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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.20549

FORM 10-K

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

For the fiscal year ended December 31, 2004

OR

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

For the transition period from_______ to_______Commission file number: 001-12391

PANAVISION INC.(Exact name of Registrant as specified initscharter)

|                                                                         |  |                                     |  |  |  |  |
|-------------------------------------------------------------------------|--|-------------------------------------|--|--|--|--|
| **Delaware**                                                            |  | **13-3593063**                      |
| (Stateor other jurisdiction ofincorporation 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 Section 12(b) of the Act:None

Securities registered pursuant to Section 12(g) of theAct:

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

Indicateby check mark whether the registrant (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has beensubject to such filing 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 an accelerated filer (as defined by Rule12b-2 of the Securities Exchange Act of 1934). 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, 2004 (the last business day ofthe registrant's most recently completed second fiscal quarter)was approximately $3.8 million. As of March 22, 2005, there were39,380,729 shares of Panavision Inc. Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of theregistrant's 2005 definitive proxy statement, issued inconnection with the annual meeting of stockholders, are incorporated byreference in Part III of this Form10-K.

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PANAVISION INC.

INDEX TO ANNUAL REPORT ON FORM 10-K For the Year EndedDecember 31, 2004

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|        |  |                                                                                                       |  | Page   |
| **PARTI**   |
| Item1       |  | Business                                                                                                   |  |   | 1  |    |
| Item 2      |  | Properties                                                                                                 |  |   | 11 |    |
| Item3       |  | Legal Proceedings                                                                                          |  |   | 12 |    |
| Item4       |  | Submission of Matters to a Vote of SecurityHolders                                                         |  |   | 12 |    |
| **PARTII**  |
| Item 5      |  | Market for Registrant'sCommon Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities |  |   | 12 |    |
| Item6       |  | Selected Financial Data                                                                                    |  |   | 13 |    |
| Item7       |  | Management's Discussion and Analysis of FinancialCondition and Results of Operations                       |  |   | 14 |    |
| Item7A      |  | Quantitative and Qualitative Disclosures About MarketRisk                                                  |  |   | 30 |    |
| Item 8      |  | Financial Statementsand Supplementary Data                                                                 |  |   | 30 |    |
| Item9       |  | Changes in and Disagreements With Accountants on Accountingand Financial Disclosure                        |  |   | 30 |    |
| Item9A      |  | Controls and Procedures                                                                                    |  |   | 31 |    |
| Item9B      |  | Other information                                                                                          |  |   | 31 |    |
| **PARTIII** |
| Item 10     |  | Directors and ExecutiveOfficers of the Registrant                                                          |  |   |    | *  |
| Item11      |  | Executive Compensation                                                                                     |  |   |    | *  |
| Item12      |  | Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters              |  |   |    | *  |
| Item 13     |  | Certain Relationships and RelatedTransactions                                                              |  |   |    | *  |
| Item 14     |  | PrincipalAccounting Fees and Services                                                                      |  |   |    | *  |
| **PARTIV**  |
| Item 15     |  | Exhibits and FinancialStatement Schedules                                                                  |  |   | 32 |    |
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| * | Incorporated by reference from the Panavision Inc. 2005 ProxyStatement. |

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PART I

Item 1.Business

Business Overview

In the document thatfollows, unless the context requires otherwise, the terms"Panavision," "we,""our," "ours" and"us" refer to Panavision Inc. and itssubsidiaries. Panavision is a leading designer, manufacturer andsupplier of high precision camera systems, comprising cameras, lensesand accessories for the motion picture, television series andtelevision commercial markets in North America, Europe and the AsiaPacific region. Our camera systems have been widely used in the filmingof major motion pictures over the last 30 years, including the recentbox office hits MILLION DOLLAR BABY, THE AVIATOR, SPIDERMAN 2 andSIDEWAYS. We are also a leading supplier of camera equipment to U.S.prime time episodic or "series" network andcable television productions, such as DESPERATE HOUSEWIVES, LOST, CSI,and 24.

We believe that our position as an industry leaderresults from our broad range of technologically superior and innovativeproducts, our long-standing collaborative relationships with filmmakersand studios, our dedication to customer service, the breadth of ourcamera and lens equipment inventory and our unique worldwidedistribution network. Panavision is the only supplier of cinematographyequipment that manufactures a complete camera system incorporating itsown proprietary prime and zoom lenses, the most critical components ofa camera system. We are also the only major manufacturer of cameras andlenses that is located near Hollywood. In contrast, our manufacturingcompetitors are primarily located in Europe and sell their products torental companies, which then rent the equipment to the ultimateuser.

In addition to manufacturing and renting camera systems,we also have rental operations providing lighting, lighting grip, powergeneration, distribution and related transportation equipment, cranesand remote camera heads. These operations include Lee Lighting, thelargest lighting rental company in the United Kingdom, as well as otherowned-and-operated facilities in North America and Australia. Recently,Lee Lighting supplied the lighting needs of such major films as HARRYPOTTER AND THE PRISONER OF AZKABAN, BRIDGET JONES: THE EDGE OF REASONand CLOSER. Our Lee Filters operation manufactures and sells lightingfilters and other color-correction and diffusion filters.

Webelieve that we are well positioned to take advantage of the emergingmarkets for the capture of images in digital format. We currently offerthe F-900, a complete high definition digital camera system comprisedof a modified version of Sony Electronics Inc.'s("Sony") 24P CINEALTATM high definitiondigital camera, coupled with our series of specially designed PRIMODIGITAL® lenses and other accessories for use in themotion picture and television industries. The F-900 has been used on avariety of series television programs and commercials, including 8SIMPLE RULES, ACCORDING TO JIM, LIFE WITH BONNIE and STARGATE ATLANTIS.In 2004, the Academy of Television Arts and Sciences recognizedPanavision and Sony with a distinguished EMMYTM award for ourdigital imaging system.

In 2004, we demonstrated theGENESISTM high definition digital camera system. TheGENESISTM camera, which we launched in early 2005, is anothercollaborative effort with Sony that combines high performanceelectronic imaging with Panavision's PRIMO® cineoptics. The GENESISTM system offers a number of technological andperformance advantages over the F-900 and other available digitalimaging systems, including a one-inch CCD sensor which allows thecamera to utilize all focal lengths of our existing spherical 35mmlenses, a form factor similar to film cameras, and the ability torecord from 1 to 50 frames per second. Whereas the primary market forthe F-900 was episodic television, we believe the GENESISTM camerasystem will be attractive to cinematographers in the feature filmmarket.

During 2004, we made several acquisitions anddispositions. In May, we sold our lighting assets in Canada, therebyexiting the lighting business in that country. In August, we sold our80% membership interest in EFILM, LLC("EFILM"), a digital post-productionlaboratory, to Deluxe Laboratories Inc.("Deluxe"), which held the remaining20% ownership of EFILM. In August, we also purchasedTechnovision France, a film equipment rental company in Paris. InSeptember, Panavision purchased the 

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49% interest in DHD Ventures, LLC("DHD") held by Sony, making DHD ourwholly-owned subsidiary. In December, we purchased all the film, highdefinition and video camera equipment of William F. White InternationalInc. ("WFW") in Canada.

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.

Market Overview

The demand forcinematographic equipment is driven by the number and budget size offeature films, television programs and commercials being produced.Increases in the number of action films and special effects in featurefilm and television productions increase the range and volume ofequipment required and lengthen the rental period. Increases in thenumber of television networks and channels and in the networks'demand for original programming also drive the increased use of camerasystems.

Feature Films

We view featurefilms in two categories: major studio features and independentfeatures. Major studio features are typically large-budget productionsrequiring a greater range and volume of camera and lighting equipment,thus providing greater revenue potential for us. The average majorstudio feature film rental is for 10 to 12 weeks. The camera andlighting rental revenue potential from feature films is dependent onthe number and types of productions filmed in any given year. We havebeen the market leader for many years in the feature film segment andwe provide equipment to the majority of major studio feature filmproductions worldwide.

