookingstatements. These forward-looking statements may be identified by,among other things, the use of forward-looking language, such as thewords ‘‘believe,’’‘‘anticipate,’’‘‘expect,’’‘‘intend,’’‘‘may,’’‘‘project,’’ ‘‘scheduledto,’’ ‘‘seek,’’‘‘should,’’ ‘‘willbe,’’ ‘‘will continue,’’‘‘will likely result,’’ or the negative ofthose terms, or other similar words or phrases or by discussions ofintentions or strategies.

In addition to factors described inPanavision's Securities and Exchange Commission filings andelsewhere (including, without limitation, in Item 1A.‘‘Risk Factors’’ of this Annual Report onForm 10-K), the following factors could cause Panavision's actualresults to differ materially from those expressed in anyforward-looking statements made by Panavision: (a) a significantreduction in the number of feature film, commercial or seriestelevision productions; (b) competitive pressures arising from changesin technology, changing customer requirements, price competition,evolving industry standards or improvements in, and the expansion of,product offerings of Panavision's competitors;  (c)unfavorable foreign currency fluctuations; (d) lower-than-expected cashflows from operations;  (e) difficulties or delays in developingand introducing new products or the failure of Panavision'scustomers to accept new product offerings; (f) difficulties or delaysin implementing improvements in 

35

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operating efficiencies; (g) the inability tosecure capital contributions or loans from affiliates, refinance itsindebtedness or to sell its equity securities; or (h) significantincreases in interest rates.

Panavision encourages investors toread Item 1A. ‘‘Risk Factors,’’ as well asthe summary of its critical accounting policies included above.Forward-looking statements speak only as of the date they are made, andexcept for our ongoing obligations under the U.S. federal securitieslaws, we undertake no obligation to publicly update any forward-lookingstatements whether as a result of new information, future events orotherwise.

Item 7A.    Quantitative and QualitativeDisclosures About Market Risk

Panavision is exposed to marketrisk from changes in foreign currency exchange rates and interestrates, which could affect its business, results of operations andfinancial condition. Panavision manages its exposure to these marketrisks through its regular operating and financing activities. During2006, Panavision plans to continue to evaluate the need and opportunityfor hedging arrangements with respect to certain of its foreigncurrency and interest rate risks.

Foreign CurrencyRisk

As of December  31,  2005 and 2004,Panavision’s primary net foreign currency market exposuresinclude the Euro, British pound, Canadian dollar, Australian dollar andthe New Zealand dollar. At the present time, the Company does notgenerally hedge against foreign currency fluctuation but is analyzingopportunities to mitigate such risks. Management does not foresee norexpect any significant changes in foreign currency exposure in the nearfuture.

As of December  31,  2005 and 2004, a10% appreciation in foreign currency exchange rates from theprevailing market rates would increase the related net unrealized gainon intercompany balances by $2.8  million and $1.9million, respectively. Conversely, a 10% depreciation in thesecurrencies from the prevailing market rates would decrease the relatednet unrealized loss on intercompany balances by $2.8  million and$1.7  million, respectively, as of December  31,2005 and 2004.

Interest Rate Risk

Panavision isexposed to changes in interest rates on its variable rate debt. Ahypothetical 10% increase in the interest rates applicable to2005 and 2004 would have resulted in an increase to interest expense ofapproximately $2.0  million and $1.1  million,respectively. Conversely, a hypothetical 10% decrease in theinterest rates applicable to 2005 and 2004 would have decreasedinterest expense by approximately $2.0  million and $1.1million, respectively. As of December  31,  2005,Panavision believes that the carrying value of its amounts that werepayable under the Amended Credit Agreement approximate fairvalue.

Panavision believes the carrying value of its debtsecurities approximates fair value. The fair value ofPanavision’s fixed rate long-term debt is sensitive to changesin interest rates. Based upon a hypothetical 10% increase in theinterest rate, the value of Panavision’s fixed rate debt wouldhave decreased approximately $2.0  million and $1.9million at December  31,  2005 and 2004, respectively.Conversely, a hypothetical 10% decrease in the interest ratewould have resulted in an increase in fair value of approximately$2.0  million and $1.9  million over the same period.Management does not expect any significant change in its exposure tointerest rate fluctuations or in how such exposure is managed in thefuture.

Panavision manages its fixed and floating rate debt withthe objective of achieving a mix that management believes isappropriate. To manage this mix in a cost-effective manner, Panavision,from time to time, has entered into interest rate swap agreements, inwhich it agrees to exchange various combinations of fixed and/orvariable interest rates based upon agreed upon notional amounts.Panavision had no interest rate swap agreements in effect atDecember  31,  2005.

Item 8.    FinancialStatements and Supplementary Data

An index to financialstatements and required financial statement schedules is set forth inItem 15(a).

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Item 9.    Changes In andDisagreements with Accountants on Accounting and FinancialDisclosure

None.

Item 9A.    Controls andProcedures

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a)  | Disclosure Controls andProcedures. Panavision's management, with the participation ofits Chief Executive Officer and Chief Financial Officer, has evaluatedthe effectiveness of the Company's disclosure controls andprocedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)under the Securities Exchange Act of 1934, as amended (the‘‘Exchange Act’’)) as of the end of theperiod covered by this report. Based on such evaluation, Panavision's Chief Executive Officer and Chief Financial Officer haveconcluded that, as of the end of such period, such disclosure controlsand procedures are effective in accurately recording, processing,summarizing and reporting, on a timely basis, information required tobe disclosed by the Company in the reports that it files or submitsunder the Exchange Act and are effective in ensuring that informationrequired to be disclosed by the Company in the reports that it files orsubmits under the Exchange Act is accumulated and communicated to theCompany’s management, including the Company’s ChiefExecutive Officer and Chief Financial Officer, as appropriate to allowtimely decisions regarding requireddisclosure. |

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (b)  | Changes in Internal Control OverFinancial Reporting. There have not been any changes in Panavision's internal control over financial reporting (as such term isdefined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) duringthe fourth fiscal quarter ended December  31,  2005 thathave materially affected, or are reasonably likely to materiallyaffect, Panavision’s internal control over financialreporting. |

Item 9B.    Other Information

Thefollowing disclosure is being provided pursuant to Items 1.01, 1.02,2.03, 3.03 and 5.03 of Form 8-K:

March 2006Refinancing

As described above, on March 30, 2006, Panavisionconsummated the March 2006 Refinancing, a series of transactions torefinance its indebtedness under its Amended and Restated CreditAgreement, Senior Notes, PX Term Loan Agreement, Second MacAndrews Lineand GE Term Loan & Security Agreement.

As part of the March2006 Refinancing, on March 30, 2006, the Company entered into theSenior Secured Credit Facility with a syndicate of lenders. The SeniorSecured Credit Facility consists of a First Lien Facility Agreement anda Second Lien Term Loan Agreement. For a description of the First LienFacility Agreement and the Second Lien Term Loan Agreement, see"Management's Discussion and Analysis of FinancialCondition and Results of Operations—Long-Term Debt—March2006 Refinancing", which description is incorporatedherein by reference. Copies of the First Lien Facility Agreement andthe Second Lien Term Loan Agreement are attached hereto as Exhibits4.15 and 4.16, respectively, and are incorporated herein by reference.The descriptions of the First Lien Facility Agreement and the SecondLien Term Loan Agreement are qualified in their entirety by referenceto the First Lien Facility Agreement and the Second Lien Term LoanAgreement, respectively.

In addition, as part of the March 2006Refinancing, on March 30, 2006, the Company entered into a LetterAgreement (the "2006 Preferred Stock LetterAgreement") with its controlling stockholder, PX Holding,pursuant to which the Company paid to PX Holding an aggregate ofapproximately $15.0 million in cash and issued 49,792 shares of theCompany's Series F Preferred Stock to PX Holding, collectively inexchange for the retirement of all principal and interest outstanding(approximately $65.8 million as of March 30, 2006) under, and thetermination of, the PX Term Loan Agreement. A copy of the 2006Preferred Stock Letter Agreement is attached hereto as Exhibit 10.20and is incorporated herein by reference. The description of the 2006Preferred Stock Letter Agreement is qualified in its entirety byreference to Exhibit 10.20.

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The Series F Preferred Stock was issuedin a private transaction exempt from registration under the SecuritiesAct of 1933 pursuant to Section 4(2) thereunder. PX Holding is an"accredited investor" as defined in Rule 501of Regulation D. The Series F Preferred Stock, a series consisting of200,000 authorized shares, was created on March 30, 2006 out of the2,000,000 authorized shares of Preferred Stock, par value $0.01 pershare, of the Company pursuant to the authority granted to the Board ofDirectors by the provisions of the Company's Amended and RestatedCertificate of Incorporation. The Series F Preferred Stock has theterms set forth in the Certificate of Designations, Powers, Preferencesand Rights of Series F Cumulative Pay-In-Kind Mandatorily RedeemablePreferred Stock (the "Certificate ofDesignations") attached hereto as Exhibit 3.3 andincorporated herein by reference. The Series F Preferred Stock isnon-voting and ranks, with respect to dividend rights and rights uponliquidation, winding up or dissolution, senior to the Company'sCommon Stock. The holders of the Series F Preferred Stock are entitledto a liquidation preference of $1,000 per share (the"Liquidation Preference") plus accrued andunpaid dividends. The Certificate of Designations provides forcumulative dividends at an annual rate of 12% of the LiquidationPreference per share, compounding quarterly, payable in additionalshares of Series F Preferred Stock on each March 30 (commencing onMarch 30, 2007), prior to the payment of any dividends on juniorsecurities. The Series F Preferred Stock is mandatorily redeemable bythe Company on March 30, 2016 for cash at a redemption price per shareequal to the Liquidation Preference thereof plus any accrued and unpaiddividends as of such date. The Certificate of Designations provides forrestrictions on certain transactions and, in the event of a Change ofControl (as defined in the Certificate of Designations), the holders ofthe Series F Preferred Stock will have the right to require the Companyto repurchase all or any part of the holders' shares of Series FPreferred Stock for an amount in cash equal to the LiquidationPreference of such Series F Preferred Stock plus any accrued and unpaiddividends. The foregoing description of the Certificate of Designationsis qualified in its entirety by reference to Exhibit 3.3.

Usingthe proceeds of the March 2006 Refinancing, on March 30, 2006, theCompany, among other things, repaid all amounts outstanding under, andterminated, the Amended and Restated Credit Agreement, the PX TermLoan, the Second MacAndrews Line and the GE Term Loan & SecurityAgreement and redeemed all of the outstanding Senior Notes. Included inamounts paid to redeem the Senior Notes was a prepayment premium ofapproximately $8.0 million. For a description of the material terms ofthese agreements and the indenture governing the Senior Notes, see"Management's Discussion and Analysis of FinancialCondition and Results of Operations—Long-Term Debt"and Note 12 of Notes to Consolidated Financial Statements, whichdescriptions are incorporated herein by reference.

Amendment to Beitcher Employment Agreement

On March30, 2006, the Company and Robert L. Beitcher (the"Executive"), the Company's Presidentand Chief Executive Officer, entered into a First Amendment (the"First Amendment") to the EmploymentAgreement dated April 1, 2003 between the Executive and the Company(the "2003 Agreement" and, as amended by theFirst Amendment, the "Beitcher Agreement").The First Amendment has an effective date of January 1, 2006.

The First Amendment amended the 2003 Agreement by, among otherthings, extending the term of the Executive's employment suchthat it will end on December 31, 2008, or such later date to which theterm is further extended pursuant to the terms of the BeitcherAgreement. The First Amendment also provides that, effective January 1,2006, the Executive's base salary is increased to $1 million percalendar year (which amount may be increased, but not decreased, by theCompany). In addition, the First Amendment provides that the Executiveis eligible to receive a corporate performance bonus within 15 daysfollowing the issuance of audited financial statements for the fiscalyear ending December 31, 2008 in an amount based on the Company'sEBITDA as described in the First Amendment. The Executive is alsoentitled to receive the corporate performance payment in the event hisemployment is terminated by his death or disability, by the Executivefollowing the Company's material breach of the BeitcherAgreement, by the Company other than for cause (as described in theBeitcher Agreement) or by the Executive within six months following achange in control. The payment of any corporate performance bonus in2009 would be in addition to the equity participation payment (asdescribed in the 2003 Agreement), which is payable in early 2006.

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The First Amendment also amended the 2003Agreement such that, in the event that any amounts payable under theBeitcher Agreement or any other plan or agreement would constitute"excess parachute payments" that exceed theExecutive's "safe harbor" (as each termis defined in Code Section 280G and the regulations promulgatedthereunder) by more than $150,000, the Company will provide a gross-uppayment to the Executive to compensate him fully for the imposition ofexcise taxes under Code Section 280G. If the amounts payable exceed the"safe harbor" limit, but not by more than$150,000, then the amounts payable to the Executive shall be reduced sothat no payments are deemed to be "excess parachutepayments."

A copy of the First Amendment isattached hereto as Exhibit 10.8 and is incorporated herein byreference. The description of the First Amendment is qualified in itsentirety by reference to Exhibit 10.8.

Amendment to LoanOut Service Agreement

On March 30, 2006, the Company andZiffren, Brittenham, Branca, Fischer, Gilbert-Lurie, Stiffelman &Cook LLP ("ZBBFG-LS&C") entered into aFirst Amendment (the "Ziffren FirstAmendment") to the loan out service agreement between theCompany and ZBBFG-LS&C, dated April 10, 2003 (the"2003 Loan Out Service Agreement" and, asamended by the Ziffren First Amendment, the "Loan OutService Agreement") relating to the provision of theservices of Kenneth Ziffren to the Company as Co-Chairman of the Boardof Directors. Mr. Ziffren is currently a partner withZBBFG-LS&C.

The Ziffren First Amendment amended the 2003Loan Out Service Agreement by, among other things, extending the termof Mr. Ziffren's services to March 25, 2009, or such later dateto which the term is further extended pursuant to the terms of the LoanOut Service Agreement. In addition, the Ziffren First Amendmentprovides that ZBBFG-LS&C is eligible to receive a corporateperformance bonus within 15 days following the issuance of auditedfinancial statements for the fiscal year ending December 31, 2008 in anamount based on the Company's EBITDA as described in the ZiffrenFirst Amendment. 

A copy of the Ziffren First Amendment isattached hereto as Exhibit 10.14 and is incorporated herein byreference. The description of the Ziffren First Amendment is qualifiedin its entirety by reference to Exhibit 10.14.

Entry intoTax Sharing Agreement

On March 30, 2006, the Company enteredinto a Tax Sharing Agreement with MacAndrews & Forbes Holdings. Fora description of the Tax Sharing Agreement, see Note 23 of Notes toConsolidated Financial Statements, which description is incorporatedherein by reference. A copy of the Tax Sharing Agreement is attachedhereto as Exhibit 10.21 and is incorporated herein by reference. Thedescription of the Tax Sharing Agreement is qualified in its entiretyby reference to Exhibit 10.21.

PART III

Panavision willprovide the information required by Part III, Items 10 through 14, ofForm 10-K in its definitive proxy statement for its 2006 annual meetingof stockholders, which will be filed no later than April30,  2006.

39

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PART IV

Item15.    Exhibits and Financial StatementSchedules

|                        |                                                                                                           |
|------------------------|-----------------------------------------------------------------------------------------------------------|
| (a)(1) & (2)  | Theconsolidated financial statements of this Annual Report on Form 10-Kcan be found beginning on pageF-1. |

|              |          |
|--------------|----------|
| (a)(3)  | Exhibits |

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |  |  |  |
|---------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.            |  | Certificateof Incorporation and By-Laws.                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3.1           |  | RestatedCertificate of Incorporation of the Company (incorporated herein byreference to Exhibit 3.1 to the Company’s Quarterly Report onForm 10-Q for the quarter ended March  31,  1999).**                                                                                                                                                                                                                                                               |
| 3.2           |  | Restated By-Laws of the Company(incorporated herein by reference to Exhibit 3.2 to Panavision’sQuarterly Report on Form 10-Q for the quarter ended March  31,1999).**                                                                                                                                                                                                                                                                                      |
| 3.3           |  | Certificate of Designations,Powers, Preferences and Rights of Series F Cumulative Pay-In-KindMandatorily Redeemable PreferredStock*                                                                                                                                                                                                                                                                                                                              |
| 4.            |  | Instruments defining therights of security holders, includingindentures.                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.1           |  | Amendedand Restated Senior Subordinated Line of Credit Agreement datedJanuary  16,  2004, between Panavision Inc. and MacAndrews& Forbes Holdings Inc. (incorporated herein by reference to Exhibit4.16 to Panavision’s Annual Report on Form 10-K for the yearended December  31,2003).**                                                                                                                                                             |
| 4.2           |  | Second Amended and RestatedSenior Subordinated Line of Credit Agreement dated January16,  2004, amended and restated as of March  30,2005, between Panavision Inc. and MacAndrews & Forbes Inc.(formerly MacAndrews & Forbes Holdings, Inc.) (incorporated hereinby reference to Exhibit 4.4 to Panavision's Annual Report on Form10-K for the year ended December 31,2004).**                                                                           |
| 4.3           |  | Indenture, dated as ofJanuary  16,  2004, between Panavision Inc. and WilmingtonTrust Company, as Trustee, relating Panavision’s 12.50%Senior Secured Notes due 2009 (incorporated herein by reference toExhibit 4.17 Panavision’s Annual Report on Form 10-K for theyear ended December  31,2003).**                                                                                                                                                |
| 4.4           |  | Form of 12.50% SeniorSecured Note due 2009 (incorporated herein by reference from to Exhibit4.17 to Panavision’s Annual Report on Form 10-K for the yearended December  31,2003).**                                                                                                                                                                                                                                                                        |
| 4.5           |  | Amended and Restated CreditAgreement, dated as of May  28,  1998, as amended andrestated as of January  16,  2004, among Panavision Inc.,the several lenders named therein, and JP Morgan Chase Bank, asAdministrative Agent (incorporated herein by reference to Exhibit 4.19to Panavision’s Annual Report on Form 10-K for the year endedDecember  31, 2003).**                                                                                          |
| 4.6           |  | FirstAmendment and Waiver, dated as of August  11,  2004, withrespect to the Amended and Restated Credit Agreement, dated as ofMay  28,  1998, as amended and restated as ofJanuary  16,  2004, among Panavision Inc., the severallenders named therein, and JP Morgan Chase Bank, as AdministrativeAgent. (incorporated herein by reference from Exhibit 4.21 fromPanavision’s Quarterly Report on Form 10-Q for the quarter endedSeptember  30, 2004).** |
|               |

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |  |  |  |
|---------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.7           |  | First SupplementalIndenture and Waiver, dated as of August  11,  2004, withrespect to Indenture, dated as of January  16,  2004,between Panavision Inc. the subsidiary guarantors and Wilmington TrustCompany, as Trustee and Collateral Trustee, relating toPanavision's 12.50% Senior Secured Notes due 2009.(incorporated herein by reference from Exhibit 4.22 fromPanavision’s Quarterly Report on Form 10-Q for the quarter endedSeptember  30, 2004).**                                         |
| 4.8           |  | SecondAmendment and Consent, dated as of November  15,  2004,with respect to the Amended and Restated Credit Agreement, dated as ofMay  28,  1998, as amended and restated as ofJanuary  16,  2004, among Panavision Inc., the severalbanks and other financial institutions or entities from time to timeparties thereto and JPMorgan Chase Bank, as administrative agent.(incorporated herein by reference from Exhibit 10.2 toPanavision’s Current Report on Form 8-K filed on November17, 2004).** |
| 4.9           |  | Third Amendment, dated asof December  29,  2004, with respect to the Amended andRestated Credit Agreement, dated as of May  28,  1998, asamended and restated as of January  16,  2004, amongPanavision Inc., the several banks and other financial institutions orentities from time to time parties thereto and JPMorgan Chase Bank, asadministrative agent. (incorporated herein by reference from Exhibit10.1 to Panavision’s Current Report on Form 8-K filed onJanuary  4, 2005).**              |
| 4.10          |  | FourthSupplemental Indenture, dated as of December  29,  2004with respect to the Indenture, dated as of January  16,2004, among Panavision Inc. the subsidiary guarantors and WilmingtonTrust Company, as Trustee and Collateral Trustee, related toPanavision’s 12.50% Senior Secured Notes due 2009.(incorporated herein by reference from Exhibit 10.2 toPanavision’s Current Report on Form 8-K filed on January4, 2005).**                                                                  |
| 4.11          |  | Fourth Amendment, dated asof March 30, 2005, with respect to the Amended and Restated CreditAgreement, dated as of May  28,  1998, as amended andrestated as of January  16,  2004, among Panavision Inc.,the several banks and other financial institutions or entities fromtime to time parties thereto and JPMorgan Chase Bank, as administrativeagent (incorporated herein by reference to Exhibit 4.13 toPanavision's Annual Report on Form 10-K for the year endedDecember 31, 2004).**                |
| 4.12          |  | FifthSupplemental Indenture, dated as of March  30,  2005, withrespect to the Indenture, dated as of January  16,  2004,among Panavision Inc., the subsidiary guarantors and Wilmington TrustCompany, as Trustee and Collateral Trustee, related toPanavision’s 12.50% Senior Secured Notes due 2009(incorporated herein by reference to Exhibit 4.14 to Panavision'sAnnual Report on Form 10-K for the year ended December 31,2004).**                                                                |
| 4.13          |  | Fifth Amendment, dated as ofNovember  14,  2005, with respect to the Amended andRestated Credit Agreement, dated as of May  28,  1998, asamended and restated as of January  16,  2004, amongPanavision Inc., the several banks and other financial institutions orentities from time to time parties thereto and JPMorgan Chase Bank, asadministrative agent. (incorporated herein by reference from Exhibit4.1 to Panavision’s Current Report on Form 8-K filed onNovember  18, 2005).**             |
| 4.14          |  | SeniorSubordinated Term Loan Agreement, dated as of December  1,2005, between Panavision Inc. and PX Holding Corporation (incorporatedherein by reference to Exhibit 4.1 to Panavision’s CurrentReport on Form 8-K filed on December  2,2005).**                                                                                                                                                                                                                                                       |
| 4.15          |  | First Lien Credit Agreement,dated as of March  30,  2006, among Panavision Inc, thelenders party thereto and Credit Suisse, as Administrative Agent andCollateral Agent.*                                                                                                                                                                                                                                                                                                                                    |
|               |

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|               |  |                                                                                                                                                                                                                                                                                                                     |  |  |  |  |
|---------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                         |
| 4.16          |  | Second Lien CreditAgreement, dated as of March  30,  2006, among PanavisionInc, the lenders party thereto and Credit Suisse, as AdministrativeAgent and CollateralAgent.*                                                                                                                                           |
| 10.           |  | MaterialContracts.                                                                                                                                                                                                                                                                                                  |
| 10.1          |  | PanavisionInc. 1999 Stock Option Plan (incorporated herein by reference fromAnnex A Panavision’s 1999 Definitive Proxy Statement datedMarch  31,  1999).**                                                                                                                                                    |
| 10.2          |  | Panavision Inc. 2003 ExecutiveIncentive Compensation Plan (incorporated herein by reference toExhibit 10.2 to Panavision’s Quarterly Report on Form 10-Q forthe quarter ended March  31,2003).**                                                                                                              |
| 10.3          |  | Lease, dated June13,  1995, between the Company and Trizec Warner Inc.(incorporated herein by reference to Exhibit 10.5 toPanavision’s Registration Statement on Form S-1/A, RegistrationNo. 333-12235 filed with the Securities and Exchange Commission onOctober  31,  1996).**                             |
| 10.4          |  | Letter Agreement, dated as ofMarch  27,  2003, between MacAndrews & Forbes Inc., PXHolding Corporation and Panavision Inc. (incorporated herein byreference to Exhibit 10.3 from the Company’s Annual Report onForm 10-K for the year ended December  31,2002).**                                         |
| 10.5          |  | Letter Agreement, dated as ofJanuary  31,  2003, between MacAndrews & Forbes Inc.,PX Holding Corporation and Panavision Inc. (incorporated herein byreference to Exhibit 10.14 from the Company's Annual Report onForm 10-K for the year ended December  31,2002).**                                            |
| 10.6          |  | Registration Rights Agreement,dated as of December  3,  2002, by and between PX HoldingCorporation and Panavision Inc. (incorporated herein by reference toExhibit 3 from the Schedule 13D filed by Mafco Holdings Inc. and PXHolding Corporation on December  9,2002).**                                           |
| 10.7          |  | Employment Agreement, datedApril  1,  2003, between Panavision Inc. and Robert L.Beitcher (the ‘‘Beitcher Agreement’’)(incorporated herein by reference to Exhibit 10.30 toPanavision’s Quarterly Report on Form 10-Q for the quarter endedMarch  31, 2003).**                        |
| 10.8          |  | FirstAmendment to the Beitcher Agreement, dated as of March  30,2006.*                                                                                                                                                                                                                                              |
| 10.9          |  | Amended & RestatedEmployment Agreement, dated May  9,  2003, betweenPanavision Inc. and Bobby G. Jenkins (incorporated herein by referenceto Exhibit 10.32 to Panavision’s Quarterly Report on Form 10-Qfor the quarter ended March  31,  2003).**                                                        |
| 10.10         |  | Separation Agreement, dated as ofJanuary  10,  2005, between Panavision and Eric W. Golden,formerly the Company’s Executive Vice President, General Counseland Secretary (incorporated herein by reference to Exhibit 10.10 toPanavision's Annual Report on Form 10-K for the year endedDecember 31, 2004).** |
| 10.11         |  | EmploymentAgreement, dated September  30,  2005, between PanavisionInc. and Ross Landsbaum, Executive Vice President and Chief FinancialOfficer (incorporated herein by reference to Exhibit 10.1 toPanavision’s Current Report on Form 8-K filed on October5, 2005).**                                       |
| 10.12         |  | Letter Agreement, dated asof November  16,  2004, by and between Panavision Inc. andPX Holding Corporation (incorporated herein by reference from Exhibit10.1 to Panavision’s Current Report on Form 8-K filed onNovember  17, 2004).**                                                                       |
|               |

42

----

|               |  |                                                                                                                                                                                                                                                                                                                                                                                              |  |        |  |  |
|---------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|--|--|
| ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.13         |  | Loan Out ServiceAgreement, dated April  10,  2003, and made effectiveMarch  26,  2003, between Panavision Inc., and Ziffren,Brittenham, Branca, Fischer, Gilbert-Lurie & Stiffelman LLP (the‘‘Ziffren Agreement’’) (incorporated hereinby reference to Exhibit 10.15 to Panavision’s Quarterly Reporton Form 10-Q for the quarter ended March  31,2003).** |
| 10.14         |  | First Amendment to theZiffren Agreement, dated as of March  30,2006.*                                                                                                                                                                                                                                                                                                                        |
| 10.15         |  | Stock and Warrant PurchaseAgreement dated July  26,  2000 by and between SonyElectronics Inc. and Panavision Inc. (incorporated herein by referenceto Exhibit 10.17 to Panavision’s Quarterly Report on Form 10-Qfor the quarter ended June  30,2000).**                                                                                                                               |
| 10.16         |  | Warrant No. W-1, datedJuly  26,  2000, Warrant for Purchase of Shares of CommonStock from Panavision Inc. by Sony Electronics Inc. (incorporatedherein by reference to Exhibit 10.18 to Panavision’s QuarterlyReport on Form 10-Q for the quarter ended June  30,2000).**                                                                                                              |
| 10.17         |  | Panavision Inc. StockholdersAgreement dated July  26,  2000 by and among PanavisionInc., Sony Electronics Inc. and PX Holding Corporation (incorporatedherein by reference to Exhibit 10.19 to Panavision’s QuarterlyReport on Form 10-Q for the quarter ended June  30,2000).**                                                                                                       |
| 10.18         |  | Registration Rights Agreementdated July  26,  2000 by and between Panavision Inc. andSony Electronics Inc. (incorporated herein by reference to Exhibit10.20 to Panavision’s Quarterly Report on Form 10-Q for thequarter ended June  30,2000).**                                                                                                                                      |
| 10.19         |  | Letter Agreement, dated as ofJanuary  16,  2004, among Mafco Holdings Inc., MacAndrewsand Forbes Holdings Inc., PX Holding Corporation and Panavision Inc.(incorporated herein by reference to Exhibit 4.20 toPanavision’s Annual Report on Form 10-K for the year endedDecember  31, 2004).**                                                                                         |
| 10.20         |  | LetterAgreement, dated as of March  30,  2006, between PanavisionInc. and PX Holding Corporation.*                                                                                                                                                                                                                                                                                           |
| 10.21         |  | TaxSharing Agreement between Panavision Inc., its subsidiaries andMacAndrews & Forbes Holdings Inc. dated as of March 30,2006*                                                                                                                                                                                                                                                           |
| 21.           |  | Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                |
| 21.1          |  | Subsidiariesof Panavision. *                                                                                                                                                                                                                                                                                                                                                                 |
| 23.           |  | Consents.                                                                                                                                                                                                                                                                                                                                                                                    |
| 23.1          |  | Consentof Ernst & Young LLP, independent registered public accountingfirm*                                                                                                                                                                                                                                                                                                               |
| 24.           |  | Powers ofAttorney.                                                                                                                                                                                                                                                                                                                                                                           |
| 24.1          |  | Powerof Attorney executed by Ronald O.Perelman.*                                                                                                                                                                                                                                                                                                                                             |
| 24.2          |  | Power of Attorney executedby Robert L. Beitcher.*                                                                                                                                                                                                                                                                                                                                            |  |   |
| 24.3          |  | Powerof Attorney executed by HowardGittis.*                                                                                                                                                                                                                                                                                                                                                  |
| 24.4          |  | Power of Attorney executed byEdward Grebow.*                                                                                                                                                                                                                                                                                                                                                 |
| 24.5          |  | Power of Attorneyexecuted by Ed GregoryHookstratten.*                                                                                                                                                                                                                                                                                                                                        |
| 24.6          |  | Power of Attorneyexecuted by James R. Maher.*                                                                                                                                                                                                                                                                                                                                                |
| 24.7          |  | Power ofAttorney executed by Martin D. Payson.*                                                                                                                                                                                                                                                                                                                                              |
|               |

43

----

|               |  |                                                                                                                                                                                                                 |  |        |  |  |  |  |  |  |
|---------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|--|--|--|--|--|--|
| ExhibitNumber |  | Description                                                                                                                                                                                                     |
| 24.8          |  | Power of Attorneyexecuted by John A. Scarcella.*                                                                                                                                                                |
| 24.9          |  | Powerof Attorney executed by Robert S. Wiesenthal.*                                                                                                                                                             |  |   |
| 24.10         |  | Power of Attorney executed byKenneth Ziffren.*                                                                                                                                                                  |
| 31.           |  | Section 302Certifications.                                                                                                                                                                                      |
| 31.1          |  | Certificationof Robert L. Beitcher, Chief Executive Officer, dated March  31,2006 pursuant to Rule 13a-14(a)/15d-14(a) of the Securities andExchange Act of 1934.*                                              |
| 31.2          |  | Certification ofRoss G. Landsbaum, Chief Financial Officer, dated March  31, 2006pursuant to Rule 13a-14(a)/15d-14(a) of the Securities and Exchange Actof 1934.*                                               |
| 32.           |  | Section 906Certifications.                                                                                                                                                                                      |
| 32.1          |  | Certificationof Robert L. Beitcher, Chief Executive Officer, dated March31,  2006, pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnishedherewith) |
| 32.2          |  | Certification of Ross G.Landsbaum, Chief Financial Officer, dated March  31,  2006,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the Sarbanes-Oxley Act of 2002. (furnishedherewith) |
|               |

|  |
|--|
|  |  |
|  |

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

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

44

----

SIGNATURES

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto dulyauthorized.

|  | PANAVISIONINC. |
|--|----------------|

Date: March 31, 2006

|  | By:/s/ Robert L. Beitcher        Name: Robert L.BeitcherTitle: President and Chief ExecutiveOfficer |
|--|---------------------------------------------------------------------------------------------------------------------------------------------|

|  | By: /s/ Ross G.Landsbaum        Name: Ross G. LandsbaumTitle:Executive Vice President, |
|--|--------------------------------------------------------------------------------------------------------------------------------|

|  | ChiefFinancial Officer andPrincipal AccountingOfficer |
|--|-------------------------------------------------------|

45

----

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the Registrant and in the capacitiesand on the dates indicated.

|                        |  |                                                                                 |  |                |
|------------------------|--|---------------------------------------------------------------------------------|--|----------------|
| Signature              |  | Title                                                                           |  | Date           |
|                        |
| *                      |  | Co-Chairman of the Board andDirector                                            |  | March 31,2006  |
|                        |
| RonaldO. Perelman      |
|                        |
| *                      |  | Co-Chairman of the Board andDirector                                            |  | March 31, 2006 |
|                        |
| KennethZiffren         |
|                        |
| *                      |  | Vice Chairmanand Director                                                       |  | March 31, 2006 |
|                        |
| Howard Gittis          |
|                        |
| /s/ROBERT L. BEITCHER  |  | President and Chief Executive Officer andDirector                               |  | March 31, 2006 |
|                        |
| Robert L.Beitcher      |
|                        |
| /s/ ROSSG. LANDSBAUM   |  | ExecutiveVice President, Chief Financial Officer andPrincipalAccounting Officer |  | March 31,2006  |
|                        |
| Ross G. Landsbaum      |
|                        |
| *                      |  | Director                                                                        |  | March 31,2006  |
|                        |
| EdwardGrebow           |
|                        |
| *                      |  | Director                                                                        |  | March 31,2006  |
|                        |
| Ed GregoryHookstratten |
|                        |
| *                      |  | Director                                                                        |  | March 31,2006  |
|                        |
| James R.Maher          |
|                        |
| *                      |  | Director                                                                        |  | March 31,2006  |
|                        |
| Martin D.Payson        |
|                        |
| *                      |  | Director                                                                        |  | March 31,2006  |
|                        |
| John A.Scarcella       |
|                        |
| *                      |  | Director                                                                        |  | March 31,2006  |
|                        |
| Robert S.Wiesenthal    |
|                        |

*Ross G. Landsbaum, by signing hisname hereto, does hereby execute this Form 10-K on behalf of thedirectors of the Registrant indicated above by asterisks, pursuant topowers of attorney duly executed by such directors and filed asexhibits to the Form 10-K.

|  | By: /s/ ROSS G.LANDSBAUM                 |
|--|--------------------------------------------------------------------------------------------------------------------------|

|  | Name: Ross G.Landsbaum |
|--|------------------------|

|  | Title: Executive Vice President, ChiefFinancial Officer and Principal AccountingOfficer |
|--|-----------------------------------------------------------------------------------------|

46

----

INDEX TOFINANCIAL STATEMENTS AND FINANCIAL STATEMENTSCHEDULES 

|                                                                                                                                                 |  |        |     |        |  |  |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|-----|--------|--|--|
|                                                                                                                                            |  | Page   |
| Reportof Independent Registered Public AccountingFirm                                                                                           |  |   | F-2 |   |
| ConsolidatedStatements of Operations — Years ended December31,  2005, 2004, and 2003                                                      |  |   | F-3 |   |
| Consolidated Balance Sheets — Years EndedDecember  31,  2005 and2004                                                                      |  |   | F-4 |   |
| Consolidated Statements ofStockholders’ Equity and Comprehensive Income (Loss) —Years Ended December  31,  2005, 2004, 2003 and2002 |  |   | F-6 |   |
| Consolidated Statements of CashFlows — Years ended December  31,  2005, 2004, and2003                                                     |  |   | F-7 |   |
| Notes to Consolidated FinancialStatements                                                                                                       |  |   | F-9 |   |
|                                                                                                                                                 |

Financial StatementSchedules:

All schedules are included in the Notesto Consolidated Financial Statements are omitted because they are notrequired by the regulations or related instructions or are notapplicable.

F-1

----

Report ofIndependent Registered Public Accounting Firm

The Board ofDirectors and Stockholders Panavision Inc.

Wehave audited the accompanying consolidated balance sheets of PanavisionInc. as of December  31,  2005 and 2004, and the relatedconsolidated statements of operations, stockholders’ equity andcomprehensive income (loss), and cash flows for the each of the threeyears in the period ended December  31,  2005. Thesefinancial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

We conducted ouraudits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. Wewere not engaged to perform an audit of the Company’s internalcontrol over financial reporting. Our audit included consideration ofinternal control over financial reporting as a basis for designingaudit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion of the effectiveness of theCompany’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management andevaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for ouropinion.

In our opinion, the financial statements referredto above present fairly, in all material respects, the consolidatedfinancial position of Panavision Inc. at December  31,2005 and 2004, and the consolidated results of its operations and itscash flows for the each of the three years in the period endedDecember  31,  2005, in conformity with U.S. generallyaccepted accounting principles.

|  | ERNST &YOUNG LLP |
|--|----------------------|

Los Angeles,California

March  17,  2006, except for Note23,as to which the date is March  30,2006

F-2

----

Panavision Inc.ConsolidatedStatements of Operations(In thousands, except per shareamounts)

|                                                                                       |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------------------------------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                  |  | Yearended December31, |
|                                                                                  |  | 2005                  |         | 2004    |  | 2003   |
| Camerarental                                                                          |  | $                     | 147,281 |    |  | $      | 127,188 |    |  | $      | 118,787 |    |
| Lightingrental                                                                        |  |                  | 44,110  |    |  |   | 41,701  |    |  |   | 38,886  |    |
| Salesandother                                                                         |  |                  | 41,910  |    |  |   | 38,175  |    |  |   | 33,467  |    |
| Totalrental revenue andsales                                                          |  |                  | 233,301 |    |  |   | 207,064 |    |  |   | 191,140 |    |
| Costof camera rental                                                                  |  |                  | 78,651  |    |  |   | 67,818  |    |  |   | 58,380  |    |
| Costof lightingrental                                                                 |  |                  | 33,789  |    |  |   | 33,867  |    |  |   | 32,108  |    |
| Costof sales andother                                                                 |  |                  | 24,710  |    |  |   | 22,472  |    |  |   | 19,657  |    |
| Grossmargin                                                                           |  |                  | 96,151  |    |  |   | 82,907  |    |  |   | 80,995  |    |
| Selling,general and administrativeexpenses                                            |  |                  | 77,534  |    |  |   | 72,338  |    |  |   | 68,804  |    |
| Researchand developmentexpenses                                                       |  |                  | 5,219   |    |  |   | 5,641   |    |  |   | 4,510   |    |
| Operatingincome                                                                       |  |                  | 13,398  |    |  |   | 4,928   |    |  |   | 7,681   |    |
| Interestincome                                                                        |  |                  | 413     |    |  |   | 522     |    |  |   | 356     |    |
| Interestexpense                                                                       |  |                  | (36,425 | )  |  |   | (32,284 | )  |  |   | (30,011 | )  |
| Refinancingexpense                                                                    |  |                  | (262    | )  |  |   | (6,191  | )  |  |   | (1,505  | )  |
| Foreignexchange gain (loss)                                                           |  |                  | (1,979  | )  |  |   | 338     |    |  |   | (604    | )  |
| Otherincome,net                                                                       |  |                  | 2,044   |    |  |   | 4,024   |    |  |   | 1,867   |    |
| Lossfrom continuing operations before incometaxes                                     |  |                  | (22,811 | )  |  |   | (28,663 | )  |  |   | (22,216 | )  |
| Incometax benefit(provision)                                                          |  |                  | (873    | )  |  |   | 7,463   |    |  |   | 5,693   |    |
| Netloss from continuingoperations                                                     |  |                  | (23,684 | )  |  |   | (21,200 | )  |  |   | (16,523 | )  |
| Discontinuedoperations:                                                               |  |                  |    |    |  |   |    |    |  |   |    |    |
| Income(loss) from EFILM (net of income tax (provision) benefit of $0, $(462),and$721) |  |                  | — |    |  |   | 715     |    |  |   | (1,233  | )  |
| Gainon disposal of EFILM (net of income tax (provision) of $ 0, $(6,682),and$0).      |  |                  | — |    |  |   | 10,330  |    |  |   | — |    |
| Netincome (loss) from discontinuedoperations                                          |  |                  | — |    |  |   | 11,045  |    |  |   | (1,233  | )  |
| Netloss                                                                               |  | $                     | (23,684 | )  |  | $      | (10,155 | )  |  | $      | (17,756 | )  |
| Netloss from continuing operations attributable to commonstockholders                 |  | $                     | (23,684 | )  |  | $      | (40,524 | )  |  | $      | (30,308 | )  |
| Netloss from continuing operations per share — basic anddiluted                 |  | $                     | (0.60   | )  |  | $      | (3.21   | )  |  | $      | (3.46   | )  |
| Netloss per share — basic and diluted                                           |  | $                     | (0.60   | )  |  | $      | (2.34   | )  |  | $      | (3.60   | )  |
| Sharesused in computation — basic anddiluted                                    |  |                  | 39,381  |    |  |   | 12,617  |    |  |   | 8,770   |    |
|                                                                                       |

Seeaccompanying notes.