Episodic Television

The episodic or "series" television marketin North America is comprised primarily of one-hour dramas andhalf-hour situation comedies, which are aired in both prime andnon-prime time slots. These programs are broadcast on the majortelevision networks as well as on cable networks. The average half-hoursituation comedy series generates 22 weeks of billing per year. Theaverage one-hour drama series generates 33 weeks of billing per year.We have been the market leader for many years in the prime timesegment, supplying equipment to the majority of U.S. prime time networkseries shot on film. In addition, we have become the leading supplierof high definition digital camera equipment for use in televisionsituation comedies, a market that has developed over the last severalyears. We believe we will continue to be a strong supplier to thismarket as we continue to offer customized equipment designed fortelevision production, which we believe provides both economic andqualitative benefits to our customers.

In Europe and the AsiaPacific markets, the television segment is characterized by lowerbudget productions than the U.S. that do not generate as many billingweeks on average.

Commercials

Althoughthe production of a commercial generally lasts for only one to sevendays, 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 believe can,in many cases, be achieved best by using our products. 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 Rental Operations

Panavision suppliescinematographic equipment, such as cameras, lenses and accessories, toits customers on a project-by-project basis. We have an extensiverental inventory of cameras and lenses, as 

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well as associated accessories, includingnon-Panavision manufactured equipment. We rent our equipment through anetwork of owned-and-operated rental facilities located throughoutNorth America, Europe and the Asia Pacific region and throughindependent distributors located around the world. This networkprovides us with a competitive advantage, as we are the only rentalcompany that offers clients both equipment and service on a nationaland worldwide basis. For the fiscal years 2004, 2003 and 2002 ourcamera rental operations accounted for approximately 61%,62% and 66%, respectively, of total rental revenue andsales.

For financial information as to our operations indifferent geographical areas, see Note 8 of the Notes to theConsolidated Financial Statements of Panavision included elsewhere inthis Form 10-K.

Camera System Products

We arethe only provider of camera systems with an integrated design thatprovides customers with compatible products available on a worldwidebasis. Each camera package rented for a project is comprised of anumber of camera systems, each of which includes a camera, lenses andaccessories. Each camera's rental price includes a variety ofaccessories such as eyepieces, viewfinders, cables and brackets.

Film Cameras.    There are two basictypes of motion picture cameras—Synchronous, or"sync-sound," and Mit Out Sound (MOS).Sync-sound cameras are used to shoot pictures while recording dialogue.MOS cameras are used primarily to shoot high-speed footage and specialeffects and may also be used as backup cameras in situations wheredialogue is not being recorded. Our camera inventory consists of bothsync-sound and MOS cameras with various features and at a range ofprices. While the majority of our sync-sound cameras are 35mm cameras,we also have 16mm cameras, which are used primarily to film episodictelevision shows, and 65mm cameras, which are used primarily to filmspecial effects and special venue presentations.

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 if there is abusiness need to do so, we can compete with independent renters ofcinematography equipment on the same level and with the same equipment.Our competitors, on the other hand, do not have the correspondingability to purchase Panavision equipment, as our equipment is notavailable to rental companies other than ourselves and our independentdistributors.

Film Lenses.    Wedevelop, design and manufacture our own prime (fixed focal length) andzoom lenses, the most critical component affecting picture quality andan important consideration for the filmmaker. For many years, we havespecialized in anamorphic lenses, which are used for the wide-screenmovie format. While we continue as the world's leading supplierof these lenses, we have also created a line of advanced sphericallenses for the non-wide screen format, producing Panavision'sproprietary PRIMO PRIME® and PRIMO ZOOM®lenses.

HD Digital CameraSystems.    We offer a complete high definition digital camerasystem, the F-900, comprised of a modified version of Sony's 24PCINEALTATM high definition digital camera coupled with ourspecially designed PRIMO DIGITAL® lenses and otheraccessories. The PRIMO DIGITAL® lenses representsignificant technological breakthroughs, providing extremely highperformance.

As described above, in early 2005,we launched our next-generation digital camera, GENESISTM,which we believe will become a market leader in digital imagecapture.

Accessories.    In orderto provide our customers with a fully integrated camera system, wefrequently introduce new camera accessories and currently offer anextensive range of products requested by and developed in conjunctionwith filmmakers. An accessory product often achieves such widespreadacceptance among its customers that we incorporate it into the basecamera package, thereby increasing the rental price of the overallpackage.

Business Strategy

Panavision intends to pursuethe following strategies to enhance its position as the leadingdesigner, manufacturer and supplier of high precision film camerasystems, lighting, and other equipment and services for the motionpicture, television, and commercials industries.

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Strengthen OurPosition in Our Core Business.    While Panavision is the marketleader in most of the segments in which it competes, we continue tostrive to increase our market share through aggressive marketing, acommitment to high quality service, improved equipment reliability,technical innovation, and a broader reach into the emerginggeographical markets. We believe that we can serve our customers betterthan other competitors by continuing to offer the broadest range ofequipment with the best customer service behind it.

We also look to strengthen our position in our corebusiness through selective strategic acquisitions as opportunitiesarise throughout our global market and across the range of our productofferings. Our Technovision, DHD and WFW acquisitions exemplify thisapproach.

Improved OperatingEfficiency.    We believe that profitability can be enhancedthrough improvements in operating efficiency. To this end, we areimplementing a standardized global information system to better manageequipment utilization, best practices throughout our rental facilitiesworldwide, and a new product development program aimed at acceleratingthe cycle between concept and market delivery. In addition to improvedprofitability, we believe these changes will also ultimately lead tomore efficient use of equipment, thereby mitigating capitalrequirements in the future.

Develop NewProducts and Applications.    We intend to continue developingand manufacturing innovative cameras, lenses and accessories. We arefocused on remaining close to the needs of our customers throughcollaborative interactions and set visits. With a research anddevelopment group currently comprised of mechanical, software,electronic and optical engineers, draftsmen and machinists, along witha dedicated machine shop that manufactures prototype equipment, we areable to develop proprietary technology in collaboration with filmmakersto address their unique requirements and position us to develop newproducts. Examples include:

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| •  | **HDDigital Camera Systems.**    Certain market segments such asfeature films have not utilized digital image capture to a significantdegree because of a gap in performance and functionality versus film.We believe the GENESISTM digital camera system bridges that gap.The GENESISTM system offers a number of technological andperformance advantages over existing digital equipment, such as aphysical footprint more similar to a film camera, a higher (andvariable) operating speed, and the ability to utilize a wide variety ofspherical 35mm lenses. |

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| •  | **HighPerformance Lenses for New Markets.**    We have developedsignificant expertise in the design, development and manufacture ofhigh performance lenses used in the feature film, series television andcommercial markets. The Academy of Motion Picture Arts and Sciences hasrecognized our contributions in this field with multiple ACADEMYAWARDS®. |

Lighting Rental Operations

In addition to manufacturing and renting camera systems, we rentlighting, lighting grip, transportation and distribution equipment andmobile generators used in the production of feature films, televisionprograms and commercials, outside broadcasts and other events from ourowned-and-operated facilities located in New York, Florida, Texas, theUnited Kingdom and Australia. Our extensive inventory of lightingequipment enables various lighting operations to service severalprojects with large-scale equipment and personnel requirementsconcurrently. Our worldwide lighting rental operations employ seniormanagement who have developed relationships over many years withinfluential individuals in the motion picture and televisionindustries.

These operations include Lee Lighting, the largestlighting rental operation in the United Kingdom. Lee maintains thelargest rental asset base of lighting equipment, transport, mobilegenerators and power distribution equipment in the United Kingdom. LeeLighting currently has the largest inventory of lampheads, the coreelement of lighting equipment used by filmmakers in all areas of theindustry, in the United Kingdom. Lee Lighting operates lighting rentaloperations in London, Bristol and Manchester, England and Glasgow,Scotland, each of which has its own rental inventories. From these fourlocations, Lee Lighting is able to service any production in England,Wales, Ireland, or Scotland. Lee Lighting is also able to serviceselect projects outside of the United Kingdom. In addition, LeeLighting maintains a rental 

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base at Shepperton Studios, the second largeststudio complex in the United Kingdom for the production of featurefilms. Lee Lighting is the only lighting company in the United Kingdomthat supplies 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. Our lighting facilities in the United States are operated byTFN Lighting Corp., a wholly-owned subsidiary of Panavision.