F-3

----

Panavision Inc.Consolidated BalanceSheets(In thousands, except sharedata)

|                                                                         |  |             |         |        |  |        |         |        |  |  |
|-------------------------------------------------------------------------|--|-------------|---------|--------|--|--------|---------|--------|--|--|
|                                                                    |  | December31, |
|                                                                    |  | 2005        |         | 2004   |
| ASSETS                                                                  |  |        |    |   |  |   |    |   |
| Currentassets:                                                          |  |        |    |   |  |   |    |   |
| Cash and cashequivalents                                                |  | $           | 9,057   |   |  | $      | 6,593   |   |
| Depositfor redemption ofdebt                                            |  |        | 67,477  |   |  |   | — |   |
| Accountsreceivable (net of allowance of $945 in 2005 and $1,618 in2004) |  |        | 29,981  |   |  |   | 28,897  |   |
| Inventories                                                             |  |        | 13,298  |   |  |   | 14,926  |   |
| Prepaidexpenses                                                         |  |        | 3,334   |   |  |   | 3,912   |   |
| Notereceivable                                                          |  |        | — |   |  |   | 826     |   |
| Duefrom relatedparties                                                  |  |        | 5       |   |  |   | 106     |   |
| Other currentassets                                                     |  |        | 2,600   |   |  |   | 2,081   |   |
| Totalcurrentassets                                                      |  |        | 125,752 |   |  |   | 57,341  |   |
| Property,plant and equipment,net                                        |  |        | 220,824 |   |  |   | 230,795 |   |
| Goodwill,net                                                            |  |        | 259,909 |   |  |   | 259,909 |   |
| Patentsand trademarks,net                                               |  |        | 66,052  |   |  |   | 66,266  |   |
| Otherassets                                                             |  |        | 4,786   |   |  |   | 6,349   |   |
| Totalassets                                                             |  | $           | 677,323 |   |  | $      | 620,660 |   |
|                                                                         |

Seeaccompanying notes.

F-4

----

Panavision Inc.Consolidated BalanceSheets(In thousands, except sharedata)

|                                                                                                                                    |  |             |          |         |  |        |          |         |  |  |
|------------------------------------------------------------------------------------------------------------------------------------|--|-------------|----------|---------|--|--------|----------|---------|--|--|
|                                                                                                                               |  | December31, |
|                                                                                                                               |  | 2005        |          | 2004    |
| LIABILITIESAND STOCKHOLDERS’EQUITY                                                                                           |  |        |     |    |  |   |     |    |
| Currentliabilities:                                                                                                                |  |        |     |    |  |   |     |    |
| Accountspayable                                                                                                                    |  | $           | 10,555   |    |  | $      | 8,634    |    |
| Accruedliabilities                                                                                                                 |  |        | 31,945   |    |  |   | 28,117   |    |
| Dueto relatedparties                                                                                                               |  |        | 603      |    |  |   | 2        |    |
| Currentmaturities of long-termdebt                                                                                                 |  |        | 82,071   |    |  |   | 9,557    |    |
| Totalcurrentliabilities                                                                                                            |  |        | 125,174  |    |  |   | 46,310   |    |
| Long-termdebt                                                                                                                      |  |        | 219,201  |    |  |   | 290,740  |    |
| Long-term debtdue toaffiliate                                                                                                      |  |        | 88,526   |    |  |   | 9,154    |    |
| Deferred taxliabilities, net                                                                                                       |  |        | 25,461   |    |  |   | 28,201   |    |
| Otherliabilities                                                                                                                   |  |        | 2,623    |    |  |   | 3,323    |    |
| Commitmentsandcontingencies                                                                                                        |  |        |     |    |  |   |     |    |
| Stockholders’equity:                                                                                                         |  |        |     |    |  |   |     |    |
| Common Stock, $0.01par value; 50,000,000 shares authorized; 39,380,729 shares issued andoutstanding at December  31,  2005 and2004 |  |        | 394      |    |  |   | 394      |    |
| Additionalpaid-incapital                                                                                                           |  |        | 374,780  |    |  |   | 374,780  |    |
| Revaluationcapital                                                                                                                 |  |        | 333,199  |    |  |   | 333,199  |    |
| Accumulateddeficit                                                                                                                 |  |        | (495,634 | )  |  |   | (471,950 | )  |
| Accumulatedother comprehensiveincome                                                                                               |  |        | 3,599    |    |  |   | 6,509    |    |
| Totalstockholders’equity                                                                                                     |  |        | 216,338  |    |  |   | 242,932  |    |
| Totalliabilities and stockholders’equity                                                                                     |  | $           | 677,323  |    |  | $      | 620,660  |    |
|                                                                                                                                    |

Seeaccompanyingnotes

F-5

----

Panavision Inc.ConsolidatedStatements of Stockholders’ Equityand Comprehensive Income(Loss)(In thousands, except shareamount)

|                                                                                        |  |                            |         |                 |  |                              |         |                  |  |                             |         |         |  |                          |         |                     |  |                    |         |                                             |  |                                               |         |        |  |        |         |         |  |        |          |        |  |        |          |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------------------------------------------------|--|----------------------------|---------|-----------------|--|------------------------------|---------|------------------|--|-----------------------------|---------|---------|--|--------------------------|---------|---------------------|--|--------------------|---------|---------------------------------------------|--|-----------------------------------------------|---------|--------|--|--------|---------|---------|--|--------|----------|--------|--|--------|----------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                   |  | PreferredStock             |         | CommonStock     |  |                         |         |             |  |                        |         |    |  |                     |
|                                                                                   |  | SharesIssuedAndOutstanding |         | SeriesA/EAmount |  | SharesIssued and Outstanding |         | Series C/DAmount |  | Shares IssuedandOutstanding |         | Amount  |  | AdditionalPaid-inCapital |         | Revaluation Capital |  | AccumulatedDeficit |         | Accumulated OtherComprehensiveIncome (Loss) |  | Stockholders'Equity/ComprehensiveIncome(Loss) |
| Balance at December  31,2002                                                           |  |                       | 1,382   |            |  | $                            | 14      |             |  |                        | — |    |  | $                        | — |                |  |               | 8,770   |                                        |  | $                                             | 88      |   |  | $      | 189,476 |    |  | $      | 333,199  |   |  | $      | (444,039 | )  |  | $      | (6,609  | )  |  | $      | 72,129  |    |
| Comprehensiveloss:                                                                     |  |                       |    |            |  |                         |    |             |  |                        |    |    |  |                     |    |                |  |               |    |                                        |  |                                          |    |   |  |   |    |    |  |   |     |   |  |   |     |    |  |   |    |    |  |   |    |    |
| Netloss                                                                                |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | — |    |  |   | —  |   |  |   | (17,756  | )  |  |   | — |    |  |   | (17,756 | )  |
| Foreigncurrency translationadjustment                                                  |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | — |    |  |   | —  |   |  |   | —  |    |  |   | 10,644  |    |  |   | 10,644  |    |
| Totalcomprehensiveloss                                                                 |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | — |    |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | (7,112  | )  |
| Accreteddividend on Redeemable Series B PreferredStock                                 |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | (1,319  | )  |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | (1,319  | )  |
| Issuanceof Series C PreferredStock                                                     |  |                       | — |            |  |                         | — |             |  |                        | 160     |    |  |                     | 2       |                |  |               | — |                                        |  |                                          | — |   |  |   | 142,470 |    |  |   | —_ |   |  |   | —  |    |  |   | — |    |  |   | 142,472 |    |
| Adjustmentto 2002 contribution of net operating loss carryforwards by M&FWorldwide |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | (1,650  | )  |  |   | —_ |   |  |   | —  |    |  |   | — |    |  |   | (1,650  | )  |
| Other                                                                                  |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | 150     |    |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | 150     |    |
| Balanceat December  31,2003                                                            |  |                       | 1,382   |            |  |                         | 14      |             |  |                        | 160     |    |  |                     | 2       |                |  |               | 8,770   |                                        |  |                                          | 88      |   |  |   | 329,127 |    |  |   | 333,199  |   |  |   | (461,795 | )  |  |   | 4,035   |    |  |   | 204,670 |    |
| Comprehensiveloss:                                                                     |  |                       |    |            |  |                         |    |             |  |                        |    |    |  |                     |    |                |  |               |    |                                        |  |                                          |    |   |  |   |    |    |  |   |     |   |  |   |     |    |  |   |    |    |  |   |    |    |
| Netloss.                                                                               |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | — |    |  |   | —  |   |  |   | (10,155  | )  |  |   | — |    |  |   | (10,155 | )  |
| Foreigncurrency translationadjustment                                                  |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | — |    |  |   | —  |   |  |   | —  |    |  |   | 2,474   |    |  |   | 2,474   |    |
| Totalcomprehensiveloss                                                                 |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | — |    |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | (7,681  | )  |
| Exchangeof Series A for Series E and Series C                                          |  |                       | (1,382  | )          |  |                         | (14     | )           |  |                        | (160    | )  |  |                     | (2      | )              |  |               |    |                                        |  |                                          |    |   |  |   |    |    |  |   |     |   |  |   |     |    |  |   |    |    |  |   |    |    |
| forSeries D PreferredStock                                                             |  |                       | 1,382   |            |  |                         | 14      |             |  |                        | 215     |    |  |                     | 2       |                |  |               | — |                                        |  |                                          | — |   |  |   | — |    |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | — |    |
| Parentcapitalcontribution                                                              |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | 22,710  |    |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | 22,710  |    |
| Parentnon-cash contribution of related party notes and 1/3 interest in PANYRental      |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | 19,033  |    |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | 19,033  |    |
| EFILMdisposition                                                                       |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | 4,641   |    |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | 4,641   |    |
| Exchangeof Common Stock for Series A and Series D PreferredStock                       |  |                       | (1,382  | )          |  |                         | (14     | )           |  |                        | (215    | )  |  |                     | (2      | )              |  |               | 30,611  |                                        |  |                                          | 306     |   |  |   | (818    | )  |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | (528    | )  |
| Other                                                                                  |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | 87      |    |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | 87      |    |
| Balanceat December  31,2004                                                            |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | 39,381  |                                        |  |                                          | 394     |   |  |   | 374,780 |    |  |   | 333,199  |   |  |   | (471,950 | )  |  |   | 6,509   |    |  |   | 242,932 |    |
| Comprehensiveloss:                                                                     |  |                       |    |            |  |                         |    |             |  |                        |    |    |  |                     |    |                |  |               |    |                                        |  |                                          |    |   |  |   |    |    |  |   |     |   |  |   |     |    |  |   |    |    |  |   |    |    |
| Netloss                                                                                |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | — |    |  |   | —  |   |  |   | (23,684  | )  |  |   | — |    |  |   | (23,684 | )  |
| Foreigncurrency translationadjustment                                                  |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | — |    |  |   | —  |   |  |   | —  |    |  |   | (2,910  | )  |  |   | (2,910  | )  |
| Totalcomprehensiveloss                                                                 |  |                       | — |            |  |                         | — |             |  |                        | — |    |  |                     | — |                |  |               | — |                                        |  |                                          | — |   |  |   | — |    |  |   | —  |   |  |   | —  |    |  |   | — |    |  |   | (26,594 | )  |
| Balanceat December  31,2005                                                            |  |                       | — |            |  | $                            | — |             |  |                        | — |    |  | $                        | — |                |  |               | 39,381  |                                        |  | $                                             | 394     |   |  | $      | 374,780 |    |  | $      | 333,199  |   |  | $      | (495,634 | )  |  | $      | 3,599   |    |  | $      | 216,338 |    |
|                                                                                        |

Seeaccompanying notes

F-6

----

Panavision Inc.ConsolidatedStatements of Cash Flows(Inthousands)

|                                                                |  |                       |         |         |  |        |          |         |  |        |         |         |  |  |
|----------------------------------------------------------------|--|-----------------------|---------|---------|--|--------|----------|---------|--|--------|---------|---------|--|--|
|                                                           |  | Yearended December31, |
|                                                           |  | 2005                  |         | 2004    |  | 2003   |
| Operatingactivities                                            |  |                  |    |    |  |   |     |    |  |   |    |    |
| Net lossfrom continuingoperations                              |  | $                     | (23,684 | )  |  | $      | (21,200  | )  |  | $      | (16,523 | )  |
| Adjustmentsto derive net cash provided by operatingactivities: |  |                  |    |    |  |   |     |    |  |   |    |    |
| Depreciationandamortization                                    |  |                  | 43,082  |    |  |   | 40,527   |    |  |   | 39,566  |    |
| Gainon dispositions of property andequipment                   |  |                  | (1,410  | )  |  |   | (3,236   | )  |  |   | (1,507  | )  |
| Write-offof deferred financingcosts                            |  |                  | — |    |  |   | 3,436    |    |  |   | — |    |
| Amortizationof deferred financingcosts                         |  |                  | 1,659   |    |  |   | 1,072    |    |  |   | 4,831   |    |
| Dividendsfrom equity method investees.                         |  |                  | — |    |  |   | 1,112    |    |  |   | — |    |
| Deferredincome tax benefit.                                    |  |                  | (2,740  | )  |  |   | (8,175   | )  |  |   | (10,755 | )  |
| Unrealizedforeign exchange (gain)loss                          |  |                  | 2,268   |    |  |   | (270     | )  |  |   | 238     |    |
| Changesin operating assets andliabilities:                     |  |                  |    |    |  |   |     |    |  |   |    |    |
| Accountsreceivable                                             |  |                  | (1,084  | )  |  |   | (97      | )  |  |   | 547     |    |
| Inventories                                                    |  |                  | 1,628   |    |  |   | (3,129   | )  |  |   | (825    | )  |
| Prepaidexpenses and other currentassets                        |  |                  | 59      |    |  |   | (1,865   | )  |  |   | (1,902  | )  |
| Duefrom relatedparties                                         |  |                  | 101     |    |  |   | (106     | )  |  |   | 105     |    |
| Accountspayable                                                |  |                  | 1,921   |    |  |   | 1,757    |    |  |   | (262    | )  |
| Accruedliabilities                                             |  |                  | 3,828   |    |  |   | 1,146    |    |  |   | 1,255   |    |
| Dueto relatedparties                                           |  |                  | 601     |    |  |   | (801     | )  |  |   | 97      |    |
| Other,net                                                      |  |                  | (1,205  | )  |  |   | (1,488   | )  |  |   | (1,117  | )  |
| Netcash provided by continuing operatingactivities             |  |                  | 25,024  |    |  |   | 8,683    |    |  |   | 13,748  |    |
| Investingactivities                                            |  |                  |    |    |  |   |     |    |  |   |    |    |
| Capitalexpenditures                                            |  |                  | (32,829 | )  |  |   | (38,328  | )  |  |   | (22,269 | )  |
| Acquisitionofbusinesses                                        |  |                  | — |    |  |   | (7,782   | )  |  |   | 9       |    |
| Netproceeds from sale ofEFILM                                  |  |                  | — |    |  |   | 25,300   |    |  |   | — |    |
| Proceedsfrom collection of notesreceivable                     |  |                  | 826     |    |  |   | 3,729    |    |  |   | — |    |
| Proceedsfrom dispositions of fixedassets                       |  |                  | 2,853   |    |  |   | 5,010    |    |  |   | 2,377   |    |
| Netcash used in investingactivities                            |  |                  | (29,150 | )  |  |   | (12,071  | )  |  |   | (19,883 | )  |
| Financingactivities                                            |  |                  |    |    |  |   |     |    |  |   |    |    |
| Borrowingsunder creditagreement                                |  |                  | — |    |  |   | 135,600  |    |  |   | — |    |
| Proceedsfrom issuance of SeniorNotes                           |  |                  | — |    |  |   | 100,000  |    |  |   | — |    |
| Borrowingsunder notes payable toaffiliate                      |  |                  | 16,500  |    |  |   | 10,450   |    |  |   | 14,500  |    |
| Repaymentunder notes payable toaffiliate                       |  |                  | (1,920  | )  |  |   | (4,839   | )  |  |   | (1,500  | )  |
| Proceedsfrom long-termborrowings                               |  |                  | 8,594   |    |  |   | —  |    |  |   | — |    |
| Repaymentsof long-term debt, including capitalleases           |  |                  | (12,975 | )  |  |   | (264,275 | )  |  |   | (23,313 | )  |
| Depositfor redemption ofdebt                                   |  |                  | (2,685  | )  |  |   | —  |    |  |   | — |    |
| Capitalcontribution                                            |  |                  | — |    |  |   | 22,730   |    |  |   | — |    |
| Deferredfinancingcosts                                         |  |                  | (562    | )  |  |   | (1,579   | )  |  |   | (4,087  | )  |
| Saleof note receivable toaffiliate                             |  |                  | — |    |  |   | 5,000    |    |  |   | — |    |
| Proceedsfrom issuance of Series B PreferredStock*              |  |                  | — |    |  |   | —  |    |  |   | 4,372   |    |
| Proceedsfrom issuance of Series C PreferredStock*              |  |                  | — |    |  |   | —  |    |  |   | 9,725   |    |
| Notespayable to Deluxe Laboratories,Inc                        |  |                  | — |    |  |   | —  |    |  |   | 580     |    |
| Netcash provided by financingactivities                        |  |                  | 6,952   |    |  |   | 3,087    |    |  |   | 277     |    |
| Effectof exchange rate changes oncash                          |  |                  | (362    | )  |  |   | 124      |    |  |   | 726     |    |
| Netincrease (decrease) in cash and cashequivalents             |  |                  | 2,464   |    |  |   | (177     | )  |  |   | (5,132  | )  |
| Cashand cash equivalents at beginning ofperiod                 |  |                  | 6,593   |    |  |   | 6,770    |    |  |   | 11,902  |    |
| Cashand cash equivalents at end ofperiod                       |  | $                     | 9,057   |    |  | $      | 6,593    |    |  | $      | 6,770   |    |
|                                                                |

|  |
|--|
|  |  |
|  |

|  |                           |
|--|---------------------------|
|  | *net of transaction costs |

See accompanyingnotes

F-7

----

Panavision Inc.Consolidated Statementsof Cash Flows

|                                                           |  |                       |        |        |  |        |        |        |  |        |        |        |  |  |
|-----------------------------------------------------------|--|-----------------------|--------|--------|--|--------|--------|--------|--|--------|--------|--------|--|--|
|                                                      |  | Yearended December31, |
|                                                      |  | 2005                  |        | 2004   |  | 2003   |
| Supplementalcash flow information (inthousands)           |  |                  |   |   |  |   |   |   |  |   |   |   |
| Interestpaid during the period, net of amountscapitalized |  | $                     | 32,619 |   |  | $      | 30,574 |   |  | $      | 26,921 |   |
| Incometaxes paid during theperiod                         |  |                  | 3,648  |   |  |   | 2,698  |   |  |   | 3,335  |   |
|                                                           |

Supplementalnon-cash activities

The Company entered into transactionsthat affected the recorded amounts of assets and liabilities withoutinvolving a current payment or receipt of cash, and, as such, thesetransactions are not reflected in the Statements of Cash Flows. Duringthe years ended December  31,  2005, 2004 and 2003, theCompany entered into the following non-cash transactions (inthousands):

|                                               |  |      |         |        |  |      |         |        |  |   |         |        |  |  |
|-----------------------------------------------|--|------|---------|--------|--|------|---------|--------|--|---|---------|--------|--|--|
|                                          |  | 2005 |         | 2004   |  | 2003 |
| Assetadditions financed through capitalleases |  | $    | 2,700   |   |  | $    | 9,700   |   |  | $ | — |   |
| Assetadditions financed directly withdebt     |  | $    | 2,700   |   |  | $    | — |   |  | $ | — |   |
| Promissorynotes received from assetsales      |  | $    | — |   |  | $    | 6,500   |   |  | $ | — |   |
|                                               |

Asdescribed in Note 12 of the Notes to Consolidated Financial Statements,in December  2005, the Company entered into a loan agreement withPX Holding Corporation (‘‘PX Holding’’).Proceeds from the loan of approximately $65  million were paiddirectly from PX Holding to a trustee to be used to redeem the9 5/8% Notes in January  2006 andaccordingly are not reflected as cash from financing activities.

The Company has entered into transactions with related partiesinvolving non-cash exchanges of equity instruments. During the yearsended December  31,  2005, 2004 and 2003, the Companyentered into the following non-cashtransactions:

|                    |  |                                 |  |                          |  |            |  |                                                                                                        |  |  |  |  |  |  |  |  |  |  |
|--------------------|--|---------------------------------|--|--------------------------|--|------------|--|--------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|--|--|--|--|
| IssuedbyPanavision |
| Date               |  | RelatedParty                    |  | Instrument               |  | Shares     |  | Received byPanavision                                                                                  |
| March2003          |  | MacAndrews & ForbesHoldings |  | Series C PreferredStock  |  | 102,220    |  | $90.9million of 9 5/8%Notes                                                                            |
| March  2003        |  | PXHolding                       |  | Series C Preferred Stock |  | 57,424     |  | 53,571Shares Series B Preferred Stock                                                                  |
| January2004        |  | PX Holding                      |  | Series D PreferredStock  |  | 215,274    |  | 159,644 Shares Series C Preferred Stockplus other non-cash consideration with fair value of $19million |
| January  2004      |  | PXHolding                       |  | Series E PreferredStock  |  | 1,381,690  |  | 1,381,690 Shares Series A PreferredStock                                                               |
| November  2004     |  | PXHolding                       |  | Common Stock             |  | 30,610,810 |  | 215,274 SharesSeries D Preferred Stock 1,381,690 Shares Series E PreferredStock                        |
|                    |

See Notes 12 and 13 for a completedescription of the instruments and the transactions, including any cashconsideration that may have been involved. See Note 23 for subsequentnon-cash transactions.

In connection with the 2003 contributionof 9 5/8 % Notes by the majority shareholder,deferred tax assets associated with the 9 5/8%Notes of $18.0  million were charged against additional paid-incapital.

For the year ended December  31,  2003, theCompany recorded an accreted dividend of $1.3  million on theSeries B Preferred Stock.

In 2003, adjustments were recorded togoodwill and deferred tax liabilities relating to differences in thebook and tax basis of assets not recorded at the time of the M&FPurchase (as defined below in Note 2). These adjustments resulted in anincrease in goodwill of $7.6  million and an increase in deferredtax liabilities of $7.2  million at December  31,2003.

See accompanyingnotes

F-8

----

PanavisionInc.Notes to Consolidated FinancialStatements

1.    Summary ofSignificant Accounting Policies

Description of Businessand Basis of Presentation

Panavision Inc.(‘‘Panavision’’ or the‘‘Company’’) is a leading designer,manufacturer and supplier of high-precision camera systems, comprisingcameras, lenses and accessories, for the motion picture and televisionindustries. The Company rents its products through itsowned-and-operated facilities in North America, Europe, and the AsiaPacific region, as well as through a worldwide network of independentdistributors. In addition to manufacturing and renting camera systems,the Company also rents lighting, lighting grip, power distribution,generation and related transportation equipment and sells lightingfilters and other color correction and diffusion filters.

TheCompany is an indirect majority-owned subsidiary of MacAndrews &Forbes Holdings Inc. (‘‘MacAndrews & ForbesHoldings’’ or ‘‘Parent’’),previously known as Mafco Holdings Inc. (‘‘MafcoHoldings’’), a corporation whose sole stockholder isRonald O. Perelman. All of the Company’s operations areconducted through its subsidiaries.

The consolidated financialstatements include the accounts of Panavision and its subsidiaries.Acquired businesses are included in the consolidated financialstatements from the dates of acquisition. All significant intercompanyamounts and transactions have been eliminated.

Certain amountsin previously issued financial statements have been reclassified toconform to the 2005 presentation. Additionally, the Company reviewedthe components of its reported cost of rentals and sales and determinedthat certain reclassifications were appropriate to better reflect theoperating costs related to revenues. Effective April  2005,freight charges, which had previously been reported as selling, generaland administrative (‘‘SG&A’’) costs,are now presented as cost of rentals and sales. Facilities-relatedcosts, such as rents, utilities and maintenance, which had previouslybeen allocated, using various methodologies, to cost of rental assetsproduced, cost of camera and lighting rentals, cost of sales, SG&Aand research and development expenses, are now only allocated to costof rental assets produced with the remaining unallocated amountclassified as SG&A. All prior periods have been reclassified toconform to the current classification. The effect of thereclassification was to reduce cost of sales, increase SG&A andreduce other line items in the Consolidated Statements of Operations asfollows (inthousands):

|                        |  |                            |        |          |  |       |       |        |  |   |      |         |  |  |
|------------------------|--|----------------------------|--------|----------|--|-------|-------|--------|--|---|------|---------|--|--|
|                   |  | Increase(Decrease)         |
| Year EndedDecember 31, |  | Cost of Rentals &Sales |        | SG&A |  | Other |
| 2004                   |  | $                          | (6,125 | )   |  | $     | 6,459 |   |  | $ | (334 | )  |
| 2003                   |  | $                          | (6,410 | )   |  | $     | 6,975 |   |  | $ | (565 | )  |
|                        |

Translationof Foreign Currencies

The functional currency for theCompany’s foreign subsidiaries is the local currency primarilythe Pound Sterling, the Euro, and the Canadian, Australian, and NewZealand dollars. All assets and liabilities denominated in foreignfunctional currencies are translated into U.S. dollars at rates ofexchange in effect at the balance sheet date. Statement of operationsitems are translated at the average rate of exchange prevailing duringthe period. Translation gains and losses are recorded as a component ofaccumulated other comprehensive income (loss) in the accompanyingstatements of stockholders’ equity and comprehensive income(loss). Gains and losses resulting from transactions in other thanfunctional currencies are reflected in operatingresults.

Cash Equivalents

The Company considersall highly liquid debt instruments purchased with original maturitydates of three months or less and investments in money market funds tobe cash equivalents. The carrying amounts reported in the balancesheets for cash and cash equivalents approximate fairvalue.

F-9

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

1.    Summary ofSignificant Accounting Policies (Continued)

Inventories

Inventories arevalued at the lower of cost or market value and are determinedprincipally under the first-in, first-out method. Inventories arereviewed for excess quantities and obsolescence based upon demandforecasts within a specific time horizon and reserves are establishedaccordingly.

Property, Plant and Equipment

Withthe exception of rental assets, which were adjusted in connection withthe M&F Purchase (see Note 2), property, plant andequipment are stated at cost. Maintenance and repairs are charged toexpense as incurred. Additions, improvements and replacements thatextend asset life are capitalized.

Depreciation is provided on astraight-line basis over the estimated useful lives of the assets.Leasehold improvements are amortized over the shorter of the usefullife of the related asset or the remaining lease term. Cost andaccumulated depreciation applicable to assets retired or otherwisedisposed of are eliminated from the accounts, and any gain or loss onsuch disposition is reflected in operatingresults.

Depreciation is provided principally over thefollowing usefullives:

|                           |  |                              |  |  |  |  |
|---------------------------|--|------------------------------|--|--|--|--|
| Buildingsand improvements |  | 10–30years             |
| Rental assets             |  |   3–20years  |
| Machinery andequipment    |  |   3–10 years |
| Furnitureand fixtures     |  |   5–10years  |
|                           |

Depreciation expense, including depreciationon assets recorded under capitalized leases, totaled $42.5million, $38.9  million, and $37.1  million for the yearsended December  31,  2005, 2004, and 2003,respectively.

Financial Instruments

The majorityof the Company’s customers are in the entertainment industry.Concentration of credit risk with respect to trade receivables isconsidered to be limited due to the diversity of both the customer baseand the geographic area of operations. The Company performs ongoingcredit evaluations of its customers and maintains allowances forpotential credit losses; such losses have historically been withinmanagement’s expectations. The Company does not generallyrequire collateral.

The carrying amounts for cash and cashequivalents, accounts receivable, accounts payable, accrued liabilitiesand debt approximate fair value.

Goodwill and IntangibleAssets

Goodwill and intangible assets deemed to have indefinitelives are not amortized, but are subject to impairment tests conductedat least annually. Other intangible assets are amortized over theirestimated useful lives.

The Company performed an impairment testrelating to its goodwill and tradename as of December  31,2005 and December  31,  2004, and found that the fairvalues of its goodwill and its tradename are in excess of carryingvalue.

As of December  31,  2005 and 2004, goodwillwas $259.9  million, net of accumulated amortization of$9.1  million for both years. Goodwill is principally related tothe M&F Purchase (see Note 2).

Patents are being amortized ona straight-line basis over their estimated useful lives ranging from 5to 12 years. Amortization expense amounted to $0.5  million,$0.3  million, and $0.4  million for 2005, 2004,

F-10

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

1.    Summary ofSignificant Accounting Policies (Continued)

and 2003, respectively. The Companyanticipates the amortization expense will be at approximately the samelevel over the next five years, excluding any impairment write-downthat may be required. Accumulated amortization was $5.0  millionand $4.5  million at December  31,  2005 and 2004,respectively.

Accounting for Long-Lived Assets

TheCompany assesses on an ongoing basis the recoverability of long-livedtangible and intangible assets based on estimates of futureundiscounted cash flows compared to net book value. If the futureundiscounted cash flow estimates were less than net book value, netbook value would then be reduced to estimated fair value, whichgenerally approximates discounted cash flows. The Company alsoevaluates the amortization periods of assets to determine whetherevents or circumstances warrant revised estimates of useful lives.

Income Taxes

Income taxes are accounted for using theliability method in accordance with Statement of Financial AccountingStandards (‘‘SFAS’’) No. 109,‘‘Accounting for Income Taxes’’ (see Note7). Under this method, deferred tax assets and liabilities arerecognized for the expected future tax consequences of temporarydifferences between the carrying amounts and the tax bases of assetsand liabilities. As of December  31,  2005, the Company hasprovided deferred income taxes, including withholding taxes, onundistributed earnings from Canada totaling approximately $0.9million.

Revenue Recognition

Rental revenue isrecognized over the related equipment rental period. Sales revenue isrecognized upon shipment. Returns and allowances, which have not beensignificant, are provided for in the period of sale.

Accounting for Long-Term Contracts

A subsidiary ofthe Company is party to one or more long-term contracts with the U.S.Government. We recognize revenue from these long-term contracts underthe percentage of completion method using primarily a ratio of costsincurred to our estimate of total costs at completion. There were nomaterial amounts of unbilled costs or deferred revenue associated withlong-term contracts at December  31,2005.

Advertising Costs

For the years endedDecember  31,  2005, 2004 and 2003, advertising costsamounted to $2.6  million, $2.4  million, and $1.9million, respectively, and are included in SG&A in the accompanyingConsolidated Statements of Operations. Advertising costs are expensedas incurred.

Freight Costs

For the years endedDecember  31,  2005, 2004 and 2003, freight costs amountedto $4.2  million, $2.0  million, and $1.5  million,respectively, and are included in costs of rentals in the accompanyingConsolidated Statements of Operations.

Stock-BasedBenefits

The Company follows the provisions of SFASStatement No. 123, ‘‘Accounting for Stock-BasedCompensation’’ (‘‘SFAS123’’), as amended, which permit companies to eitherexpense the estimated fair value of stock options, or to continue tofollow the intrinsic value method set forth in Accounting PrinciplesBoard Opinion No. 25, ‘‘Accounting for Stock Issued toEmployees’’ (‘‘APB 25’’), butdisclose 

F-11

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

1.    Summary ofSignificant Accounting Policies (Continued)

the pro forma effects on net income (loss)had the fair value of the options been expensed. Through the year endedDecember  31,  2005, the Company has elected to continue toapply APB 25 in accounting for its stock option grants while complyingwith amended disclosure requirements.

In accordance with APB 25and related interpretations, compensation expense for stock options isrecognized in income based on the excess, if any, of the quoted marketprice of the stock at the grant date of the award or other measurementdate over the amount an employee must pay to acquire thestock.

Generally, the exercise price for stock options granted toemployees equals or exceeds the fair market value of theCompany’s common stock at the date of grant, thereby resultingin no recognition of compensation expense by the Company. For awardsthat generate compensation expense as defined under APB 25, the Companycalculates the amount of compensation expense and recognizes theexpense over the vesting period of the award.

As described belowin New Accounting Pronouncements the Company will be required toadopt SFAS 123R in the first quarter of2006.

Investments

At December  31,2005 and 2004, respectively, the Company had no investments accountedfor under the equity method. The Company’s share of earnings(losses) of its previously held equity investments of approximately$(72,000) and $137,000 for the years ended December  31,2004 and 2003, respectively, is included in other, net in theaccompanying consolidated statements of operations.

NewAccounting Pronouncements

In November  2004, the FinancialAccounting Standards Board (‘‘FASB’’)issued SFAS No. 151, ‘‘Inventory Costs – anamendment of ARB No. 43, Chapter 4’’(‘‘SFAS 151’’). SFAS 151 amends theexisting guidance to clarify the accounting for abnormal amounts ofidle facility expense, freight, handling costs and spoilage. Whereasexisting guidance stated that under some circumstances the amount ofthese items may be so abnormal as to warrant treatment as a currentperiod expense, SFAS 151 requires treatment as current period expenseregardless of the ‘‘so abnormal’’criterion. SFAS 151 also requires the allocation of fixed productionoverheads be based on the normal capacity of the production facilities.SFAS 151 will be effective for the Company’s 2006 fiscal year.We believe that implementation of SFAS 151 will not have a materialimpact on our consolidated financial position, results of operations orcash flows.

In December  2004, the FASB issued SFAS No.153, ‘‘Exchanges of Nonmonetary Assets – anamendment of APB No. 29’’ (‘‘SFAS153’’). The existing guidance was based on the principlethat exchanges of nonmonetary assets should be based on the fair valueof the assets exchanged with certain exceptions. SFAS 153 amendsexisting guidance to eliminate the exception for nonmonetary exchangesof similar productive assets and replaces it with a general exceptionfor exchanges of nonmonetary assets that do not have commercialsubstance. SFAS 153 will be effective for the Company’s 2006fiscal year. As the provisions of SFAS 153 are to be applied toprospective transactions, we cannot ascertain at this time whetherimplementation of SFAS 153 will have any impact on our consolidatedfinancial position, results of operations or cash flows.

InDecember  2004, the FASB issued revisedSFAS No. 123R, ‘‘Share-BasedPayment.’’ SFAS No. 123R sets accountingrequirements for ‘‘share-based’’compensation to employees and requires companies to recognize in theincome statement the grant-date fair value of stock options and otherequity-based compensation granted after the effective date of theStatement and to awards modified, repurchased or cancelled after thatdate. SFAS No. 123R is effective for interim or annualperiods beginning after December 15, 2005. The Company will berequired to adopt SFAS No. 123R in its first quarter offiscal 

F-12

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

1.    Summary ofSignificant Accounting Policies (Continued)

2006 and currently discloses the effect onnet income (loss) and earnings (loss) per share of the fair valuerecognition provisions of SFAS No. 123,‘‘Accounting for Stock-BasedCompensation.’’ We believe that implementation of SFASNo. 123R will not have a material impact on our financial position,results of operations, and cash flows.

Use of Estimatesand Assumptions

The preparation of financial statements inconformity with accounting principles generally accepted in the UnitedStates requires management to make estimates and assumptions thataffect the amounts reported in the financial statements andaccompanying notes, including the collectibility of receivables and therealizability of assets such as fixed assets and deferred taxes. Actualresults could differ from such estimates.

Accounting forDerivative Instruments

SFAS No. 133, ‘‘Accountingfor Derivative Instruments and Hedging Activities’’(‘‘SFAS 133’’), as amended by SFAS 137,requires the Company to recognize all derivatives as either assets orliabilities and measure those instruments at fair value. It furtherprovides criteria for derivative instruments to be designated as fairvalue, cash flow and foreign currency hedges and establishes respectiveaccounting standards for reporting changes in the fair value of thederivative instruments. All hedging instruments are to be adjusted tofair value in the balance sheet and the offsetting gains or losses arerecognized as adjustments to net loss or other comprehensive loss, asappropriate. The Company did not hold any derivative instruments atDecember  31,  2005 and 2004, and did not recognize anygains or losses on derivative instruments for the years endedDecember  31,  2005, 2004 and2003.

2. Transactionswith M&F Worldwide Corp.

On April  19,  2001,M&F Worldwide purchased from PX Holding all 7,320,225 shares (the‘‘Purchased Shares’’) of theCompany’s Common Stock held by PX Holding (the‘‘M&F Purchase’’). The Purchased Sharesconstituted approximately 83.5% of the Company’s thenoutstanding Common Stock. The aggregate consideration for the PurchasedShares consisted of (a) 1,500,000 shares of M&F Worldwide commonstock; (b) 6,182,153 shares of M&F Worldwide preferred stock; and(c) $80.0  million in cash. As a result of the purchase,MacAndrews & Forbes Holdings increased its indirect interest inM&F Worldwide to a majority position.

The Company, PXHolding and M&F Worldwide entered into a letter agreement (the‘‘Registration Rights Agreement TransferLetter’’), dated as of April  19,  2001,which confirmed that, upon acquisition of the Purchased Shares, M&FWorldwide or its designated affiliate, PVI Acquisition Corp., became a‘‘Holder’’ under the Registration RightsAgreement dated as of June  5,  1998, between the Companyand PX Holding (the ‘‘Registration RightsAgreement’’), and that all Purchased Shares became‘‘Registrable Securities’’ under suchagreement. The Registration Rights Agreement Transfer Letter wasterminated on December  3,  2002, in connection with theM&F Settlement (as defined below).

In connection with theM&F Purchase, the carrying values of Panavision’s assets andliabilities were changed to reflect the fair values of the assets andliabilities as of the acquisition date to the extent of M&FWorldwide’s 83.5% controlling interest. The remaining16.5% is accounted for at Panavision’s historical basis.As a result of the purchase price allocation for assets and liabilitiesrepresenting 83.5% of the totals, the following adjustments wererecorded as of the acquisition date to adjust the historical carryingvalues (in thousands):

F-13

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

2. Transactionswith M&F Worldwide Corp. (Continued)

|                              |  |                    |         |         |  |  |
|------------------------------|--|--------------------|---------|---------|--|--|
|                         |  | Increase(Decrease) |
| Property, plant andequipment |  | $                  | 40,783  |    |
| Goodwill                     |  |               | 260,006 |    |
| Trademarks                   |  |               | 68,612  |    |
| Other                        |  |               | (2,838  | )  |
| Long-termdebt                |  |               | 3,847   |    |
| Deferred taxassets           |  |               | 15,553  |    |
| Deferred taxliabilities      |  |               | 45,134  |    |
|                              |

In 2002 and 2003,adjustments were recorded to goodwill and deferred tax liabilitiesrelating to differences in book and tax basis of assets not recorded atthe time of the M&F purchase. These adjustments resulted in anincrease in goodwill of $7.6  million and an increase in deferredtax liabilities of $7.2  million at December  31,2003.

At the closing of the M&F Purchase, Ronald O. Perelman,MacAndrews & Forbes Holdings’ sole shareholder, delivered aletter to M&F Worldwide in which Mr.  Perelman agreed that,if M&F Worldwide determined in its good faith reasonable judgmentthat Panavision were unable to make required payments of principal orinterest under its Prior Credit Agreement or its9 5/8% Notes, he or corporations under hiscontrol would provide such financial support to M&F Worldwide asmay be required by Panavision in connection with such payments ofprincipal and interest. Pursuant to the M&F Settlement, this letteragreement was terminated on December  3,  2002.