Forthe fiscal years ended 2004, 2003 and 2002, our lighting rentaloperations accounted for approximately 21%, 20% and18%, respectively, of total rental revenue and sales. Forfinancial information as to our operations in different geographicalareas, see Note 8 of the Notes to the Consolidated Financial Statementsof Panavision included elsewhere in this Form 10-K.

Sales andOther Operations

Panavision manufactures and sells lightingfilters through our Lee Filters operations in the United Kingdom andthe United States. In addition, we sell various consumable productssuch as film stock, light bulbs and gaffer tape, which are used in alltypes of productions, from several of our facilities.

LeeFilters is a manufacturer of light control media for the motionpicture, television, theater and other industries. The majority of LeeFilters' business is the sale of filters or gels used by lightingdirectors to control or correct lighting conditions during productions.On a worldwide basis, lighting filter distribution is handled primarilythrough a network of third-party dealers who have been selected becauseof their specific knowledge of the filters market in their respectivecountries. However, in the United Kingdom and United States, LeeFilters sells directly to end users and rental houses as well as todistributors and dealers.

For the fiscal years 2004, 2003 and2002, sales and other revenues accounted for approximately 18%,18% and 16%, respectively, of total rental revenue andsales. For financial information as to our operations in differentgeographical areas, see Note 8 of the Notes to the ConsolidatedFinancial Statements of Panavision included elsewhere in this Form10-K

Research and Product Development

Our research anddevelopment group is comprised of mechanical, software, electronic andoptical engineers, draftsmen and machinists. The research anddevelopment group has a dedicated machine shop that manufacturesprototype equipment. These internal capabilities enable us to developproprietary technology in collaboration with filmmakers to addresstheir unique requirements. We have long been a leader in the researchand development of film camera lenses. Since the first Panavision lenswas introduced in 1957, we have introduced many innovative sphericaland anamorphic lenses, including the PRIMO® series,which won ACADEMY AWARDS® in 1990, 1991, 1994, 1995,1999 and 2002 for Scientific and Technical Achievement. In 2000, welaunched a new series of specially designed PRIMODIGITAL® lenses for use with the Sony 24PCINEALTATM digital camera. These lenses are among the mostsophisticated and highest performing lenses we have ever produced.

The research and development group also explores camera and lenstechnology for use outside of our traditional markets. In 2004, weintroduced our new 300X zoom lens, targeted primarily at the sportsbroadcast and military/threat detection markets. Research anddevelopment expense for the years ended December 31, 2004, 2003, and2002 was $6.1 million, $5.1 million, and $4.4 million,respectively.

Manufacturing and Assembly

We manufacturecameras, lenses, and accessories designed by our in-house research anddevelopment staff at our 150,000 square foot corporate headquarters andmanufacturing facility located near Hollywood in Woodland Hills,California. We develop and design all the critical components for ourfilm camera systems, including the camera movement and lens. An entirecamera system consists of hundreds of parts, each carefully produced,assembled and tested. The manufacturing process takes up to four monthsand primarily involves the fabrication and assembly of camera and lenscomponents by highly skilled workers, each of whom generally has anarea of specialization. We also purchase digital cameras 

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bodies which we then modify and outfit in ourfacility. Following the assembly process, each camera system isrigorously tested to achieve the high standard of performance thatcustomers expect from Panavision.

While we manufacture most ofthe components internally, certain components and subassembly work,including glass grinding, lens element polishing and die casting, areoutsourced to selected suppliers. We have developed long-standingrelationships with our significant suppliers and we believe that theywill continue to supply high-quality products in quantities sufficientto satisfy our requirements. Since certain components, particularly thelens element, require long lead times, precise production schedules arecritical. Inventory levels are determined based on input frommarketing, operations and the agent network. We maintain a fairlyconstant production schedule in order to utilize our resourcesefficiently and service our customers' requirements.

Marketing and Customer Service

The principaldecision-makers in the selection of the camera packages arecinematographers, directors and producers, each of whom who viewcameras and related equipment as critical artistic tools. In additionto cost considerations, the selection of equipment is driven by itssuitability, technological capabilities and reliability, as well as bythe degree to which the manufacturer or renter is able to rapidlyservice the technical needs of the filmmaker, both before and duringfilm production.

Our skilled sales representatives haveestablished close working relationships with the filmmaker community.To cultivate these relationships, we assign to each production a salesrepresentative who possesses skills and experience appropriate to theneeds and personnel of that production. Based on discussions with thefilmmaker, the sales representative recommends a camera packagetailored to achieve the filmmaker's desired visual effect andmeet the production's budget. In addition, sales representativesprovide further advice and support by visiting film production sitesduring the production. As a result of providing high-quality customerservice, many of our representatives have been working with the samefilmmakers throughout their careers and in many instances thecollaborative effort with the filmmaker has prompted the design ofinnovative camera systems and accessories.

After preliminarydecisions have been made with respect to the proper camera package, thecamera equipment is delivered to a preparation area in one of ourfacilities reserved for that filmmaker. The filmmaker, together withhis or her own and Panavision's representatives, then inspects,tests and experiments with the equipment at the facility's prepfloor, sound stage, film processing room and screening room.

Distribution

Camera packages are rented to the motionpicture and television industries through rental offices owned andoperated by Panavision as well as through our independent distributors.These rental offices serve as a single point of contact for thecinematographers and often provide services that include maintenanceand technical advice. We believe we are the only manufacturer to havethe majority of its revenue generated through owned-and-operated rentalhouses, primarily because of our choice not to sell our equipment. Wedo not currently intend to begin selling our cinema camera systems. Weown and operate camera rental and camera and lighting rental facilitiesworldwide in North America, Europe and the Asia Pacific region. Inaddition to these owned-and-operated facilities, we serve our customersthrough a network of international independent distributors who areresponsible for the rental of Panavision equipment in locations thatare not serviced by our owned-and-operated facilities. All of ourindependent distributors are well trained in the use of Panavisionequipment and are supported by our technical staff.

CompetitiveStrengths

Panavision's leading market position isdemonstrated by our premier brand name recognition and strong marketshare of the major studio feature films worldwide and episodictelevision programs in North America. We believe our leading positionresults from the following competitive strengths:

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| •  | Reputation forQuality and Technologically Advanced Products.    Panavision isrecognized in the motion picture and television industries as thepreeminent brand name for cinematography equipment and the industryleader in the development of high quality, technologically advancedcamera systems, lenses and accessories. Since our inception in 1954, wehave continually introduced camera systems, lenses and accessories thathave become industry standards. We have been awarded threeOSCARS® and 23 other ACADEMY AWARDS®granted for Scientific and Technical Achievement, including a 2003award for advancement in camera systems designed for the film industry,a 2002 award for the PRIMO MACRO ZOOM® lens, a 2001award for the MILLENNIUM® XL camera system, a 2000 awardfor the MILLENNIUM® camera viewfinder and a 1999 awardfor the development of the PRIMO® lens series. Wereceived two EMMY® awards, including one in July of 2000for the development of the MILLENNIUM® XL camera systemand another in 2001 for the development of the PRIMO®lens series. Since 1990, 12 of the 15 OSCARS® for BestCinematography have been awarded to cinematographers who used ourcamera systems, including the cinematographers of THE AVIATOR, MASTERAND COMMANDER, ROAD TO PERDITION, AMERICAN BEAUTY, and SAVING PRIVATERYAN. |

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| •  | Range and Breadth of CameraSystems.     We believe that we have the world's largestinventory of camera systems, including cameras, lenses, andaccessories. We also offer a broad range of choices, includingequipment that is exclusively available through us and our agents aswell as equipment manufactured by others. We are able to upgrade ourexisting inventory to meet continually changing market demands, therebyreducing obsolescence, achieving better control of inventory andproduct availability and providing customers with access to the latesttechnological advances. We believe that the range and breadth of ourcamera systems inventory enables us to provide camera systems to agreater number of film productions throughout the world than any of ourcompetitors and to serve multiple large-scale feature film productionssimultaneously. |

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| •  | LongstandingRelationships with Filmmakers.    As a result of our significantrelationships with cinematographers, directors, producers and studioexecutives and our leading market position, we have favorable access tokey decision-makers regarding camera system selection. Theserelationships foster a cooperative effort to design and produce uniquesystems and accessories that meet filmmakers' creative needs.Additionally, we offer instruction and training in the handling of ourequipment to young directors and cinematographers while they are stillin film school and thereafter, thereby developing loyalty to Panavisionand providing a foundation for us to sustain our strong marketposition. For several years, Panavision, in association with theInternational Cinematographers Guild, has been providing training inthe use of digital cameras. In addition, we are the only majormanufacturer of cameras and lenses in the Hollywood area, enabling usto maintain our close relationships with Hollywood filmmakers and torespond rapidly to our customers' needs. |

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| •  | UniqueManufacturing and Distribution Model.     We are the onlyvertically integrated worldwide provider of camera systems, lenses andaccessories to the film, series television and television commercialindustries. By renting camera systems from us, customers are ensuredcontinual access to compatible state-of-the-art equipment as well asthe availability of proper equipment combinations for each specificproject. Our control over the design, development, manufacturing anddistribution processes enables us to 1) rapidly incorporatetechnological developments and filmmakers' suggestions into newproducts, 2) maintain product exclusivity and 3) offer products withgreater quality and higher performance at a premium price. |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Dedication to CustomerService.    Our customer service, repair and maintenancepersonnel are "on call" and available toassist customers 24 hours a day. In order to provide filmmakers with ahigh level of support, we regularly send marketing representatives andtechnicians to production sets to provide advice or immediateassistance with any equipment needs or questions. In the Hollywoodarea, we operate a "Panavan," a commercialvan fully equipped with service equipment that visits our customers ona daily basis. We assign a marketing representative to each productionin an effort to foster a strong and lasting working relationship withthe customer. In addition, as part of our customer service activities,we often develop, customize or procure equipment for specific customersor projects. Central to our customer service philosophy isPanavision's maintenance and repair team, which services allequipment between projects to ensure the quality and reliability of ourequipment. We are currently in the process of reviewing our servicestandards and upgrading the entire rentalprocess. |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Worldwide DistributionNetwork.    We are the only camera and lighting operation withan extensive worldwide distribution network, including 31owned-and-operated rental facilities throughout North America, Europeand the Asia Pacific region. With the increasing globalization offeature film production, this worldwide Panavision network offers itscustomers an integrated support system totally unique in the industry.These facilities offer a large inventory of rental equipment, on-sitetechnical expertise, knowledgeable market specialization in featurefilms, episodic television and commercials, and strong customersupport. We also serve our customers through a network of 19international third-party independent distributor offices, who areresponsible for the rental of Panavision equipment in locations thatare not served by its owned-and-operated facilities. The extensivenetwork for the distribution of our products instills confidence in ourcustomers that they can receive the level of quality and customerservice they expect from us for their cinematography equipment needsworldwide. |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | ExperiencedManagement.    Our management team provides depth and continuityof experience. Our senior management has developed relationships overmany years with influential individuals in the motion picture andtelevision industries, a central aspect to maintaining our strongmarket share. Our management team has also been instrumental indeveloping new technologies in the industry. |

Competition – Camera

The market forhigh-precision cinematography equipment is highly competitive,primarily driven by technology, customer service and price. As amanufacturer of cinematography equipment, we have one primarycompetitor, Arri Inc., based in Munich, Germany. Arri Inc. manufacturesonly cameras and certain accessories, primarily for sale to rentalhouses and individuals who are not the end users. Arri Inc. has rentalfacilities in selected markets but does not have a global rentaldistribution network. Because we manufacture lenses, cameras, and afull range of accessories that are cross-compatible, have closerelationships with filmmakers, have global distribution and havein-house opto-mechanical design and manufacturing capabilities, webelieve that we are better able to develop the innovative camerasystems demanded by our customers.

As a renter of cinematographyequipment, we compete with numerous rental facilities, which generallypurchase their equipment from other manufacturers and then rent thatequipment to their customers. While the overall rental business isprice competitive and subject to discounting, we have chosen to competeprimarily on the basis of our large inventory base, technologicallyadvanced 

8

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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 existing competitors,we may encounter competition from new competitors, as well as from newtypes of equipment, such as digital cameras. Although we believe thatwe are well positioned to capitalize on potential growth in the digitalcapture market, both independently and through a series of agreementswith Sony, the digital capture market is relatively new and we cannotpredict whether or how quickly the rental market for digital cameraswill grow or what effect that market will have on our film camerabusiness.

Competition – Lighting

Ourlighting rental operations service the motion picture, television andcommercials industries, including studio programs, outside broadcasts,and commercials. 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 producer, director or cinematographer, whomay desire a specific type of image or lighting effect. Although ourworldwide inventory of lighting equipment is extensive, the lightingrental market is price competitive. Because film and televisionproductions tend to rent lighting equipment from rental agencies in theterritories where the productions are filmed, the rental revenuegenerated from our lighting rental operations depends on the number offeature films, television programs and commercials being filmed in theareas near our operations.

Customers

No one customeraccounted for more than 10% of the Company's consolidatednet revenues for the years ended December 31, 2004, 2003, and 2002.

Intellectual Property

We rely on a combination of patents,licensing arrangements, trade names, trademarks, service marks, tradesecrets, know-how and proprietary technology 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. In 2002, we filed a provisional patentapplication on the compound zoom technology used in the 300x zoom lens.A regular non-provisional patent application was filed in 2003,claiming priority to the provisional patent application. We expect thatthe regular patent application will issue as a patent in 2005. We alsoown or have been assigned several domestic and foreign trademark orservice mark registrations including PANAVISION®,PANAFLEX®, PANAHEAD®,PANALITE®, PANASTAR®,PRIMO®, PRIMO ZOOM®, PRIMO MACROZOOM®, PRIMO-L®, PRIMODIGITAL®, MILLENNIUM® andULTRAVIEW® among others which, collectively, arematerial to our business.

Environmental Matters

Panavision is subject to foreign, federal, state and localenvironmental laws and regulations relating to the use, storage,handling, generation, transportation, emission, discharge, disposal andremediation of hazardous and non-hazardous substances, materials andwastes. We are also subject to laws and regulations relating to workerhealth and safety. We believe that our operations are in substantialcompliance with all applicable environmental and health and safetylaws. Although no material capital or operating expenditures relatingto environmental controls or other environmental matters are currentlyanticipated, there can be no assurance that we will not incur costs inthe future relating to environmental matters that would have a materialadverse effect on our business or financial condition.

Employees

As of December 31, 2004, we had 1,181 full-timeemployees, consisting of 507 employees based in North America, 543employees based in Europe, and 131 employees based in the Asia Pacificregion. The 

9

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Company's subsidiary, PANY Rental Inc.("PANY Rental"), is a party to collectivebargaining agreements with two local affiliates of the InternationalBrotherhood of Teamsters, which together cover approximately 25employees. We believe that relationships with our employees aregood.