Insatisfaction of the obligation of M&F Worldwide under anotheragreement entered into contemporaneously with the closing of theM&F Purchase, MacAndrews & Forbes Holdings and M&FWorldwide entered into a letter agreement, and M&F Worldwide andthe Company entered into a letter agreement, both dated as ofDecember  21,  2001, pursuant to which M&F Worldwidepurchased from PX Holding $22.0  million principal amount of9 5/8% Notes for an aggregate purchase price of$8.14  million, and M&F Worldwide delivered to the Company anaggregate of $24.5  million principal amount of9 5/8% Notes in exchange for 1,381,690 shares ofSeries A Preferred Stock of the Company. The Series A Preferred Stockwas issued at a value of approximately $9.3  million, whichrepresented M&F Worldwide’s cost to purchase the9 5/8% Notes delivered to the Company. BecauseM&F Worldwide delivered the 9 5/8% Notes tothe Company in satisfaction of obligations under an agreement enteredinto concurrent with the M&F Purchase, the difference betweenM&F Worldwide’s cost and the Company’s book value ofthe 9 5/8% Notes was recorded as a reduction ofgoodwill.

The Company and M&F Worldwide entered into a letteragreement (the ‘‘Registration Rights Agreement AmendmentLetter’’), dated as of December  21,  2001,pursuant to which the Company and M&F Worldwide agreed to amend theRegistration Rights Agreement to, among other things, include theSeries A Preferred Stock within the definition of‘‘Registrable Securities.’’

During2001, certain stockholders of M&F Worldwide brought lawsuitsagainst M&F Worldwide and its directors challenging the M&FPurchase as an alleged breach of fiduciary duty and sought, among otherthings, rescission of the M&F Purchase transaction. One of thestockholders dismissed his lawsuit pursuant to a settlement. OnDecember  3,  2002, the remaining parties to the litigationconsummated a Stipulation of Settlement (the ‘‘M&FSettlement’’) whereby MacAndrews & Forbes Holdingsacquired, through PX Holding, (1) the shares of the Company’sCommon Stock that M&F Worldwide had purchased in April  2001,(2) 1,381,690 shares of the Company’s Series A Preferred Stockthat M&F Worldwide acquired in December of 2001, (3) $11.4million principal amount of 9 5/8% Notes that asubsidiary of M&F Worldwide acquired in November of 2001, and (4) apromissory note in the amount of $6.7  million that the Companyissued to M&F Worldwide on its acquisition of the shares of acertain subsidiary. In addition, all agreements to which M&FWorldwide entered into in connection with the M&F Purchase and theDecember  2001 issuance of the Series A Preferred Stock wereterminated.

F-14

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

2. Transactionswith M&F Worldwide Corp. (Continued)

Thus, after the consummation of theM&F Settlement, the Company ceased being a subsidiary of M&FWorldwide. The M&F Settlement did not have a significant impact onthe recorded values of the Company’s assets or liabilities sincethe transaction was between parties under commoncontrol.

3.    DiscontinuedOperations

In August  2004, the Company disposed of its80% interest in EFILM, LLC(‘‘EFILM’’). Accordingly, both EFILM andits holding company, LPPI, LLC, are presented as discontinuedoperations in the consolidated financial statements and theaccompanying notes.

Revenue and income (loss) before incometaxes from discontinued operations for the years ended December31,  2005, 2004 and 2003 were as follows (inthousands):

|                                 |  |                       |         |        |  |        |        |        |  |        |        |         |  |  |
|---------------------------------|--|-----------------------|---------|--------|--|--------|--------|--------|--|--------|--------|---------|--|--|
|                            |  | Yearended December31, |
|                            |  | 2005                  |         | 2004   |  | 2003   |
| Revenue                         |  | $                     | — |   |  | $      | 15,488 |   |  | $      | 16,817 |    |
| Income(loss) before incometaxes |  |                  | — |   |  |   | 1,177  |   |  |   | (1,954 | )  |
|                                 |

4.    OtherIncome, net

The components of Other income, net for the yearsended December  31,  2005, 2004 and 2003 were as follows(in thousands):

|                                                  |  |                       |         |        |  |        |       |         |  |        |         |         |  |  |
|--------------------------------------------------|--|-----------------------|---------|--------|--|--------|-------|---------|--|--------|---------|---------|--|--|
|                                             |  | Yearended December31, |
|                                             |  | 2005                  |         | 2004   |  | 2003   |
| Netgain on dispositions of property andequipment |  | $                     | 823     |   |  | $      | 2,489 |    |  | $      | 1,027   |    |
| Majorinsurancesettlements                        |  |                  | 587     |   |  |   | 1,083 |    |  |   | 763     |    |
| Minorityinterestincome                           |  |                  | — |   |  |   | 18    |    |  |   | 320     |    |
| Earnings(loss) of equityaffiliates               |  |                  | — |   |  |   | (72   | )  |  |   | 137     |    |
| Feesfrom relatedparty                            |  |                  | 420     |   |  |   | 420   |    |  |   | — |    |
| Otherincome(expense)                             |  |                  | 214     |   |  |   | 86    |    |  |   | (380    | )  |
| Totalother income,net                            |  | $                     | 2,044   |   |  | $      | 4,024 |    |  | $      | 1,867   |    |
|                                                  |

5.    ComprehensiveLoss

Components of accumulated other comprehensive loss were asfollows (inthousands):

|                                       |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                  |  | Yearended December31, |
|                                  |  | 2005                  |         | 2004    |  | 2003   |
| Netloss                               |  | $                     | (23,684 | )  |  | $      | (10,155 | )  |  | $      | (17,756 | )  |
| Foreigncurrency translationadjustment |  |                  | (2,910  | )  |  |   | 2,474   |    |  |   | 10,644  |    |
| Totalcomprehensiveloss                |  | $                     | (26,594 | )  |  | $      | (7,681  | )  |  | $      | (7,112  | )  |
|                                       |

F-15

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

6.    EarningsPer Share

Basic earnings per share is based upon theweighted-average number of common shares outstanding. Diluted earningsper share is based upon the weighted-average number of common sharesand dilutive potential common shares outstanding. Potential commonshares, consisting of outstanding stock options and warrants areconsidered in the calculation under the treasury stockmethod.

The following table sets forth the computation for basicand diluted earnings per share (in thousands, except per sharedata):

|                                                                              |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|------------------------------------------------------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                         |  | YearEnded December31, |
|                                                                         |  | 2005                  |         | 2004    |  | 2003   |
| Numerators:                                                                  |  |                  |    |    |  |   |    |    |  |   |    |    |
| Netloss from continuingoperations                                            |  | $                     | (23,684 | )  |  | $      | (21,200 | )  |  | $      | (16,523 | )  |
| Accreteddividends on Redeemable Series B PreferredStock                      |  |                  | — |    |  |   | — |    |  |   | (1,319  | )  |
| SeriesC Preferred Stock accumulateddividend                                  |  |                  | — |    |  |   | (765    | )  |  |   | (12,466 | )  |
| SeriesD Preferred Stock accumulateddividend                                  |  |                  | — |    |  |   | (18,559 | )  |  |   | — |    |
| Netloss from continuing operations attributable to commonstockholders        |  |                  | (23,684 | )  |  |   | (40,524 | )  |  |   | (30,308 | )  |
| Netincome (loss) from discontinuedoperations                                 |  |                  | — |    |  |   | 11,045  |    |  |   | (1,233  | )  |
| Netloss attributable to commonstockholders                                   |  | $                     | (23,684 | )  |  | $      | (29,479 | )  |  | $      | (31,541 | )  |
| Denominator:                                                                 |  |                  |    |    |  |   |    |    |  |   |    |    |
| Denominatorfor basic loss per share – weighted averageshares           |  |                  | 39,381  |    |  |   | 12,617  |    |  |   | 8,770   |    |
| Effectof dilutive securities –stock options andwarrants                |  |                  | — |    |  |   | — |    |  |   | — |    |
| Denominatorfor diluted loss per share –adjusted weighted averageshares |  |                  | 39,381  |    |  |   | 12,617  |    |  |   | 8,770   |    |
| Income(loss) per share, basic anddiluted:                                    |  |                  |    |    |  |   |    |    |  |   |    |    |
| Continuingoperations                                                         |  | $                     | (0.60   | )  |  | $      | (3.21   | )  |  | $      | (3.46   | )  |
| Discontinuedoperations                                                       |  |                  | — |    |  |   | 0.87    |    |  |   | (0.14   | )  |
| Income(loss) per share, basic anddiluted                                     |  | $                     | (0.60   | )  |  | $      | (2.34   | )  |  | $      | (3.60   | )  |
|                                                                              |

Outstandingstock options to purchase 586,000, 614,000 shares, and 642,000 sharesof common stock at December  31,  2005, 2004 and 2003,respectively, were excluded from the calculation of diluted loss pershare as their effect would have been antidilutive. Warrantsoutstanding at December  31,  2005, 2004 and 2003 topurchase 714,300 shares of common stock at an exercise price of $17.50per share were excluded from the calculation of diluted loss per shareas their effect would have been antidilutive. Such warrants are fullyexercisable at any time through July  25,2010.

F-16

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

7.    IncomeTaxes

Under applicable Internal Revenue Service regulations, theCompany may not join in filing a consolidated federal income tax returnwith either MacAndrews & Forbes Holdings or the Company’ssubsidiaries until May  2006 without consent from the InternalRevenue Service. Accordingly, since the effective date of the M&FSettlement of December  3,  2002, the Company has filedseparate federal income tax returns for the Company and each of itsincorporated subsidiaries.

For the period from April19,  2001 through December  31,  2001 and for theperiod from January  1,  2002 through December3,  2002, Panavision, for federal income tax purposes, wasincluded in the affiliated group of which M&F Worldwide is thecommon parent, and Panavision's federal taxable income wasincluded in such group's consolidated tax return filed by M&FWorldwide. Panavision was also included in certain state and local taxreturns of M&F Worldwide or its subsidiaries. As of April19,  2001, Panavision and M&F Worldwide entered into a taxsharing agreement (the ‘‘M&F Worldwide Tax SharingAgreement’’), pursuant to which M&F Worldwide agreedto indemnify Panavision against federal, state or local income taxliabilities of the consolidated or combined group of which M&FWorldwide (or a subsidiary of M&F Worldwide other than Panavisionor its subsidiaries) is the common parent for taxable periods beginningafter April  19,  2001 during which Panavision or asubsidiary of Panavision was a member of such group. The M&FWorldwide Tax Sharing Agreement will continue in effect afterDecember  3,  2002 only as to matters such as auditadjustments and indemnities.

Since the M&F Purchaseconstituted a deconsolidation event under the MacAndrews & ForbesTax Sharing Agreement, federal and state net operating losscarryforwards of approximately $31.8  million and $17.3million, respectively, are no longer available for use by theCompany.

Although the Company had taxable income on aconsolidated basis for the tax years ending December  3,2002 and December  31,  2001, current operating losses andnet operating loss carryforwards of M&F Worldwide were used tooffset this income before the Company’s net operating losscarryforwards were utilized due to the ordering rules set forth in theInternal Revenue Code. Consequently, upon leaving the M&F Worldwideconsolidated group on December  3,  2002, the Company tookapproximately $60.1  million of net operating loss carryforwards,of which $15.1  million relates to net operating losscarryforwards that otherwise would have been used prior toDecember  3,  2002 but for the ordering rules. The Companyhas accounted for these additional net operating loss carryovers as acontribution to capital by M&FWorldwide.

F-17

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

7.    IncomeTaxes (Continued)

The (provision) benefit for income taxescomprises the following (inthousands):

|                             |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|-----------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                        |  | Yearended December31, |
|                        |  | 2005                  |         | 2004    |  | 2003   |
| Currentprovision:           |  |                  |    |    |  |   |    |    |  |   |    |    |
| Federal                     |  | $                     | (41     | )  |  | $      | — |    |  | $      | — |    |
| State                       |  |                  | (49     | )  |  |   | (48     | )  |  |   | — |    |
| Foreign                     |  |                  | (3,523  | )  |  |   | (1,491  | )  |  |   | (1,447  | )  |
| Totalcurrentprovision       |  |                  | (3,613  | )  |  |   | (1,539  | )  |  |   | (1,447  | )  |
| Deferredbenefit:            |  |                  |    |    |  |   |    |    |  |   |    |    |
| Federal                     |  |                  | 1,150   |    |  |   | 8,117   |    |  |   | 6,825   |    |
| State                       |  |                  | 1,590   |    |  |   | 885     |    |  |   | 315     |    |
| Foreign                     |  |                  | — |    |  |   | — |    |  |   | — |    |
| Totaldeferredbenefit        |  |                  | 2,740   |    |  |   | 9,002   |    |  |   | 7,140   |    |
| Totaltax (provision)benefit |  | $                     | (873    | )  |  | $      | 7,463   |    |  | $      | 5,693   |    |
|                             |

Forfinancial statement purposes, loss from continuing operations beforeincome taxes includes the following components (in thousands):

|                                                             |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                        |  | Yearended December31, |
|                                                        |  | 2005                  |         | 2004    |  | 2003   |
| Income(loss) from continuing operations before incometaxes: |  |                  |    |    |  |   |    |    |  |   |    |    |
| Domestic                                                    |  | $                     | (14,880 | )  |  | $      | (24,974 | )  |  | $      | (19,469 | )  |
| Foreign                                                     |  |                  | (7,931  | )  |  |   | (3,689  | )  |  |   | (2,747  | )  |
|                                                        |  | $                     | (22,811 | )  |  | $      | (28,663 | )  |  | $      | (22,216 | )  |
|                                                             |

Thedifference between the income tax (provision) benefit and the amountcomputed by applying the Federal statutory rate (35%) to lossbefore income taxes is explained below (inthousands):

|                                                                                               |  |                       |         |         |  |        |         |         |  |        |        |         |  |  |
|-----------------------------------------------------------------------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                                                                          |  | YearEnded December31, |
|                                                                                          |  | 2005                  |         | 2004    |  | 2003   |
| Taxat federal statutoryrate                                                                   |  | $                     | 7,935   |    |  | $      | 10,032  |    |  | $      | 7,776  |    |
| Stateincome taxbenefit                                                                        |  |                  | 508     |    |  |   | 837     |    |  |   | 315    |    |
| Decrease/(increase)in valuationallowance                                                      |  |                  | (6,667  | )  |  |   | (781    | )  |  |   | (474   | )  |
| Changein taxcredits                                                                           |  |                  | — |    |  |   | — |    |  |   | 449    |    |
| Non-deductibleitems                                                                           |  |                  | (76     | )  |  |   | (79     | )  |  |   | (77    | )  |
| Foreignincome taxed at varying rates including foreign losses for which nobenefit wasreceived |  |                  | (4,279  | )  |  |   | (2,223  | )  |  |   | (3,038 | )  |
| Other,net                                                                                     |  |                  | 1,706   |    |  |   | (323    | )  |  |   | 742    |    |
|                                                                                          |  | $                     | (873    | )  |  | $      | 7,463   |    |  | $      | 5,693  |    |
|                                                                                               |

F-18

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

7.    IncomeTaxes (Continued)

Significant components of theCompany’s deferred tax assets and liabilities as ofDecember 31, 2005 and 2004 are as follows (inthousands):

|                                                                    |  |             |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------------|--|-------------|---------|---------|--|--------|---------|---------|--|--|
|                                                               |  | December31, |
|                                                               |  | 2005        |         | 2004    |
| Deferredtax assets:                                                |  |        |    |    |  |   |    |    |
| Debt originalissue discount                                        |  | $           | 194     |    |  | $      | 230     |    |
| Domesticnet operating losscarryforwards                            |  |        | 25,969  |    |  |   | 29,703  |    |
| Foreignnet operating losscarryforwards                             |  |        | 8,559   |    |  |   | 7,133   |    |
| Taxcredit carryforwards (primarily alternative minimum taxcredits) |  |        | 10,690  |    |  |   | 10,355  |    |
| Expenseaccruals                                                    |  |        | 1,926   |    |  |   | 669     |    |
| Stateincome taxes andother                                         |  |        | 2,291   |    |  |   | 3,982   |    |
| Totaldeferred taxassets                                            |  |        | 49,629  |    |  |   | 52,072  |    |
| Valuationallowance                                                 |  |        | (14,781 | )  |  |   | (8,114  | )  |
| Netdeferred taxassets                                              |  |        | 34,848  |    |  |   | 43,958  |    |
| Deferredtax liabilities:                                           |  |        |    |    |  |   |    |    |
| Fixedassets                                                        |  |        | (33,055 | )  |  |   | (41,543 | )  |
| Unremittedforeignearnings                                          |  |        | (1,793  | )  |  |   | (2,415  | )  |
| Intangibles                                                        |  |        | (25,461 | )  |  |   | (28,201 | )  |
| Totaldeferred taxliabilities                                       |  |        | (60,309 | )  |  |   | (72,159 | )  |
| Netdeferred taxliabilities                                         |  | $           | (25,461 | )  |  | $      | (28,201 | )  |
| BalanceSheet Classifications:                                      |  |        |    |    |  |   |    |    |
| Non-currentdeferred taxliability                                   |  | $           | (25,461 | )  |  | $      | (28,201 | )  |
|                                                                    |

SFAS109 provides for the recognition of deferred tax assets if realizationof such assets is more likely than not. Based upon the weight ofavailable evidence, which includes the uncertainty regarding theCompany’s ability to utilize certain net operating losses andtax credits in the future, the Company has provided a partial valuationallowance against its net domestic deferred tax assets.

After theeffect of the deconsolidation, as of December  31,  2005,the Company has federal and state net operating loss carryforwards ofapproximately $86.9  million, respectively. The net operatingloss carryforwards will expire at various dates beginning in 2017through 2025, if not utilized.

At December  31,2005, the Company also had federal alternative minimum tax creditcarryforwards of approximately $5.8  million, which may be usedindefinitely, and research and development credit carryforwards of$0.4  million, which will expire from 2006 through 2025, if notutilized.

At December  31,  2005, the Company alsohad California alternative minimum tax credit carryforwards andCalifornia research and development credit carryforwards totalingapproximately $2.1  million, both of which may be carried forwardindefinitely.

At December  31,  2005, the Company hadU.K. net operating loss carryforwards totaling approximately$40.6  million that may be carried forward indefinitely. A fullvaluation allowance has been provided against thisasset.

8.    Depositfor Redemption of Debt

As discussed in Note 12, onDecember  1,  2005, Panavision entered into the PX TermLoan Agreement (as defined below), pursuant to which approximately$64.8  million was deposited on behalf of the Company directlyinto a designated account with a trustee. On that same date the Companydeposited 

F-19

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

8.    Depositfor Redemption of Debt (Continued)

$2.7  million of its own funds intothe same account. The amounts on deposit in this account may only beused for the redemption of the 9 5/8% Notes andaccrued interest thereon and are therefore excluded from cash and cashequivalents in the Consolidated Balance Sheet at December31,  2005. See Note 23, Subsequent Events, regarding theJanuary  2006 redemption of the 9 5/8%Notes.

9.    Inventories

Inventoriesconsist of the following (inthousands):

|                          |  |             |        |        |  |        |        |        |  |  |
|--------------------------|--|-------------|--------|--------|--|--------|--------|--------|--|--|
|                     |  | December31, |
|                     |  | 2005        |        | 2004   |
| Finishedgoods            |  | $           | 2,299  |   |  | $      | 2,476  |   |
| Work-in-process          |  |        | 966    |   |  |   | 315    |   |
| Componentparts           |  |        | 3,386  |   |  |   | 4,664  |   |
| Spare parts andsupplies  |  |        | 1,106  |   |  |   | 1,409  |   |
| Goods purchasedforresale |  |        | 5,541  |   |  |   | 6,062  |   |
|                     |  | $           | 13,298 |   |  | $      | 14,926 |   |
|                          |

10.    Property,Plant and Equipment

Property, plant and equipment consist of thefollowing (inthousands):

|                                               |  |             |         |        |  |        |         |        |  |  |
|-----------------------------------------------|--|-------------|---------|--------|--|--------|---------|--------|--|--|
|                                          |  | December31, |
|                                          |  | 2005        |         | 2004   |
| Buildingsandimprovements                      |  | $           | 14,526  |   |  | $      | 15,457  |   |
| Rentalassets                                  |  |        | 369,945 |   |  |   | 359,972 |   |
| Machinery andequipment                        |  |        | 10,039  |   |  |   | 9,468   |   |
| Furniture andfixtures                         |  |        | 4,780   |   |  |   | 4,835   |   |
| Other                                         |  |        | 729     |   |  |   | 1,739   |   |
|                                          |  |        | 400,019 |   |  |   | 391,471 |   |
| Less:accumulated depreciation andamortization |  |        | 179,195 |   |  |   | 160,676 |   |
|                                          |  | $           | 220,824 |   |  | $      | 230,795 |   |
|                                               |

During2005 and 2004, the Company recorded approximately $78,000 and $150,000of capitalized interest costs, respectively.