Availability of Certain Documents Concerning theCompany

Copies of our annual reports on Form 10-K, ourquarterly reports on Form 10-Q, our current reports on Form 8-K, proxystatements, reports under Section 16 of the Exchange Act and anyamendment to any of these documents, as well as current versions of thefollowing documents are available, without charge, on our website,www.panavision.com (under the heading "InvestorRelations") and upon request to the Secretary, PanavisionInc., 6219 De Soto Avenue, Woodland Hills, California91367:

|              |                                                                                                                 |
|--------------|-----------------------------------------------------------------------------------------------------------------|
| •  | Panavision's Code ofBusiness Conduct, which includes its Code of Financial Ethics forSenior Financial Officers. |

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

|              |                                              |
|--------------|----------------------------------------------|
| •  | Panavision's CorporateGovernance Guidelines. |

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

10

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Item 2. Properties

Panavision's headquarters and principal manufacturing facilityare located at its 150,000 square-foot facility in Woodland Hills,California. The Lee Filters manufacturing facility is located inAndover, England. We conduct our operations through rental officesowned and operated by us as well as through independent distributors.All facilities are leased. The following table summarizes the worldwidepresence of our owned-and-operatedoffices:

|                                |  |               |        |                |  |            |        |        |  |        |        |        |  |  |
|--------------------------------|--|---------------|--------|----------------|--|------------|--------|--------|--|--------|--------|--------|--|--|
| Owned& Operated Facilities |  | Camera Rental |        | LightingRental |  | Filters ** |
| **NorthAmerica**               |  |          |   |           |  |       |   |   |  |   |   |   |
| WoodlandHills,California       |  |          | X      |           |  |       |   |   |  |   |   |   |
| Hollywood,California           |  |          | X      |           |  |       |   |   |  |   |   |   |
| Burbank,California             |  |          |   |           |  |       |   |   |  |   | X      |   |
| Dallas,Texas                   |  |          | X      |           |  |       | X      |   |  |   |   |   |
| New York,New York              |  |          | 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      |   |  |   |   |   |
|                                |

|  |
|--|
|  |  |
|  |

|   |               |
|---|---------------|
| * | openedin 2005 |

|    |                                                                                                               |
|----|---------------------------------------------------------------------------------------------------------------|
| ** | Primary filters facilities. Filtersand other consumables are available from numerous rental locations aswell. |

11

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Panavision camera equipment andaccessories are also available through a worldwide network ofindependentdistributors:

|                         |  |                    |  |                             |  |  |  |  |  |  |
|-------------------------|--|--------------------|--|-----------------------------|--|--|--|--|--|--|
| Americas                |  | Europe             |  | AsiaPacific                 |
| Montreal, Quebec,Canada |  | Rome,Italy         |  | Beijing,China               |
| Mexico City, Mexico     |  | Milan,Italy        |  | Guangzhou, China            |
| Sao Paulo,Brazil        |  | Bucharest, Romania |  | Shanghai,China              |
| Rio de Janeiro, Brazil  |  | Madrid, Spain**    |  | Kowloon, HongKong           |
|                    |  |               |  | Kuala Lumpur,Malaysia       |
|                    |  |               |  | Singapore,Singapore         |
|                    |  |               |  | Bangkok,Thailand            |
|                    |  |               |  | Tokyo, Japan(2)             |
|                    |  |               |  | Osaka,Japan                 |
|                    |  |               |  | Muntinlupa City,Philippines |
|                         |

|  |
|--|
|  |  |
|  |

|    |                      |
|----|----------------------|
| ** | Effective March 2005 |

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 Matters to aVote of Security Holders

No matter was submitted to a vote ofsecurity holders during the fourth quarter of 2004.

PARTII

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

Until August 5, 2002, Panavision Common Stockwas 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 of March 22,2005, there were approximately 80 registered holders of record ofPanavision Common Stock.

|               |  |                   |        |        |  |         |        |        |  |        |        |        |  |  |
|---------------|--|-------------------|--------|--------|--|---------|--------|--------|--|--------|--------|--------|--|--|
|          |  | StockSalesPrices* |
|          |  | High              |        | Low    |  | Closing |
| **2004**      |  |              |   |   |  |    |   |   |  |   |   |   |
| FirstQuarter  |  | $                 | 6.00   |   |  | $       | 4.80   |   |  | $      | 5.00   |   |
| SecondQuarter |  |              | 6.00   |   |  |    | 3.25   |   |  |   | 5.90   |   |
| ThirdQuarter  |  |              | 6.75   |   |  |    | 5.75   |   |  |   | 6.00   |   |
| FourthQuarter |  |              | 7.00   |   |  |    | 5.95   |   |  |   | 6.25   |   |
| **2003**      |  |              |   |   |  |    |   |   |  |   |   |   |
| FirstQuarter  |  | $                 | 4.50   |   |  | $       | 3.25   |   |  | $      | 3.60   |   |
| SecondQuarter |  |              | 7.75   |   |  |    | 3.60   |   |  |   | 5.50   |   |
| ThirdQuarter  |  |              | 6.50   |   |  |    | 4.10   |   |  |   | 5.45   |   |
| FourthQuarter |  |              | 6.05   |   |  |    | 5.15   |   |  |   | 5.50   |   |
|          |  |              |   |   |  |    |   |   |  |   |   |   |
|               |

|  |
|--|
|  |  |
|  |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| * | SinceAugust 5, 2002, our Common Stock has traded over the counter under theticker symbol "PVIS.OB". As such, stockinformation in this table represents over-the-counter market quotationsthat reflect inter-dealer prices, without retail mark-up, mark-down orcommissions and may not necessarily represent actual transactions. Thetrading market for our Common Stock may at times be relatively illiquiddue to low trading volume. |

12

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We have never paid a cash dividend on ourCommon 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 restricts our ability to pay dividends to our stockholders(see Item 7, "Management's Discussion and Analysisof Financial Condition and Results of Operations" and Note12 of Notes to the Consolidated Financial Statements of theCompany).

Item 6. Selected Financial Data

The following selected financial data has been derived fromour Consolidated Financial Statements. The information set forth belowis not necessarily indicative of results of future operations, andshould be read in conjunction with Item 7,"Management's Discussion and Analysis of FinancialCondition and Results of Operations" and the ConsolidatedFinancial Statements and related Notes thereto included elsewhere inthis Form10-K.

|                                                                       |  |                                                  |         |                           |  |                           |         |                                      |  |                                     |         |                          |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|-----------------------------------------------------------------------|--|--------------------------------------------------|---------|---------------------------|--|---------------------------|---------|--------------------------------------|--|-------------------------------------|---------|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                  |  |                                             |         |                      |  |                      |         | Yearended December 31,2001           |  |
|                                                                  |  |                                             |         |                      |  |                      |         | Pre-M&FPurchase(1)               |  | Post-M&FPurchase(1)             |         |
|                                                                  |  | YearendedDecember 31,2004                        |         | Year endedDecember31,2003 |  | Year endedDecember31,2002 |         | Period fromJanuary 1 toApril 19,2001 |  | Period fromApril 20 toDec. 31, 2001 |         | YearendedDecember31,2000 |
| **Statement of OperationsData:**                                      |  | (in thousands except per share pershare amounts) |
| Camerarental                                                          |  | $                                                | 125,976 |                      |  | $                         | 118,686 |                                 |  | $                                   | 122,223 |                     |  | $      | 45,660  |    |  | $      | 78,978  |    |  | $      | 130,047 |    |
| Lightingrental                                                        |  |                                             | 42,730  |                      |  |                      | 38,757  |                                 |  |                                | 32,844  |                     |  |   | 9,629   |    |  |   | 22,118  |    |  |   | 40,289  |    |
| Salesandother                                                         |  |                                             | 38,746  |                      |  |                      | 33,697  |                                 |  |                                | 31,212  |                     |  |   | 10,520  |    |  |   | 20,451  |    |  |   | 34,292  |    |
| Totalrevenue                                                          |  |                                             | 207,452 |                      |  |                      | 191,140 |                                 |  |                                | 186,279 |                     |  |   | 65,809  |    |  |   | 121,547 |    |  |   | 204,628 |    |
| Costof camerarental                                                   |  |                                             | 71,268  |                      |  |                      | 62,620  |                                 |  |                                | 62,482  |                     |  |   | 18,089  |    |  |   | 40,506  |    |  |   | 61,119  |    |
| Costof lightingrental                                                 |  |                                             | 36,670  |                      |  |                      | 34,667  |                                 |  |                                | 27,524  |                     |  |   | 8,234   |    |  |   | 18,279  |    |  |   | 29,962  |    |
| Costof sales andother                                                 |  |                                             | 22,344  |                      |  |                      | 19,268  |                                 |  |                                | 17,380  |                     |  |   | 5,681   |    |  |   | 11,483  |    |  |   | 19,214  |    |
| Totalcost ofrevenue                                                   |  |                                             | 130,282 |                      |  |                      | 116,555 |                                 |  |                                | 107,386 |                     |  |   | 32,004  |    |  |   | 70,268  |    |  |   | 110,295 |    |
| Grossmargin                                                           |  |                                             | 77,170  |                      |  |                      | 74,585  |                                 |  |                                | 78,893  |                     |  |   | 33,805  |    |  |   | 51,279  |    |  |   | 94,333  |    |
| Selling,general and administrativeexpenses                            |  |                                             | 65,879  |                      |  |                      | 61,829  |                                 |  |                                | 48,631  |                     |  |   | 16,470  |    |  |   | 40,121  |    |  |   | 55,638  |    |
| Researchand developmentexpenses                                       |  |                                             | 6,065   |                      |  |                      | 5,072   |                                 |  |                                | 4,436   |                     |  |   | 1,841   |    |  |   | 3,136   |    |  |   | 6,163   |    |
| Operatingincome                                                       |  |                                             | 5,226   |                      |  |                      | 7,684   |                                 |  |                                | 25,826  |                     |  |   | 15,494  |    |  |   | 8,022   |    |  |   | 32,532  |    |
| Netinterestexpense                                                    |  |                                             | (31,762 | )                    |  |                      | (29,655 | )                               |  |                                | (34,522 | )                   |  |   | (15,019 | )  |  |   | (28,436 | )  |  |   | (49,993 | )  |
| Refinancingexpense                                                    |  |                                             | (6,191  | )                    |  |                      | (1,505  | )                               |  |                                | (4,523  | )                   |  |   | — |    |  |   | — |    |  |   | — |    |
| Netother income(expense)                                              |  |                                             | 4,064   |                      |  |                      | 1,260   |                                 |  |                                | 2,406   |                     |  |   | 48      |    |  |   | 594     |    |  |   | (1,303  | )  |
| Income(loss) from continuing operations before incometaxes            |  |                                             | (28,663 | )                    |  |                      | (22,216 | )                               |  |                                | (10,813 | )                   |  |   | 523     |    |  |   | (19,820 | )  |  |   | (18,764 | )  |
| Incometax benefit(provision)                                          |  |                                             | 7,463   |                      |  |                      | 5,693   |                                 |  |                                | 2,464   |                     |  |   | (1,011  | )  |  |   | 6,429   |    |  |   | (4,881  | )  |
| Netloss from continuingoperations                                     |  |                                             | (21,200 | )                    |  |                      | (16,523 | )                               |  |                                | (8,349  | )                   |  |   | (488    | )  |  |   | (13,391 | )  |  |   | (23,645 | )  |
| Discontinuedoperations:                                               |  |                                             |    |                      |  |                      |    |                                 |  |                                |    |                     |  |   |    |    |  |   |    |    |  |   |    |    |
| Income(loss) from EFILM(2)                                            |  |                                             | 715     |                      |  |                      | (1,233  | )                               |  |                                | (2,730  | )                   |  |   | — |    |  |   | (134    | )  |  |   | — |    |
| Gainon disposal of EFILM(3)                                           |  |                                             | 10,330  |                      |  |                      | — |                                 |  |                                | — |                     |  |   | — |    |  |   | — |    |  |   | — |    |
| Netincome (loss) from discontinuedoperations                          |  |                                             | 11,045  |                      |  |                      | (1,233  | )                               |  |                                | (2,730  | )                   |  |   | — |    |  |   | (134    | )  |  |   | — |    |
| Netloss                                                               |  | $                                                | (10,155 | )                    |  | $                         | (17,756 | )                               |  | $                                   | (11,079 | )                   |  | $      | (488    | )  |  | $      | (13,525 | )  |  | $      | (23,645 | )  |
| Netloss per share from continuing operations – basic anddiluted |  | $                                                | (3.21   | )                    |  | $                         | (3.46   | )                               |  | $                                   | (1.28   | )                   |  | $      | (0.06   | )  |  | $      | (1.53   | )  |  | $      | (2.83   | )  |
| Netloss per share – basis and diluted                           |  | $                                                | (2.34   | )                    |  | $                         | (3.60   | )                               |  | $                                   | (1.59   | )                   |  | $      | (0.06   | )  |  | $      | (1.54   | )  |  | $      | (2.83   | )  |
| Sharesused in computation – basic anddiluted                    |  |                                             | 12,617  |                      |  |                      | 8,770   |                                 |  |                                | 8,770   |                     |  |   | 8,770   |    |  |   | 8,770   |    |  |   | 8,366   |    |
|                                                                       |

|  |
|--|
|  |  |
|  |

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

|     |                                                                                                                                                                                           |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Net of incometax benefit (provision) of $(462), $721, $1,681 and $82, for the yearsended December 31, 2004, 2003, and 2002, and the period from April 20to December 31, 2001,respectively |

|     |                              |
|-----|------------------------------|
| (3) | Net ofincome taxes of $6,682 |

13

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Item 6. Selected Financial Data(continued)

|                                  |  |                      |         |                     |  |        |         |        |  |        |         |        |  |        |         |        |  |        |          |         |  |  |
|----------------------------------|--|----------------------|---------|---------------------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--------|----------|---------|--|--|
|                             |  | Post-M&FPurchase |         | Pre-M&FPurchase |
|                             |  | December31,          |         | December31,         |
|                             |  | 2004                 |         | 2003                |  | 2002   |         | 2001   |  | 2000   |
| **BalanceSheetData:**            |  |                 |    |                |  |   |    |   |  |   |    |   |  |   |    |   |  |   |     |    |
| Totalassets                      |  | $                    | 620,660 |                |  | $      | 611,546 |   |  | $      | 614,411 |   |  | $      | 596,429 |   |  | $      | 284,712  |    |
| Totalcurrentliabilities          |  |                 | 46,310  |                |  |   | 40,326  |   |  |   | 56,074  |   |  |   | 46,942  |   |  |   | 50,133   |    |
| Long-termdebt*                   |  |                 | 299,894 |                |  |   | 333,789 |   |  |   | 467,397 |   |  |   | 448,623 |   |  |   | 477,425  |    |
| Stockholders'equity/(deficiency) |  |                 | 242,932 |                |  |   | 204,670 |   |  |   | 72,129  |   |  |   | 75,325  |   |  |   | (250,302 | )  |
|                                  |

|  |
|--|
|  |  |
|  |

|   |                                                                                     |
|---|-------------------------------------------------------------------------------------|
| * | Includes redeemable Series B Preferred Stock as of December 31,2002, 2001 and 2000. |

Item 7. Management's Discussionand Analysis of Financial Condition and Results of Operations

The following should be read in conjunction with the ConsolidatedFinancial Statements of Panavision and the Notes thereto includedelsewhere in this Form 10-K. Except for the historical informationcontained in this Annual Report on Form 10-K, this Annual Report onForm 10-K, including the following discussion, contains"forward-looking statements" that involverisks and uncertainties. See "Forward-LookingStatements."

Overview

Our revenue isderived from three sources: (i) camera rental operations, (ii) lightingrental operations, and (iii) sales and other revenue. Revenue fromcamera rental operations consists of the rental of camera systems,lenses and accessories to the motion picture and television industriesthrough a network of owned-and-operated rental offices locatedthroughout North America, Europe and the Asia Pacific region, andthrough a network of independent distributors responsible for therental 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, and Australia. Revenue generated by LeeLighting, our lighting rental facility located in the United Kingdom,generates the majority of our lighting rental operations revenue.

Sales and other revenue is comprised of: (i) the manufacture andsale of lighting filters through Lee Filters in the United Kingdom andthe United States; and (ii) sales of various consumable products, suchas film stock, light bulbs and gaffer tape, which are used in all typesof productions.

During 2004, we made several acquisitions anddispositions. In May, we sold our lighting assets in Canada, therebyexiting the lighting business in that country. In August, we sold our80% membership interest in EFILM, LLC("EFILM"), a digital post-productionlaboratory ("EFILM Sale"). As a result of thesale, EFILM and its holding company, LPPI, LLC, have been reported asdiscontinued operations in the Consolidated Financial Statements, theNotes to Consolidated Financial Statements, and in Management'sDiscussion and Analysis that follow. In August, we also purchasedTechnovision France, a film equipment rental company in Paris. Resultsof Technovision operations have been consolidated effective August 14,2004.