11.    AccruedLiabilities

Accrued liabilities consist of the following (inthousands):

|                              |  |             |         |        |  |        |        |        |  |  |
|------------------------------|--|-------------|---------|--------|--|--------|--------|--------|--|--|
|                         |  | December31, |
|                         |  | 2005        |         | 2004   |
| Interestpayable              |  | $           | 8,581   |   |  | $      | 4,792  |   |
| Professionalfees             |  |        | 1,504   |   |  |   | 1,723  |   |
| Taxes other thanincome taxes |  |        | 2,136   |   |  |   | 3,599  |   |
| Payroll andrelatedcosts      |  |        | 10,076  |   |  |   | 8,896  |   |
| Rent                         |  |        | 3,579   |   |  |   | 3,271  |   |
| Insurance                    |  |        | — |   |  |   | 1,058  |   |
| Severance,current portion    |  |        | 784     |   |  |   | 726    |   |
| Otherliabilities             |  |        | 5,285   |   |  |   | 4,052  |   |
|                         |  | $           | 31,945  |   |  | $      | 28,117 |   |
|                              |

F-20

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

12.    Long-TermDebt

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

|                                                  |  |             |         |        |  |        |         |        |  |  |
|--------------------------------------------------|--|-------------|---------|--------|--|--------|---------|--------|--|--|
|                                             |  | December31, |
|                                             |  | 2005        |         | 2004   |
| Amendedand Restated CreditAgreement              |  | $           | 118,475 |   |  | $      | 125,694 |   |
| 12.50%Senior Notes Due2009                       |  |        | 101,308 |   |  |   | 100,597 |   |
| 9 5/8%Term Loan fromAffiliate                    |  |        | 64,792  |   |  |   | — |   |
| 9 5/8%Senior Subordinated Discount Notes Due2006 |  |        | 64,815  |   |  |   | 65,084  |   |
| Notes payable toaffiliate                        |  |        | 23,734  |   |  |   | 9,154   |   |
| Other(including capitalleases)                   |  |        | 16,674  |   |  |   | 8,922   |   |
|                                             |  |        | 389,798 |   |  |   | 309,451 |   |
| Less:Currentmaturities                           |  |        | 82,071  |   |  |   | 9,557   |   |
| TotalLong-TermDebt                               |  | $           | 307,727 |   |  | $      | 299,894 |   |
|                                                  |

TheCompany does not have any off-balance sheet financingarrangements.

9 5/8%Notes

The 9 5/8% Senior SubordinatedDiscount Notes Due 2006 (‘‘9 5/8%Notes’’) were issued at a discount representing a yieldto maturity of 9 5/8%. There were no periodic orinterest payments through February  1,  2002. Thereafter,they bear interest at a rate of 9 5/8% perannum, payable semi-annually on February  1 and August  1of each year, commencing August  1,  2002. The9 5/8% Notes are due February  1,2006, and are reflected as a component of current maturities. See Note23, Subsequent Events, regarding the January  3,  2006redemption of the 9 5/8%Notes.

MacAndrews Lines

On August  13,2003, MacAndrews & Forbes Inc., (formerly MacAndrews & ForbesHoldings Inc.) agreed to amend an existing line of credit provided toPanavision to increase the amount available for borrowing from$4.0  million to $10.0  million and extend the maturitydate to August  31,  2006 (as amended, the‘‘MacAndrews Line’’). In connection with anamendment to Panavision's Prior Credit Agreement (as definedbelow), on November  12,  2003, MacAndrews & ForbesInc. agreed to provide a second revolving line of credit (the‘‘Second MacAndrews Line’’) in the amountof $10.0  million at a rate equal to 50 basis points above therate provided for in the revolving facility pursuant to the PriorCredit Agreement and a maturity date 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 Inc. increased the amount of the SecondMacAndrews Line to $20.0  million and extended the maturity dateto April  16,  2009. On March  30,  2005, theSecond MacAndrews Line was amended and restated to increase the amountto $32.0  million. As of December  31,  2005,Panavision had drawn approximately $23.8  million under theSecond MacAndrews line, including accrued interest of $0.1million. See Note 23, Subsequent Events, regarding the March2006 Refinancing.

Prior Credit Agreement

OnJune  4,  1998, Panavision entered into a Credit Agreementwith 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 andNovember  12,  2003, the ‘‘Prior CreditAgreement’’). Panavision’s obligations under thePrior Credit Agreement were secured by substantially all ofPanavision’s assets. The Prior Credit Agreement comprised twofacilities, the Term Facility and the Revolving Facility. As describedbelow, the Prior Credit Agreement was replaced with the Amended andRestated Credit Agreement pursuant to the January  2004Refinancing.

F-21

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

12.    Long-TermDebt (Continued)

January  2004Refinancing – 12.50% Senior Notes Due 2009 and Amended andRestated Credit Agreement

On January  16,  2004,Panavision consummated a series of transactions to refinance itsindebtedness under the Prior Credit Agreement (the‘‘January 2004 Refinancing’’). As part ofthe January  2004 Refinancing, Panavision sold, in a privateplacement, $104.2  million of senior secured notes (the‘‘Senior Notes’’) bearing interest at arate of 12.50%, payable quarterly, with a maturity date ofJanuary  16,  2009. The Senior Notes were sold at anoriginal issue discount of approximately 4% for an aggregatepurchase price of $100.0  million. The Senior Notes are securedby a second-priority lien on substantially all of the Company’sassets. The indenture pursuant to which the Senior Notes were issued(the ‘‘2004 Indenture’’) requires that,among other provisions, Panavision achieve certain EBITDA levels andabide by 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.

As part ofthe January  2004 Refinancing, Panavision issued to PX HoldingCorporation (‘‘PX Holding’’) 215,274 sharesof new 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’’),of Panavision, held by PX Holding (together with approximately$13.2  million of accumulated dividends thereon); (b)$23.0  million in cash; (c) the retirement of all principal andinterest (an aggregate of $10,180,930) owed as of January16,  2004 under the MacAndrews Line; (d) 33.3 shares of commonstock of PANY Rental Inc. (‘‘PANY Rental’’)having a fair market value of $0.7  million (such that, as ofJanuary  16,  2004, Panavision 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 unpaidinterest) owed to MacAndrews & Forbes Holdings under a certainpromissory note in the principal amount of $6.7  million, datedJuly  1,  2002, issued by Panavision to M & F WorldwideCorp. and subsequently acquired by MacAndrews & Forbes Holdings.Panavision also issued to PX Holding 1,381,690 shares of new Series ENon-Cumulative Perpetual Participating Preferred Stock, par value $0.01per 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 PreferredStock’’). As a result of the January  2004Refinancing transactions, all of the outstanding shares of Series A andSeries C Preferred Stock were transferred to Panavision. In addition,MacAndrews & Forbes Inc. increased the amount of the SecondMacAndrews Line to $20.0  million and extended the maturity dateto April  16,  2009.

Panavision used proceeds fromthe sale of the Senior Notes and the issuance of Series D PreferredStock to reduce the indebtedness under the Prior Credit Agreement by$115.4  million, and replaced the Prior Credit Agreement with anAmended and Restated Credit Agreement (the ‘‘Amended andRestated Credit Agreement’’) with the lenders under thePrior Credit Agreement. The Amended and Restated Credit Agreementprovides for a single term loan facility in the principal amount of$135.6  million repayable in quarterly installments with a finalmaturity of January  12,  2007, except that the termfacility was to be due on December  1,  2005 if any of the9 5/8% Notes remain outstanding on that date.See Note 23, Subsequent Events, regarding January  3,  2006redemption of the 9 5/8% Notes.

The termfacility under the Amended and Restated Credit Agreement bears interestat either the ABR or Eurodollar Rate (as defined in the Amended andRestated Credit Agreement) plus a margin of 5.25% in the case ofABR loans or 6.25% in the case of Eurodollar Loans.

Theterm facility under the Amended and Restated Credit Agreement issecured on substantially the same basis as indebtedness under the PriorCredit Agreement. In connection with the Amended and Restated CreditAgreement, Panavision paid fees to lenders and professional advisors ofapproximately 

F-22

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

12.    Long-TermDebt (Continued)

$3.5  million, including an originalissue discount fee of approximately $2.0  million. Approximately$3.1  million of the fees paid were expensed in 2004.

TheAmended Credit Agreement revised certain financial tests and otherrestrictive covenants set forth in the Prior Credit Agreement,including required EBITDA (as defined), limitations on indebtedness,and other provisions. As defined in the Amended Credit Agreement and2004 Indenture, EBITDA includes adjustments for certain severanceexpenses, refinancing expenses, foreign exchange (gain) loss, and othernon-cash charges.

The required level of EBITDA, as defined inthe Amended and Restated Credit Agreement and the 2004 Indenture, forthe last twelve months in the period ended December  31,2005, was $58.0  million pursuant to the Amended and RestatedCredit Agreement and $50.0  million pursuant to the 2004Indenture. The Company met the required levels of EBITDA for thetwelve-month period ended December  31,  2005. See Note 23,Subsequent Events, regarding the March  2006Refinancing.

Amendments to Amended Credit Agreement and2004 Indenture

EFILM ProceedsAmendment

Principally to provide a mechanism for thereinvestment of the proceeds of the sale of EFILM, LLC(‘‘EFILM’’), on August  11,2004, Panavision and the other parties to the Amended and RestatedCredit Agreement entered into an amendment and waiver to the Amendedand Restated Credit Agreement (‘‘First Amendment andWaiver’’). To provide a similar mechanism for thereinvestment of the proceeds of the sale of EFILM under the 2004Indenture, on August  11,  2004, Panavision and WilmingtonTrust Company, as Trustee, entered into a supplemental indenture(‘‘Supplemental Indenture’’). OnSeptember  30,  2004, upon repayment of $1.3  millionto Federal Financial Credit Inc. of amounts owed by PANY Rental withpart of the proceeds of the sale of EFILM, PANY Rental and itswholly-owned subsidiary TFN Lighting Corp. became guarantors under theAmended and Restated Credit Agreement and the 2004 Indenture inaccordance with the terms of those debtinstruments.

DHD

On September16,  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.

Preferred StockExchange

On November  16,  2004, Panavisionissued 30,610,810 shares of common stock, par value $.01 per share(‘‘Common Stock’’), to PX Holding, inexchange for all Series D Preferred Stock and all Series E PreferredStock held by PX Holding (the‘‘Exchange’’). The Exchange was completedpursuant to a letter agreement, dated November  16,  2004,between Panavision and PX Holding (the ‘‘LetterAgreement’’).

In this transaction,Panavision issued:

|  |              |                                                                                                                                                                                                                                                                                                           |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | 29,229,120 shares ofCommon Stock in exchange for the 215,274 shares of Series D PreferredStock held by PX Holding at an exchange ratio of 125 shares of CommonStock for each $1,000 of outstanding liquidation preference or accruedand unpaid dividends, valuing the Common Stock at $8.00 per share;and |

|  |              |                                                                                                                     |
|--|--------------|---------------------------------------------------------------------------------------------------------------------|
|  | •  | 1,381,690 shares of Common Stock inexchange for the 1,381,690 shares of Series E Preferred Stock held byPX Holding. |

This transaction was unanimously approved by anindependent Special Committee of Panavision's Board of Directors.In the Letter Agreement, PX Holding agreed, among other things, tocertain 

F-23

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

12.    Long-TermDebt (Continued)

restrictions on its ability to acquirePanavision's remaining Common Stock or to transfer the shares itholds. After giving effect to the transaction, PX Holding heldapproximately 96.3% of the Common Stock. The transactionfollowed a May  13,  2004 offer by MacAndrews & ForbesHoldings initially valuing the Common Stock at $7.00 pershare.

Following the consummation of the Exchange, no shares ofSeries D Preferred Stock or Series E Preferred Stock were outstanding.Accordingly, effective November  16,  2004, Panavisioneliminated the certificates of designation for the Series D PreferredStock and Series E Preferred Stock.

The Special Committee wasrepresented by independent counsel and retained Peter J. SolomonCompany L.P. as its independent financial advisor. In connection withits recommendation that the Board of Directors approve the transaction,the Special Committee received an opinion from Peter J. Solomon CompanyL.P. that the consideration paid by PX Holding in the transaction wasfair, from a financial point of view, to Panavision.

In addition,in connection with the Exchange, Panavision entered into a SecondAmendment and Consent, dated as of November  15,  2004,with respect to Panavision's Amended and Restated CreditAgreement.

WFW Asset Acquisition

Inconnection with the Panavision acquisition of the William F. WhiteInternational Inc. camera inventory in Canada (the ‘‘WFWAcquisition’’), Panavision entered into a ThirdAmendment, dated as of December  29,  2004 with respect toPanavision’s Amended and Restated Credit Agreement. Inaddition, in connection with the WFW Acquisition, Panavision enteredinto a Fourth Supplemental Indenture, dated as of December29,  2004, with respect to the 2004Indenture.

March  2005Amendment

Panavision entered into a Fourth Amendment, datedas of March  30,  2005, to the Amended and Restated CreditAgreement and Fifth Supplemental Indenture, dated as of March30,  2005, with respect to the 2004 Indenture. This amendment andindenture supplement was entered into principally to (a) reducerequired EBITDA levels, as provided in the Amended and Restated CreditAgreement, to $52.0  million, $54.0  million, $54.0million and $58.0  million for the twelve-month periods endedMarch  31,  2005, June  30,  2005,September  30,  2005 and December  31,  2005,respectively; (b) extend the date on which the term facility under theAmended and Restated Credit Agreement shall be due if the9 5/8% Notes remain outstanding fromSeptember  1,  2005 to December  1,  2005; (c)increase the limitation on capital expenditure, as defined in theAmended and Restated Credit Agreement, from $25.0  million to$37.5  million for the twelve-month period ended December31,  2005; and (d) permit the increase of the Second MacAndrewsLine to $32.0  million.

November  2005Amendment

On November  14,  2005, Panavisionentered into a Fifth Amendment, dated as of November  14,2005 to the Amended and Restated Credit Agreement. Prior to the FifthAmendment, the Amended and Restated Credit Agreement provided that thefinal maturity date of the term facility under the Amended and RestatedCredit Agreement shall be January  12,  2007, except thatthe term facility shall become due and payable on December1,  2005 if any 9 5/8% Notes remainoutstanding on that date. Pursuant to the Fifth Amendment, the lendersunder the Amended and Restated Credit Agreement agreed to extend thisDecember  1,  2005 date to January  5,  2006,provided that, on or before December  1,  2005, Panavision(a) deposits into a designated account an amount not less than theprincipal outstanding and accrued interest through the date ofredemption of the 9 5/8% Notes and (b) mails anotice of redemption to holders of the 9 5/8%Notes indicating that Panavision intends to redeem all outstanding9 5/8% Notes on or before January5,  2006.

F-24

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

12.    Long-TermDebt (Continued)

GE Term Loan & SecurityAgreement

On June  14,  2005, Panavision entered intoa term loan and security agreement (‘‘GE Term Loan &Security Agreement’’) with General Electric CapitalCorporation (‘‘GE’’) pursuant to which GEshall make available to Panavision term loans in aggregate principalamount not exceeding $10  million and maturing September14,  2006 for the purchase of digital cameras and equipment.Panavision's obligations pursuant to the GE Term Loan &Security Agreement are guaranteed by MacAndrews & Forbes Holdingsand secured by a first priority security interest in the cameras andrelated equipment purchased with the proceeds of the term loans. As ofDecember  31,  2005, there were term loans outstanding ofapproximately $6.6  million. See Note 23, Subsequent Events,regarding the March  2006 Refinancing.

PX Term LoanAgreement

Pursuant to the November  2005 Amendment to theAmended and Restated Credit Agreement, on December  1,2005, Panavision entered into a Senior Subordinated Term Loan Agreement(the ‘‘PX Term Loan Agreement’’) with PXHolding, as lender. The PX Term Loan Agreement provides for, amongother things, a $64,792,000 term loan from PX Holding to Panavisionthat will mature on December  31,  2007. The term loanbears interest at a rate per annum equal to9 5/8%, payable semi-annually on February1 and August  1 of each year, commencing February1,  2006. All payment obligations under the Loan Agreement aresubordinated in right of payment to the prior payment ofPanavision's obligations under its existing Amended and RestatedCredit Agreement and the 2004 Indenture.

The PX Term LoanAgreement includes certain restrictive covenants substantially similarto those applicable to the 9 5/8% Notes thatlimit, among other things, the incurrence of additional indebtedness,the payment of dividends or other distributions or the making ofcertain other restricted payments, the sale of assets of Panavision,certain transactions with affiliates and certain mergers orconsolidations or transfers of all or substantially all ofPanavision's assets. The PX Term Loan Agreement also prohibitscertain restrictions on distributions from subsidiaries. The PX TermLoan Agreement provides for events of default that are substantiallysimilar to the 9 5/8% Notes. Following theoccurrence of an event of default, PX Holding may accelerate allamounts outstanding under the term loan. See Note 23, SubsequentEvents, regarding the March  2006 Refinancing.

Thefollowing sets forth the aggregate principal maturities of theCompany’s debt, excluding capital leases (which are included inNote 18), during the twelve-month periods ending December (inthousands):

|                   |  |        |         |        |  |  |
|-------------------|--|--------|---------|--------|--|--|
| 2006              |  | $      | 79,416  |   |
| 2007              |  |   | 176,784 |   |
| 2008              |  |   | 367     |   |
| 2009              |  |   | 127,901 |   |
| 2010andthereafter |  |   | — |   |
|              |  | $      | 384,468 |   |
|                   |

SeeNote 23, Subsequent Events, regarding developments that took placesubsequent to December  31,  2005 that substantiallyrevised the Company’s long-termdebt.

13.    PreferredStock

As more fully described in Note 2, the Company issued1,381,690 shares of Series A Preferred Stock in December  2001.The Series A Preferred Stock was entitled to non-cumulative dividendsat a rate of $0.05 per share per annum payable, if declared, quarterlyon each March  31, June  30, September  30 andDecember  31. In addition, the Series A Preferred Stock had alsoparticipated pro rata on a share-for-share basis with the common stock,par value $0.01 per share, of the Company (‘‘CommonStock’’) with respect to any dividends declared or paidon the Common Stock. The Company's Prior Credit Agreementrestricted the payment of dividends.

F-25

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

13.    PreferredStock (Continued)

In June  2002, the Company issued49,199 shares of Series B Cumulative Pay in Kind Preferred Stock(‘‘Series B Preferred Stock) to MacAndrews & ForbesHoldings in exchange for $10.0  million in cash and $37.7million principal amount at maturity of 9 5/8%Notes plus unpaid interest of $1.5  million. The Company issuedan additional 4,372 shares of Series B Preferred Stock to MacAndrews& Forbes Holdings in exchange for $4.3  million in cash inJanuary  2003. The Series B Preferred Stock was non-voting, had aliquidation preference of $49.2  million plus accrued and unpaiddividends, and entitled its holders to cumulative dividends at a rateof 10% per annum. The terms of the Series B Preferred Stockindicated that such stock may be redeemed by the Company, at itsoption, at any time at a price of $1,000 per share, plus accrued andunpaid dividends. Additionally, the Series B Preferred Stock wassubject to redemption in certain circumstances upon a change ofcontrol. Since MacAndrews & Forbes Holdings maintained the majorityshareholder vote of the Company, the Series B Preferred Stock wasdeemed to be redeemable at the option of MacAndrews & ForbesHoldings, and was therefore classified outside of permanent equity inthe accompanying consolidated balance sheets.

The issuance ofthe Series B Preferred Stock was recorded at its redemption value, netof $0.3  million of transaction costs. Because the Series BPreferred Stock was redeemable at the option of MacAndrews & ForbesHoldings, the Company was required to carry the Series B PreferredStock at its redemption value. The Company recorded an accreteddividend of $1.3  million during the year ended December31,  2003 in accordance with the terms of the Series B PreferredStock.