On September 16, 2004, we purchased the outstanding49% interest in DHD Ventures, LLC("DHD"), making DHD our wholly-ownedsubsidiary, at which point we began consolidating DHD's resultsof operations. Prior to this purchase the DHD joint venture wasreported using the equity method of accounting. As a result, theanalyses that follow reflect the consolidation of DHD for approximatelythree and one half months in 2004 and none in 2003 and 2002. InDecember, we purchased all the film, high definition and video cameraequipment of William F. White International Inc.("WFW") in Canada. This transaction had noimpact on the results of operations for the year ended December 31,2004.

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 

14

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the equity method of reporting for PANYRental. As a result, the analyses that follow reflect the consolidationof PANY Rental for 12 months in 2004, eight months in 2003, and none in2002. As of January 2004, we own 100% of PANY Rental.

Weconsider revenue from international business to be that revenue whichis generated from the rental of our equipment by productions that arelocated at production sites outside of the United States. Disclosure ofrevenues and long-lived assets by geographical region appears in Note 8of the Notes to Consolidated Financial Statements.

We transactthe majority of our 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 will have an impact on both the balance sheet andthe revenues and costs analyzed below. While both rental revenues andcosts of rental revenues in any given country will typically beaffected in the same manner, a change in gross margin can be amplifiedor mitigated depending on the direction of foreign exchange ratechanges.

Results of Operations

The following discussionand analysis includes our consolidated historical results of operationsfor the years 2004 compared to 2003 and 2003 compared to 2002.

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

During 2004, the USD weakened compared tomost major foreign currencies from countries in which we do business.The following table presents the average exchange rates we used during2004 and 2003 in translating LC-denominated activity (USD: 1LC)

|                |  |                    |       |                  |  |                  |       |         |  |                |       |         |  |        |       |         |  |        |       |         |  |  |
|----------------|--|--------------------|-------|------------------|--|------------------|-------|---------|--|----------------|-------|---------|--|--------|-------|---------|--|--------|-------|---------|--|--|
|           |  | U.K. PoundSterling |       | AustralianDollar |  | NewZealandDollar |       | Euro    |  | CanadianDollar |
| 2004           |  |               | 1.825 |             |  |             | 0.737 |    |  |           | 0.663 |    |  |   | 1.241 |    |  |   | 0.769 |    |
| 2003           |  |               | 1.637 |             |  |             | 0.653 |    |  |           | 0.583 |    |  |   | 1.133 |    |  |   | 0.714 |    |
| 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 with 2003.

CameraRentalOperations

|                |  |                        |         |                    |  |        |         |         |  |        |        |         |  |        |        |          |  |  |
|----------------|--|------------------------|---------|--------------------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|----------|--|--|
| (inthousands)  |  | Year Ended December31, |         | Increase(Decrease) |
|           |  | 2004                   |         | 2003               |  |   |         | %       |
| Rentalrevenue  |  | $                      | 125,976 |               |  | $      | 118,686 |    |  | $      | 7,290  |    |  |   | 6.1    | %   |
| Costof rentals |  |                   | 71,268  |               |  |   | 62,620  |    |  |   | 8,648  |    |  |   | 13.8   | %   |
| Grossmargin    |  | $                      | 54,708  |               |  | $      | 56,066  |    |  | $      | (1,358 | )  |  |   | (2.4   | )%  |
| Cost%          |  |                   | 56.6    | %             |  |   | 52.8    | %  |  |   |   |    |  |   |   |     |
|                |

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 of DHD andthe acquisition of Technovision, as discussed in the overview,contributed additional revenues of approximately $2.5 million in 2004.The consolidation effect of PANY Rental was not significant on theyear-to-year rental revenue comparison because prior to consolidation,most of PANY Rental's camera rental revenue was included as athird-party agent. Excluding the effect of currency rate changes andthe acquisitions, camera rental revenue declined approximately $0.8million. The primary driver of this decline was the television marketwhere our revenues declined by about $2.0 million. We believe thisdecline was 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 was an increase in the commercialsmarket of approximately $1.0 million.

15

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Major feature film production is a globalactivity and the level of activity in any given geographic region canfluctuate from year to year. We estimate that the total number of majorfeature film starts was essentially unchanged from 2003 to 2004 andthat our share of these total starts increased slightly. For thefeature film category, our owned-and-operated("O&O") units captured more of thisbusiness in 2004 at the expense of our third-party agents due to thelocation of these productions and as a result, revenue was comparableyear to year.

Similar to the change in revenues, the primaryreasons for the increase in cost of camera rentals were the translationeffect of foreign currency rate changes and the consolidation ofacquired businesses. Approximately $3.0 million of the increase was dueto the translation effect and approximately $1.6 million was due to theacquisition of Technovision and DHD. The consolidation impact of PANYRental was not significant as the increase in camera costs was offsetby a decrease in third-party agent commissions. The balance of thechange was due to cost increases throughout our O&O offices, withthe largest increase occurring in the U.S. Costs increased $3.4 milliondomestically, reflecting an increase to inventory reserves of $1.4million for obsolete raw glass and other items, with the balance due tohigher cost of sub-rentals (the cost of our having to rent additionalequipment not currently available in our inventory) and highermaintenance and depreciation costs.

Excluding the positiveeffects of currency rate changes of $2.6 million and $0.8 million fromthe acquisitions of Technovision and DHD, camera rental gross margindeclined approximately $4.8 million. This decrease was primarily causedby the $1.4 million increase to inventory reserves, the $0.8 millionnet decline in camera rental revenue, and higher sub-rental andmaintenance costs throughout our O&O offices.

Lighting RentalOperations

|                |  |                        |        |                    |  |        |        |         |  |        |        |        |  |        |        |         |  |  |
|----------------|--|------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands)  |  | Year Ended December31, |        | Increase(Decrease) |
|           |  | 2004                   |        | 2003               |  |   |        | %       |
| Rentalrevenue  |  | $                      | 42,730 |               |  | $      | 38,757 |    |  | $      | 3,973  |   |  |   | 10.3   | %  |
| Costof rentals |  |                   | 36,670 |               |  |   | 34,667 |    |  |   | 2,003  |   |  |   | 5.8    | %  |
| Grossmargin    |  | $                      | 6,060  |               |  | $      | 4,090  |    |  | $      | 1,970  |   |  |   | 48.2   | %  |
| Cost%          |  |                   | 85.8   | %             |  |   | 89.4   | %  |  |   |   |   |  |   |   |    |
|                |

Lightingrental revenue increased $3.7 million as compared to 2003 as the resultof 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 $3.6 million. In Asia Pacific,lighting contracts for several large-budget motion picture productionswere the primary reason for revenue improvement of $2.0 million. Theseimprovements were substantially offset by a decrease of $1.6 milliondue to the May 2004 sale of Canadian lighting assets and a $3.7 milliondecrease in revenue at Lee Lighting in the U.K. that was primarily dueto a decline in revenue from major and independent motion pictures ascompared with 2003.

The cost of lighting rentals increased $3.2million as the result of foreign exchange rate changes on internationalcosts. Excluding currency effects, U.S. lighting costs increased $2.1million, while internationally costs declined $1.8 million at LeeLighting and $1.3 million in Canada as result of the lighting assetsale. U.S. costs increased due to the consolidation effect of PANYRental discussed above and an increase in equipment sub-rental andmaintenance. At Lee Lighting in the U.K., the costs declines were dueprimarily to lower sub-rental and labor costs related to the revenuedecline. The overall improvement in gross margin as a percentage ofrevenues was due primarily to the Asia Pacific region, which had ahigher profit margin than Lee Lighting primarily due to lower laborcosts.