In connection with the March  2003 Amendment,MacAndrews & Forbes Holdings contributed $90.9  millionprincipal amount of 9 5/8% Notes and$10.0  million in cash in exchange for 102,220 shares of Series CPreferred Stock, which it contributed to the capital of PX Holding, andPX Holding contributed to the Company 53,571 shares of Series BPreferred Stock in exchange for 57,424 shares of Series C PreferredStock. As a result of this transaction, all of the outstanding Series BStock was transferred to the Company. The Series C Preferred Stock, parvalue $0.01 per share, was non-voting; had a liquidation preference of$1,000 per share plus accrued and unpaid dividends; and entitled theholder to cumulative dividends at a rate of 10% per annumregardless of whether declared or earned. Additionally, the Series CPreferred Stock was subject to redemption in certain circumstances upona change of control.

As described in Note 12, the Company issuedto PX Holding 215,274 shares of new Series D Cumulative Pay-In-KindPreferred Stock on January  16,  2004. The Series DPreferred Stock was non-voting, had a liquidation preference of $1,000per share plus accrued and unpaid dividends, and entitled the holder tocumulative dividends at a rate of 10% per annum regardless ofwhether declared or earned. Additionally, the Series D Preferred Stockwas subject to redemption in certain circumstances upon a change ofcontrol. The Company also issued to PX Holding 1,381,690 shares of newSeries E Non-Cumulative Perpetual Participating Preferred Stock (the‘‘Series E Preferred Stock’’) in exchangefor 1,381,690 shares of Series A Preferred Stock. The Series EPreferred Stock was entitled to one vote per share, voting togetherwith the Common Stock as a single class, had a liquidation preferenceof $1.00 per share plus accrued and unpaid dividends, and provided fornon-cumulative cash dividends at an annual rate of $0.05 per share ifdeclared 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 and aCertificate of Elimination was filed for each series.

Asdiscussed in Note 12, on November  16,  2004, Panavisionissued 30,610,810 shares of common stock, par value $.01 per share toPX Holding Corporation, in exchange for all Series D Preferred Stockand all Series E Preferred Stock held by PX Holding (the‘‘Exchange’’). As a result of the Exchange,all of the outstanding shares of Series D and Series E Preferred Stockwere transferred to the Company and a Certificate of Elimination wasfiled for each series.

See Note 23, Subsequent Events, regardingpreferred stock issuance subsequent to December  31,2005.

F-26

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

14.    SegmentInformation

The Company has one reportable segment, anaggregation of operating segments engaged in the rental of camerasystems, lighting systems and other equipment, and the sales of relatedproducts. These activities are conducted in a number of geographiclocations though the Company’s owned-and-operated facilities andits network of independent distributors.

The following tablepresents revenue and other financial information for the reportablesegment by geographic region (inthousands):

|                                |  |                 |         |        |  |               |        |               |  |             |        |        |  |   |        |        |  |   |        |        |  |   |         |        |  |  |
|--------------------------------|--|-----------------|---------|--------|--|---------------|--------|---------------|--|-------------|--------|--------|--|---|--------|--------|--|---|--------|--------|--|---|---------|--------|--|--|
|                           |  | December31,2005 |
|                           |  | UnitedStates    |         | Canada |  | UnitedKingdom |        | Restof Europe |  | AsiaPacific |        | Total  |
| Revenue from externalcustomers |  | $               | 91,672  |   |  | $             | 26,700 |          |  | $           | 60,036 |   |  | $ | 22,560 |   |  | $ | 32,333 |   |  | $ | 233,301 |   |
| Long-livedassets*              |  | $               | 178,305 |   |  | $             | 3,746  |          |  | $           | 21,903 |   |  | $ | 11,522 |   |  | $ | 10,134 |   |  | $ | 225,610 |   |
|                                |

|                                |  |                 |         |        |  |               |        |               |  |             |        |        |  |   |        |        |  |   |        |        |  |   |         |        |  |  |
|--------------------------------|--|-----------------|---------|--------|--|---------------|--------|---------------|--|-------------|--------|--------|--|---|--------|--------|--|---|--------|--------|--|---|---------|--------|--|--|
|                           |  | December31,2004 |
|                           |  | UnitedStates    |         | Canada |  | UnitedKingdom |        | Restof Europe |  | AsiaPacific |        | Total  |
| Revenue from externalcustomers |  | $               | 81,843  |   |  | $             | 13,320 |          |  | $           | 63,793 |   |  | $ | 20,581 |   |  | $ | 27,527 |   |  | $ | 207,064 |   |
| Long-livedassets*              |  | $               | 183,657 |   |  | $             | 3,755  |          |  | $           | 27,294 |   |  | $ | 12,763 |   |  | $ | 9,675  |   |  | $ | 237,144 |   |
|                                |

|                                |  |                 |        |        |  |               |        |               |  |             |        |        |  |   |        |        |  |   |        |        |  |   |         |        |  |  |
|--------------------------------|--|-----------------|--------|--------|--|---------------|--------|---------------|--|-------------|--------|--------|--|---|--------|--------|--|---|--------|--------|--|---|---------|--------|--|--|
|                           |  | December31,2003 |
|                           |  | UnitedStates    |        | Canada |  | UnitedKingdom |        | Restof Europe |  | AsiaPacific |        | Total  |
| Revenue from externalcustomers |  | $               | 77,535 |   |  | $             | 16,023 |          |  | $           | 58,838 |   |  | $ | 16,907 |   |  | $ | 21,837 |   |  | $ | 191,140 |   |
|                                |

|   |                            |
|---|----------------------------|
| * | Excludingintangible assets |

No one customer accounted for more than10% of the Company’s consolidated net revenues for theyears ended December  31,  2005, 2004 and2003.

15.    StockBased Benefits

During 1999, the Board of Directors adopted astock option plan (the ‘‘Plan’’) which isopen to participation by directors, officers, consultants, and otherkey employees of the Company or of its subsidiaries and certain otherkey persons. The Plan provides for the issuance of incentive andnonqualified stock options under the Internal Revenue Code. Anaggregate of 1,500,000 shares of Panavision Common Stock are reservedfor issuance under the Plan. The options are granted for a term of tenyears. If an incentive stock option is granted to an individual owningmore than 10% of the total combined voting power of all stock,the exercise price of the option may not be less than 110% ofthe fair market value of the underlying shares on the date of grant andthe term of the option may not exceed five years. The Plan alsoprovides that the aggregate fair market value (determined as of thetime the option is granted) of Panavision Common Stock with respect towhich incentive stock options are exercisable for the first time by anoptionee during any calendar year shall not exceed $100,000. Optioninformation with respect to the Company’s stock option plan isas follows:

F-27

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

15.    StockBased Benefits (Continued)

|                                         |  |        |          |               |  |                    |  |        |         |        |  |  |  |  |
|-----------------------------------------|--|--------|----------|---------------|--|--------------------|--|--------|---------|--------|--|--|--|--|
|                                    |  |   |          | ExercisePrice |
|                                    |  | Shares |          | Range         |  | WeightedAvg. Price |
| Options outstanding at December31,2002  |  |   | 992,000  |          |  | $10.00-$7.50       |  | $      | 9.67    |   |
| Optionsexpired                          |  |   | (350,000 | )        |  | $10.00-$7.50       |  |   | — |   |
| Optionsoutstanding at December  31,2003 |  |   | 642,000  |          |  | $10.00             |  | $      | 10.00   |   |
| Optionsexpired                          |  |   | (28,000  | )        |  | $10.00             |  | $      | 10.00   |   |
| Optionsoutstanding at December  31,2004 |  |   | 614,000  |          |  | $10.00             |  | $      | 10.00   |   |
| Optionsexpired                          |  |   | (28,000  | )        |  | $10.00             |  | $      | 10.00   |   |
| Optionsoutstanding at December  31,2005 |  |   | 586,000  |          |  | $10.00             |  | $      | 10.00   |   |
|                                         |

Theweighted-average remaining contractual life of options outstanding atDecember  31,  2005 is 3.8 years.

Informationregarding stock options exercisable is asfollows:

|                                |  |             |         |        |  |        |         |        |  |        |         |        |  |  |
|--------------------------------|--|-------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                           |  | December31, |
|                           |  | 2005        |         | 2004   |  | 2003   |
| OptionsExercisable:            |  |        |    |   |  |   |    |   |  |   |    |   |
| Number                         |  |        | 586,000 |   |  |   | 614,000 |   |  |   | 642,000 |   |
| Weightedaverage exerciseprices |  | $           | 10.00   |   |  | $      | 10.00   |   |  | $      | 10.00   |   |
|                                |

Therewere no options granted under the Plan during 2005, 2004, or2003.

For purposes of the pro forma expense discussed in Note 1,the weighted average fair value of the options was amortized over thevesting period. Applying SFAS 123 in the pro forma disclosures may notbe representative of the effects on pro forma net loss for future yearsas options vest over several years and additional awards may be madeeach year.

The Black-Scholes option valuation model was developedfor use in estimating the fair value of traded options. TheCompany’s stock options have characteristics significantlydifferent from those of traded options such as vesting restrictions andnon-transferability of options. In addition, the assumptions used inoption valuation models are subjective, particularly the expected stockprice volatility for the underlying stock. Because changes in thesesubjective input assumptions can materially affect the fair valueestimate, in management’s opinion, the existing model does notprovide a reliable single measure of the fair value of its employeestock options.

F-28

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

15.    StockBased Benefits (Continued)

The following table illustrates theeffect on net loss and loss per share if the Company had applied thefair value recognition provision of SFAS 123 to stock-based employeecompensation (in thousands, except per sharedata):

|                                                                                                       |  |                           |         |                           |  |                           |         |         |  |        |         |         |  |  |
|-------------------------------------------------------------------------------------------------------|--|---------------------------|---------|---------------------------|--|---------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                                  |  | YearendedDecember 31,2005 |         | Year endedDecember31,2004 |  | Year endedDecember31,2003 |
| Net loss asreported                                                                                   |  | $                         | (23,684 | )                    |  | $                         | (10,155 | )  |  | $      | (17,756 | )  |
| Add:stock-based employee compensation expense included in reported netloss                            |  |                      | — |                      |  |                      | — |    |  |   | — |    |
| Deduct:total stock-based employee compensation expense determined under fairvalue method of allawards |  |                      | — |                      |  |                      | — |    |  |   | — |    |
| Proforma netloss                                                                                      |  | $                         | (23,684 | )                    |  | $                         | (10,155 | )  |  | $      | (17,756 | )  |
| Proforma net loss attributable to commonstockholders                                                  |  | $                         | (23,684 | )                    |  | $                         | (29,479 | )  |  | $      | (31,541 | )  |
| Sharesused in computation – basic and diluted                                                   |  |                      | 39,381  |                      |  |                      | 12,617  |    |  |   | 8,770   |    |
| Lossper share:                                                                                        |  |                      |    |                      |  |                      |    |    |  |   |    |    |
| Basicand diluted net loss per share – asreported                                                |  | $                         | (0.60   | )                    |  | $                         | (2.34   | )  |  | $      | (3.60   | )  |
| Basicand diluted net loss per share – proforma                                                  |  | $                         | (0.60   | )                    |  | $                         | (2.34   | )  |  | $      | (3.60   | )  |
|                                                                                                       |

16.    EmployeeBenefit Plans

The Company sponsors a defined contribution 401(k)plan covering a majority of its domestic employees. Eligible employeesmay contribute from 1% to 16% of their base compensation.The Company makes matching contributions equal to 75% ofemployee before-tax contributions from 1% to 6% throughSeptember  30,  2005. Effective October  1,2005, the Company makes matching contributions equal to 75% ofemployee contributions up to 5%. For the years endedDecember  31,  2005, 2004 and 2003, the Company recordedexpense of $0.8  million, $0.9  million, and $0.8million, respectively, related to the 401(k) plan.

In addition,the Company sponsors defined contribution retirement plans in Europeand Australia that cover certain foreign employees. Participatingemployees contribute from 4% to 15% of their basecompensation. The Company contributes 10.5% to 13% ofbase compensation for participating employees depending upon theirlevel of contribution. For the years ended December  31,2005, 2004, and December  31,  2003, the Company recordedexpense of $2.2  million, $1.8  million, and $1.5million, respectively, representing the Company’scontributions.

Certain of the Company’s senior executiveshave employment agreements containing equity participation provisions.Amounts, if any, to be paid under the equity participation provisionsare based on contractually defined formulas. As of December31,  2005, approximately $1.0  million has been accrued inconnection with these equity participationprovisions.

17.    Changein Estimated Asset Retirement Obligations

Upon the initialadoption of SFAS No. 143, ‘‘Accounting for AssetRetirement Obligations’’, the Company estimated itsliability for asset retirement obligations to be zero. After completinga facilities rationalization review in 2004, the Company revised itsestimate for leasehold restoration costs upward to approximately$2.4  million. The impact of the revision on net income fromcontinuing operations for the year ended December  31,2004, was approximately $175,000, or $0.01 per common share, basic anddiluted.

F-29

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

17.    Changein Estimated Asset Retirement Obligations (Continued)

Changes in estimated asset retirementobligations for the years ended December  31,  2005 and2004 are as follows (inthousands):

|                           |  |        |         |         |  |  |
|---------------------------|--|--------|---------|---------|--|--|
| BalanceJanuary  1,2004    |  | $      | — |    |
| Revision of estimate*     |  |   | 2,394   |    |
| Accretionexpense          |  |   | 80      |    |
| Balance,December  31,2004 |  |   | 2,474   |    |
| Revision of estimate*     |  |   | (257    | )  |
| Accretionexpense          |  |   | 244     |    |
| Balance,December  31,2005 |  | $      | 2,461   |    |
|                           |

* Primarily effectsof foreign currency rate changes on balances denominated in currenciesother than the U.S.dollar.

18.    Commitmentsand Contingencies

The Company leases real estate, equipment, andvehicles under non-cancelable operating and capitalized leases. Futureminimum payments under non-cancelable leases with initial or remainingterms of one year or more are presented below (inthousands):

|                                                                  |  |           |        |         |  |        |         |        |  |  |
|------------------------------------------------------------------|--|-----------|--------|---------|--|--------|---------|--------|--|--|
|                                                             |  | Operating |        | Capital |
| 2006                                                             |  | $         | 9,760  |    |  | $      | 3,066   |   |
| 2007                                                             |  |      | 7,050  |    |  |   | 2,728   |   |
| 2008                                                             |  |      | 4,659  |    |  |   | 2,220   |   |
| 2009                                                             |  |      | 3,611  |    |  |   | 867     |   |
| 2010                                                             |  |      | 3,116  |    |  |   | 308     |   |
| Thereafter                                                       |  |      | 4,212  |    |  |   | — |   |
| Minimumleasepayments                                             |  | $         | 32,408 |    |  |   | 9,189   |   |
| Less:imputed interest at rates ranging from 3.5% to9.0%          |  |      |   |    |  |   | 1,001   |   |
| Presentvalue of minimum lease payments included in long-termdebt |  |      |   |    |  | $      | 8,188   |   |
|                                                                  |

During theyears ended December  31,  2005, 2004 and 2003, rentalexpense under operating leases was $9.7  million, $9.8million, and $10.3  million, respectively.

As ofDecember  31,  2005, the Company had a line of credit (theSecond MacAndrews Line) totaling approximately $32.0  million,under which approximately $23.8  million was drawn includingaccrued interest of $0.1  million. The Company does not have anyoff-balance sheet financing arrangements.

The Company and itssubsidiaries are defendants in actions for matters arising out ofnormal business operations. The Company, based in part on the advice oflegal counsel, does not believe that any such proceedings currentlypending will have an adverse effect on its consolidated financialposition, results of operations, or cashflows.

19.    RelatedParty Transactions

Certain related party transactions betweenPanavision and MacAndrews & Forbes Holdings and between Panavisionand PX Holding are disclosed in Note 2, Transactions with M&FWorldwide Corp., Note 7, Income Taxes, Note 12, Long-Term Debt, andNote 13, Preferred Stock. See also Note 23, Subsequent Events, forrelated party transactions that occurred subsequent to December31,  2005.

Beginning in December  2002, the Companybegan participating in MacAndrews & Forbes Holdings’directors and officers insurance program, which covers the Company aswell as MacAndrews & Forbes 

F-30

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

19.    RelatedParty Transactions (Continued)

Holdings and its other affiliates. Thelimits of coverage are applicable to aggregate losses to any or all ofthe participating companies and their respective directors andofficers. The Company reimburses MacAndrews & Forbes Holdings forits allocable portion of the premiums for such coverage, which theCompany believes are at least as favorable as the premiums the Companycould secure were it to secure stand-alone coverage. The Companyparticipates on a similar basis in other insurance programs withMacAndrews & Forbes Holdings and its affiliates which managementbelieves are at least as favorable as arms-length terms.

TheCompany and PX Holding are parties to a Registration Rights Agreementdated as of December  3,  2002 (the‘‘Registration Rights Agreement’’) pursuantto which PX Holding and certain of its transferees (the‘‘Holders’’) have the right to require theCompany to register under the Securities Act of 1933 (a‘‘Demand Registration’’) all or part of theCommon Stock and certain other shares of capital stock (collectively,‘‘Registrable Shares’’) owned by theHolders. The Company may postpone giving effect to a DemandRegistration for up to a period of 30 days if the Company believes suchregistration might have an adverse effect on any plan or proposal bythe Company with respect to any financing, acquisition,recapitalization, reorganization or other material transaction, or theCompany is in possession of material non-public information that, ifpublicly disclosed, could result in a material disruption of a majorcorporate development or transaction then pending or in progress or inother material adverse consequences to the Company. In addition, theHolders will have the right to participate in registrations by theCompany of its equity securities (an ‘‘IncidentalRegistration’’) subject, however, to certain rights infavor of the Company to reduce, or eliminate entirely, the number ofRegistrable Shares the Holders may have registered in an IncidentalRegistration. The Company will pay all out-of-pocket expenses incurredin connection with a Demand Registration or an Incidental Registration,except for underwriting discounts, commissions and related expensesattributable to the Registrable Shares sold by such Holders.

OnJuly  1,  2003, Panavision International, L.P., theCompany’s principal operating subsidiary, entered into aSecurity Officer Service Agreement (the ‘‘SecurityAgreement’’) with an operating subsidiary of AlliedSecurity Holdings LLC (‘‘AlliedSecurity’’), an affiliate of MacAndrews & ForbesHoldings. Pursuant to the Security Agreement, Allied Security providesthe Company with security officer services on terms which managementbelieves are competitive with industry rates for similarly situatedsecurity firms and as favorable as terms that could have been obtainedfrom an unrelated party in an arms-length transaction. Amounts paid toAllied Security by the Company pursuant to the Security Agreement were$149,000 and $145,000 for the years ended December  31,2005 and 2004, respectively. Since July  16,  2003, theSecurity Agreement has been continuing on a month-to-monthbasis.

In December  2003, Panavision Imaging, LLC, asubsidiary of PX Holding, purchased the assets of Silicon Video, Inc.,a designer of CMOS imaging sensors located in Homer, New York, andformed Panavision SVI, LLC to act as marketing affiliate with respectto certain products designed by Panavision Imaging, LLC. The Companymanages the operations of Panavision Imaging, LLC and Panavision SVI,LLC (together ‘‘Panavision SVI’’) inexchange for certain research and development services, management feesand most favored customer status with respect to certain products ofPanavision Imaging, LLC. In addition, the Company purchases certainsensors from Panavision Imaging, LLC on a basis that is at least asfavorable as could be obtained in an arms-length transaction.Panavision Imaging, LLC and its marketing affiliate Panavision SVI, LLCutilize the Panavision tradename pursuant to a license from theCompany. The management and royalty fees charged by the Company toPanavision SVI for each of the years ended December  2005 and2004 were $420,000, of which $0 and $105,000, respectively, was payableat December  31,  2005 and 2004.

On September16,  2004, the Company entered into an agreement with Sony, aholder of the Company’s Common Stock. Pursuant to the agreement,the Company acquired from Sony the remaining 49% interest in DHDnot then held by the Company, making DHD a wholly owned subsidiary ofthe Company for consideration of $4.4  million.

F-31

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

19.    RelatedParty Transactions (Continued)

On November  16,  2004, theCompany issued to PX Holding 30,610,810 shares of common stock, parvalue $.01 per share (‘‘Common Stock’’), inexchange for 215,274 shares of Series D Cumulative Pay-In-KindPreferred Stock, par value $.01 per share (‘‘Series DPreferred Stock’’), and 1,381,690 shares of Series ENon-Cumulative Perpetual Participating Preferred Stock, par value $.01per share (‘‘Series E Preferred Stock’’),such shares representing all outstanding shares of each series (the‘‘Exchange’’).

In the Exchange, theCompany issued 29,229,120 shares of Common Stock in exchange for allshares of Series D Preferred Stock held by PX Holding at an exchangeratio of 125 shares of Common Stock for each $1,000 of outstandingliquidation preference or accrued and unpaid dividends; and 1,381,690shares of Common Stock in exchange for all 1,381,690 shares of Series EPreferred Stock held by PX Holding. After giving effect to thetransaction, PX Holding holds approximately 96.3% of the CommonStock.

On December  29,  2004, in connection with theCompany’s acquisition of the camera inventory of William F.White International Inc. in Canada, LPPI, LLC(‘‘LPPI’’), a wholly-owned subsidiary ofthe Company, entered into a Sale and Purchase Agreement with PX Holdingpursuant to which LPPI sold and PX Holding purchased a promissory note(the ‘‘Deluxe Note’’), dated August6,  2004, issued by Deluxe Laboratories, Inc.(‘‘Deluxe’’) in favor of LPPI. The DeluxeNote was issued in connection with the sale of the Company’sinterest in EFILM, LLC to Deluxe on August  6,  2004. TheDeluxe Note was in the principal amount of $5,000,000 and bore interestat a rate of 7% per annum. As consideration for the Deluxe Note,PX Holding paid $5,000,000 in principal to LPPI and also paid to LPPIany accrued and unpaid interest on the Deluxe Note through andincluding December  29,  2004 upon receipt of such paymentfrom Deluxe when the Deluxe Note matured in August, 2005.

OnApril  8,  2005, Panavision Europe Limited(‘‘PVE’’), a subsidiary of the Company,entered into an operating lease arrangement with a related party PX(UK)Limited (‘‘PX(UK)’’), a subsidiary of PXHolding, whereby PVE leased from PX(UK) certain camera and lightingequipment (the ‘‘PX(UK) Equipment’’). TheCompany believes the rental payments called for in the lease are onarms-length terms. For the year ended December  31,  2005,PVE incurred rental charges of $1,056,000, relating to the PX(UK)Equipment, of which approximately $496,000 remained outstanding atDecember  31,  2005. In addition, in accordance with theoperating lease arrangements, PX(UK) reimbursed PVE for approximately$110,000 of costs incurred by PVE in relation to the preparation of thePX(UK) Equipment for rental to PVE’s customers.

Asdiscussed in Note 12, Long-Term Debt, the company’s obligationspursuant to the GE Term Loan & Security Agreement are guaranteed byMacAndrews & ForbesHoldings.

20.    RecentBusiness Combinations

On August  13,  2004, theCompany purchased, through one of its wholly-owned subsidiaries,100% of the share capital of Technovision France for a cashpurchase price of approximately $3.4  million. Technovision is afilm equipment rental company located in Paris, France. Goodwill ofapproximately $300,000 was recognized as result of the allocation ofpurchase price to the fair value of assets acquired and liabilitiesassumed.

On September  16,  2004, the Companypurchased from Sony, a 49% interest in DHD for a cash purchaseprice of $4.4  million, making DHD a wholly-owned subsidiary ofthe Company. 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. There wasno goodwill resulting from the purchase price allocation. The effectsof consolidating both DHD and Technovision France were immaterial forthe year ended December  31,  2004.

On May30,  2003, the Company purchased an additional 1/3 interest inPANY Rental for a combined purchase price of approximately $0.6million including transaction costs. This purchase increased theCompany’s ownership interest from a 1/3 interest to a 2/3interest. As a result of this increased ownership 

F-32

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

20.    RecentBusiness Combinations (Continued)

interest, the Company consolidated thefinancial position and results of operation of PANY Rental in theaccompanying consolidated financial statements, the effects of whichwere immaterial. In addition, on May  30,  2003, PX Holdingpurchased the remaining 1/3 interest in PANY Rental for a purchaseprice of $0.7  million and purchased a promissory note payable byPANY Rental with a principal amount plus accrued interest ofapproximately $0.7  million. As of January  2004, PANYRental is a wholly-owned subsidiary of Panavision.

As discussedin Note 13, in January  2004 the Company issued to PX Holding215,274 shares of Series D Preferred Stock in exchange for, among otheritems, the remaining 1/3 interest in PANY Rental. As a result, as ofJanuary  16,  2004 the Company owned 100% of theoutstanding shares of PANY Rental. PANY Rental holds an exclusivelicense to rent the Company’s camera systems in the New Yorkmarket and a license to use the Panavision trademark in connection withthe rental of camera systems and related equipment tocustomers.

21.    Valuationand Qualifying Accounts and Reserves

The following is a summaryof the valuation and qualifying accounts and reserves for the yearsended December  31,  2005, 2004, and 2003 (inthousands):

|                                |  |                  |        |                 |  |                    |        |               |  |        |        |        |  |        |        |        |  |  |
|--------------------------------|--|------------------|--------|-----------------|--|--------------------|--------|---------------|--|--------|--------|--------|--|--------|--------|--------|--|--|
|                           |  | BeginningBalance |        | AmountsReserved |  | BalancesWrittenOff |        | EndingBalance |
| Allowance for DoubtfulAccounts |  |             |   |            |  |               |   |          |  |   |   |   |  |   |   |   |
| December31,2005                |  | $                | 1,618  |            |  | $                  | 475    |          |  | $      | 1,148  |   |  | $      | 945    |   |
| December31,2004                |  | $                | 2,586  |            |  | $                  | 962    |          |  | $      | 1,930  |   |  | $      | 1,618  |   |
| December31,2003                |  | $                | 1,634  |            |  | $                  | 1,924  |          |  | $      | 972    |   |  | $      | 2,586  |   |
|                                |

F-33

----

PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

22. QuarterlyOperating Data (unaudited)

The following is a summary ofunaudited quarterly results of operations (in thousands, except persharedata):

|                                                                       |  |         |         |         |  |        |         |         |  |        |        |         |  |        |        |         |  |  |
|-----------------------------------------------------------------------|--|---------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                                                                  |  | Quarter |
|                                                                  |  | First   |         | Second  |  | Third  |         | Fourth  |
| Yearended December 31,2005                                            |  |    |    |    |  |   |    |    |  |   |   |    |  |   |   |    |
| Totalrevenue                                                          |  | $       | 52,102  |    |  | $      | 55,855  |    |  | $      | 64,292 |    |  | $      | 61,052 |    |
| Grossmargin                                                           |  |    | 19,488  |    |  |   | 20,382  |    |  |   | 29,432 |    |  |   | 26,849 |    |
| Netloss from continuingoperations                                     |  |    | (11,001 | )  |  |   | (12,046 | )  |  |   | (307   | )  |  |   | (330   | )  |
| Netloss from continuing operations attributable to commonshareholders |  |    | (11,001 | )  |  |   | (12,046 | )  |  |   | (307   | )  |  |   | (330   | )  |
| Netloss                                                               |  |    | (11,001 | )  |  |   | (12,046 | )  |  |   | (307   | )  |  |   | (330   | )  |
| Netloss attributable to commonshareholders                            |  |    | (11,001 | )  |  |   | (12,046 | )  |  |   | (307   | )  |  |   | (330   | )  |
| Lossfrom continuing operations per share*                             |  | $       | (0.28   | )  |  | $      | (0.31   | )  |  | $      | (0.01  | )  |  | $      | (0.01  | )  |
| Lossper share*                                                        |  | $       | (0.28   | )  |  | $      | (0.31   | )  |  | $      | (0.01  | )  |  | $      | (0.01  | )  |
| Sharesused incomputation                                              |  |    | 39,381  |    |  |   | 39,381  |    |  |   | 39,381 |    |  |   | 39,381 |    |
| Yearended December  31,2004                                           |  |    |    |    |  |   |    |    |  |   |   |    |  |   |   |    |
| Totalrevenue(1)                                                       |  | $       | 48,958  |    |  | $      | 46,875  |    |  | $      | 53,955 |    |  | $      | 57,276 |    |
| Grossmargin(2)                                                        |  |    | 20,391  |    |  |   | 16,932  |    |  |   | 22,637 |    |  |   | 22,947 |    |
| Netincome (loss) from continuingoperations                            |  |    | (14,031 | )  |  |   | (8,248  | )  |  |   | 4,870  |    |  |   | (3,791 | )  |
| Netloss from continuing operations attributable to commonshareholders |  |    | (19,281 | )  |  |   | (13,742 | )  |  |   | (761   | )  |  |   | (6,740 | )  |
| Netincome(loss)                                                       |  |    | (13,967 | )  |  |   | (7,547  | )  |  |   | 15,254 |    |  |   | (3,895 | )  |
| Netincome (loss) attributable to commonshareholders                   |  |    | (19,217 | )  |  |   | (13,041 | )  |  |   | 9,623  |    |  |   | (6,844 | )  |
| Lossfrom continuing operations per share*                             |  | $       | (2.20   | )  |  | $      | (1.57   | )  |  | $      | (0.09  | )  |  | $      | (0.28  | )  |
| Income(loss) per share*                                               |  | $       | (2.19   | )  |  | $      | (1.49   | )  |  | $      | 1.10   |    |  | $      | (0.28  | )  |
| Sharesused incomputation                                              |  |    | 8,770   |    |  |   | 8,770   |    |  |   | 8,770  |    |  |   | 24,075 |    |
|                                                                       |

|     |                                                                                                                                                                         |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Presentationof EFILM and LPPI as discontinued operations reduced previouslyreported revenue by $5,872 and $6,980 for the first and second quarterof 2004, respectively. |

|     |                                                                                                                                                                              |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Presentation of EFILMand LPPI as discontinued operations reduced previously reported grossmargin by $2,892 and $3,701 for the first and second quarter of 2004,respectively. |

|   |                                                                                                                                                                                    |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| * | Basic and diluted. Sum ofquarterly earnings per share for 2004 do not equal year-to-dateearnings per share due to issuance of 30.6  million shares ofCommon Stock in November2004. |

23.    SubsequentEvents

On January  3,  2006, Panavision completedthe redemption of all $64,792,000 aggregate principal amount of the9 5/8% Notes. In accordance with the notice ofredemption mailed to holders on December  1,  2005, theredemption was completed when the redemption funds previously depositedwith the trustee under the indenture governing the9 5/8% Notes were released to the holders of the9 5/8% Notes. The aggregate redemption price forthe 9 5/8% Notes was $67,425,075, constitutingan amount sufficient to repay the principal outstanding and accruedinterest through the date of redemption. The redemption was fundedprincipally with the funds from the PX Term Loan Agreement (See Note12).

F-34

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

23.    SubsequentEvents (Continued)

March  2006Refinancing

On March 30, 2006, Panavisionconsummated a series of transactions to refinance its indebtednessunder its Amended and Restated Credit Agreement, Senior Notes, PX TermLoan Agreement, Second MacAndrews Line and GE Term Loan & SecurityAgreement (the ‘‘March 2006 Refinancing’’).As part of the March 2006 Refinancing, Panavision entered into a$345.0  million Senior Secured Credit Facility with a syndicateof lenders (the ‘‘Senior Secured CreditFacility’’). The Senior Secured Credit Facility consistsof:

|  |              |                                                                                                                                                                                                                                                                                                                                                                  |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | First Lien Facility(‘‘First Lien Facility’’ and the governingagreement the ‘‘First Lien FacilityAgreement’’), comprising a First Lien Term Loan of$195.0  million (‘‘First Lien TermLoan’’) and a $35.0  million Revolving CreditFacility (the ‘‘Revolver’’);and |

|  |              |                                                                                                                                                                                    |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | $115.0  millionSecond Lien Term Loan (‘‘Second Lien TermLoan’’ and the governing agreement the‘‘Second Lien Term LoanAgreement’’). |

In addition, as part of theMarch  2006 Refinancing we paid $15.0 million in cash and issued49,792 shares of our Series F Cumulative Pay-In-Kind MandatorilyRedeemable Preferred Stock (‘‘Series F PreferredStock’’) to PX Holding in consideration of the retirementof the outstanding principal balance under the PX Term Loan Agreement(approximately $64.8  million as of March 30, 2006). The accruedinterest on the PX Term Loan Agreement of $1.0 million as of March 30,2006 was also paid with proceeds of the refinancing.

The totalproceeds of the March  2006 Refinancing (including $1.0 milliondrawn under the Revolver at closing and the proceeds of the issuance ofthe Series F Preferred Stock) were $360.8 million and those proceedswere used by the Company asfollows:

|  |              |                                                                                                                                                                                                             |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | $118.5million to repay the principal amount outstanding under the Amended andRestated Credit Facility and $0.6  million to repay outstandingaccrued interest under the Amended and Restated CreditFacility; |

|  |              |                                                                                                                                                           |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | $112.2million to redeem all outstanding Senior Notes, including pre-paymentpremiums, and $4.7  million of outstanding accrued interest onthe SeniorNotes; |

|  |              |                                                                                                                                                                        |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | $30.1million to repay the principal amount outstanding under the SecondMacAndrews Line and $0.9  million to repay outstanding interestunder the Second MacAndrewsLine; |

|  |              |                                                                                                                                                                                                                                                                        |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | $64.8  million(including proceeds of approximately $49.8 million from Series FPreferred Stock issuance) to repay the principal amount outstandingunder the PX Term Loan Agreement and $1.0  million to repayoutstanding accrued interest on the PX Term LoanAgreement; |

|  |              |                                                                                                                    |
|--|--------------|--------------------------------------------------------------------------------------------------------------------|
|  | •  | $4.6million to repay the principal and outstanding accrued interest underthe GE Term Loan & SecurityAgreement; |

|  |              |                                                                    |
|--|--------------|--------------------------------------------------------------------|
|  | •  | $7.0 million tofund the VFG Asset Acquisition, described below;and |

|  |              |                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------|
|  | •  | $4.9 million availablefor general corporate purposes and to fund general working capitalneeds. |

In connection with the March  2006 Refinancing,Panavision has paid or expects to pay fees to lenders under the SeniorSecured Credit Facility and professional advisors of approximately$11.5 million.

The First Lien Facility bears interest, at theoption of Panavision, at the Adjusted LIBO Rate (as defined in theFirst Lien Facility Agreement) plus a margin of 3.0% per annum(or if the Total Leverage Ratio (as defined in the First Lien FacilityAgreement) is less than 3.75 to 1.00, 2.75% per annum) or at theAlternate Base Rate (as defined in the First Lien Agreement) plus amargin of 3.0% per annum (or if the Total Leverage Ratio is lessthan 3.75 to 1.00, 1.75% per annum). The First Lien Facility issecured by a first priority lien on all property and assets ofPanavision Inc. and its domestic subsidiaries, including 

F-35

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

23.    SubsequentEvents (Continued)

but not limited to a pledge of 65% ofthe common stock of their first-tier foreign subsidiaries. Thecollateral for the First Lien Facility is substantially the same as wasthe case for the Amended and Restated Credit Agreement.

Panavision is required to make quarterly principal payments equal to1% per annum of the original outstanding balance of the FirstLien Facility, with the balance payable at maturity on March30,  2011. In addition, the First Lien Credit Agreement includescertain financial covenants and restrictions, including covenants andrestrictions relating to indebtedness, liens, sales and leasebacktransactions, investments, mergers and acquisitions, sales of assets,dividends and transactions with affiliates of Panavision, each of whichis subject to limited exceptions. Additionally, the First Lien FacilityAgreement contains financial covenants limiting: (a) the amount ofCapital Expenditures (as defined in the First Lien Facility Agreement)of Panavision and its subsidiaries, (b) Panavision's interestcoverage ratio (the ratio of Consolidated EBITDA to ConsolidatedInterest Expense, as each such term is defined in the First LienFacility Agreement), (c) Panavision's total leverage ratio (theratio of Total Debt to Consolidated EBITDA, as each such term isdefined in the First Lien Facility Agreement), and (d)Panavision's first lien leverage ratio (the ratio of First LienDebt to Consolidated EBITDA, as each such term is defined in the FirstLien Facility Agreement).

The Second Lien Term Loan bearsinterest, at the option of Panavision, at the adjusted LIBO Rate (asdefined in the Second Lien Term Loan Agreement) plus a margin of7.0% per annum or at the Alternate Base Rate (as defined in theSecond Lien Term Loan Agreement) plus a margin of 6.0% perannum. The Second Lien Term Loan is secured by a second priority lienon all property and assets of Panavision Inc. and its domesticsubsidiaries, including but not limited to a pledge of 65% ofthe common stock of their first-tier foreign subsidiaries. Thecollateral for the Second Lien Term Loan is substantially the same aswas the case for the Senior Notes.

Panavision is not required tomake principal payments on the Second Lien Term Loan, with the balancepayable at maturity on March 30, 2012. In addition, the Second LienTerm Loan Agreement includes certain financial tests covenants andrestrictions, including covenants and restrictions relating toindebtedness, liens, sales and leaseback transactions, investments,mergers and acquisitions, sales of assets, dividends and transactionswith affiliates of Pananvision, each of which is subject to limitedexceptions. Additionally, the Second Lien Term Loan Agreement containsfinancial covenants limiting the amount of Capital Expenditures (asdefined in the Second Lien Term Loan Agreement) of Panavision and itssubsidiaries, and limiting Panavision's total leverage ratio (theratio of Total Debt to Consolidated EBITDA, as each such term isdefined in the Second Lien Term Loan Agreement).

The Series FPreferred Stock issued to PX Holding is non-voting, has a liquidationpreference of $1,000 per share plus accrued and unpaid dividends, andentitles holders to cumulative dividends at a rate of 12% perannum, compounded quarterly, regardless of whether declared or earned,payable in additional shares of Series F Preferred Stock on each March30. The Series F Preferred Stock is mandatorily redeemable on March 30,2016. Additionally, the Series F Preferred Stock is subject toredemption in certain circumstances upon a change ofcontrol.

PX (UK) Equipment Acquisition.    As part ofthe March  2006 Refinancing, Panavision Europe acquired certaincamera and lighting assets (‘‘PX (UK)Equipment’’) from PX (UK). The PX (UK) Equipment wasacquired by PX (UK) from VFG Hire Limited (in Administration)(‘‘VFG’’) in March  2005 and had beenmade available to Panavision Europe under a lease from PX (UK) sincethat time. The consideration paid to PX (UK) for these assets wasapproximately $7.0 million, which represents approximately the samepurchase price as that which PX (UK) paid to VFG (and lessors of thoseVFG Assets that were subject to capital leases) when PX (UK) acquiredthe VFG Assets in March  2005, including transactionexpenses.

Tax Sharing Agreement.    For periodsbeginning on or after May 1, 2006, Panavision, for federal income taxpurposes, will be included in the affiliated group of which MacAndrews& Forbes Holdings 

F-36

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PanavisionInc.Notes to Consolidated FinancialStatements (Continued)

23.    SubsequentEvents (Continued)

is the common parent, and Panavision'sfederal taxable income for these periods will be included in theconsolidated tax return filed by MacAndrews & Forbes Holdings. OnMarch 30, 2006, Panavision entered into a tax sharing agreement (the"Tax Sharing Agreement") with MacAndrews& Forbes Holdings whereby MacAndrews & Forbes Holdings willelect to file consolidated federal income tax returns on behalf ofPanavision and its affiliated domestic subsidiaries, as well as certainother subsidiaries of MacAndrews & Forbes Holdings. Under the TaxSharing Agreement, MacAndrews & Forbes Holdings has agreed toindemnify Panavision against federal, state, local or foreign incometax liabilities of the consolidated or combined group of whichMacAndrews & Forbes Holdings (or a subsidiary of MacAndrews &Forbes Holdings other than Panavision or its subsidiaries) is thecommon parent for taxable periods during which Panavision or asubsidiary of Panavision is a member of such group. The Tax SharingAgreement requires Panavision to make quarterly estimated payments toMacAndrews & Forbes Holdings. These payments generally are based onthe applicable federal income tax liability that Panavision and itsaffiliated subsidiaries would have had for each taxable period ifPanavision had not been included in MacAndrews & ForbesHoldings' consolidated group. Similar provisions apply withrespect to any foreign, state or local tax returns filed by anyMacAndrews & Forbes Holdings consolidated, combined or unitarygroup for each year that Panavision and any of its subsidiaries isincluded in any such group for foreign, state or local taxpurposes.

F-37

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