16

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Sales andOther

|               |  |                        |        |                    |  |        |        |         |  |        |        |        |  |        |        |         |  |  |
|---------------|--|------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands) |  | Year Ended December31, |        | Increase(Decrease) |
|          |  | 2004                   |        | 2003               |  |   |        | %       |
| Sales         |  | $                      | 38,746 |               |  | $      | 33,697 |    |  | $      | 5,049  |   |  |   | 15.0   | %  |
| Cost of sales |  |                   | 22,344 |               |  |   | 19,268 |    |  |   | 3,076  |   |  |   | 16.0   | %  |
| Grossmargin   |  | $                      | 16,402 |               |  | $      | 14,429 |    |  | $      | 1,973  |   |  |   | 13.7   | %  |
| Cost%         |  |                   | 57.7   | %             |  |   | 57.2   | %  |  |   |   |   |  |   |   |    |
|               |

Theprimary factor underlying the increase in sales and other revenues wasa $3.7 million positive effect of foreign exchange rate changes oninternational revenues, which comprise over 90% of total salesand other revenues. The majority of the remaining increase arose inAsia 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 $1.7million. Cost increases in Europe, due primarily to higher raw materialcosts, comprised the majority of the remaining change.

OperatingCosts

|                                   |  |                        |        |                    |  |        |        |        |  |        |       |        |  |        |      |         |  |  |
|-----------------------------------|--|------------------------|--------|--------------------|--|--------|--------|--------|--|--------|-------|--------|--|--------|------|---------|--|--|
| (inthousands)                     |  | Year Ended December31, |        | Increase(Decrease) |
|                              |  | 2004                   |        | 2003               |  |   |        | %      |
| Selling,general andadministrative |  | $                      | 65,879 |               |  | $      | 61,829 |   |  | $      | 4,050 |   |  |   | 6.6  | %  |
| Researchanddevelopment            |  |                   | 6,065  |               |  |   | 5,072  |   |  |   | 993   |   |  |   | 19.6 | %  |
|                                   |

Theprimary factor underlying the change in selling, general andadministrative expenses ("SG&A") for theyear ended December 31, 2004 was an increase of $3.4 million due to theeffect of foreign exchange rate changes on international SG&Acosts. The remaining increase of $0.6 million resulted from severaloffsetting factors. SG&A in 2003 included severance expense of $4.6million in connection with the departure of the Company's formerChief Executive Officer, Chief Financial Officer, and President of USOperations. Excluding severance and the effects of foreign currencyrate changes, SG&A increased approximately $5.2 million. Costsrelated to the consolidation effect of PANY Rental and the acquisitionof Technovision increased SG&A by approximately $2.1 million. Othercosts in the U.S. increased by $1.8 million related to higherinfrastructure costs, the majority of which related to support offuture growth initiatives, such as the 300x compound zoom lens, andhigher professional fees related to increased regulatory compliancerequirements. The majority of the balance occurred in Europe wherecosts increased $0.9 million. The principal reasons for the increase inEurope were higher advertising, legal and bad debt expenses at LeeFilters and general wage inflation.

The increase in research anddevelopment expenses for the year ended December 31, 2004 related toPanavision's new product development efforts, such as the 300xcompound zoom lens and the GENESISTM digital camera.

OperatingIncome

|                 |  |                        |       |                    |  |        |       |        |  |   |        |         |  |        |       |          |  |  |
|-----------------|--|------------------------|-------|--------------------|--|--------|-------|--------|--|---|--------|---------|--|--------|-------|----------|--|--|
| (inthousands)   |  | Year Ended December31, |       | Increase(Decrease) |
|            |  | 2004                   |       | 2003               |  |   |       | %      |
| Operatingincome |  | $                      | 5,226 |               |  | $      | 7,684 |   |  | $ | (2,458 | )  |  |   | (32.0 | )%  |
|                 |

Consistentwith the above discussion, year to year comparisons were impacted bynumerous, sometimes offsetting factors. However, the primary drivers ofthe decline in operating income were as follows: First, severanceexpense of $4.6 million from 2003 did not reoccur. The adjusted declineof $7.0 million was caused by lower gross margin in camera rental,excluding the effect of currency rate changes and the acquisitions, ofapproximately $4.8 million, the higher SG&A and research anddevelopment, also excluding currency and acquisition effects, of $4.2million, partially offset by $1.8 million resulting from thetranslation of international results into U.S. dollars.

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Interest, Taxes andOther

|                             |  |                        |         |                              |  |        |         |         |  |        |        |         |  |  |
|-----------------------------|--|------------------------|---------|------------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--|
| (inthousands)               |  | Year Ended December30, |         | Favorable(Unfavorable)Change |
|                        |  | 2004                   |         | 2003                         |  |
| Interestexpense             |  | $                      | (32,284 | )                       |  | $      | (30,011 | )  |  | $      | (2,273 | )  |
| Interest income             |  |                   | 522     |                         |  |   | 356     |    |  |   | 166    |    |
| Foreign exchangegain (loss) |  |                   | 338     |                         |  |   | (604    | )  |  |   | 942    |    |
| Refinancingexpense          |  |                   | (6,191  | )                       |  |   | (1,505  | )  |  |   | (4,686 | )  |
| Otherincome, net            |  |                   | 3,726   |                         |  |   | 1,864   |    |  |   | 1,862  |    |
| Income taxbenefit           |  |                   | 7,463   |                         |  |   | 5,693   |    |  |   | 1,770  |    |
|                             |

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 the March 2003contribution of $90.9 million principal amount of the9 5/8% Senior Subordinated Discount Notes Due2006 ("9 5/8%Notes") owned by MacAndrews & Forbes Holdings Inc.("MacAndrews & Forbes Holdings"),formerly known as Mafco Holdings Inc., the Company's parent, inexchange for equity and the January 2004 Refinancing, discussed belowunder Long-term Debt, scheduled amortization payments as well asan additional principal payment of $5 million with part of the proceedsfrom the EFILM Sale.

Refinancing expense for the year endedDecember 31, 2004 principally reflected costs incurred in connectionwith the January 2004 Refinancing. These costs representprimarily professional fees incurred by the Company, including anoriginal issue discount fee of approximately $2.0 million. Refinancingexpense for the year ended December 31, 2003 reflects costs incurred inconnection with the Company's discontinued offering of securednotes in the summer of 2003. These costs represent primarilyprofessional fees incurred by the Company.

Other income, net wasprincipally comprised of a $2.5 million gain on sales of property andequipment, a $1.0 million gain related to an insurance settlement forfire-damaged equipment and a related loss-of-hire claim along with $0.4million trademark royalties and management fees from PanavisionImaging, LLC and Panavision SVI, LLC, both subsidiaries of MacAndrews& Forbes Holdings. The primary component for the year endedDecember 31, 2003 was a $1.0 million gain on sales of property andequipment and $0.7 million gain related to an insurance settlement forflood-damaged equipment. The reason for the increase in gain on salesof property and equipment was a $1.5 million gain on the May, 2004disposition of Canadian lighting assets.

The income tax benefitfor the year 2004 increased because of a greater pre-tax loss fromcontinuing operations. The Company was able to recognize a significantportion of the benefit of the 2004 loss as an offset to the gain onsale of EFILM reflected in discontinued operations. See Note 7 toConsolidated Financial Statements included in the Form 10-K 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 shareholder litigationrelated to the 2001 purchase of shares of the Company's CommonStock from PX Holding Corporation by M&F Worldwide Corp. (the"M&F Settlement"), the Company may notjoin in filing a consolidated federal income tax return with eitherMacAndrews & Forbes Holdings or the Company's subsidiariesuntil May 2006 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 incorporated subsidiaries. The Company does not believethat deconsolidation of its federal income tax returns has had or willhave a material adverse effect on the Company's business orfinancial condition.

18

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Year Ended December 31,2003 Compared to Year Ended December 31, 2002

During 2003, theUSD weakened compared to most major foreign currencies from countriesin which we do business. The following table presents the averageexchange rates we used during 2003 and 2002 in translatingLC-denominated activity (USD: 1LC)

|                |  |                    |       |                  |  |                  |       |         |  |                |       |         |  |        |       |         |  |        |       |         |  |  |
|----------------|--|--------------------|-------|------------------|--|------------------|-------|---------|--|----------------|-------|---------|--|--------|-------|---------|--|--------|-------|---------|--|--|
|           |  | U.K. PoundSterling |       | AustralianDollar |  | NewZealandDollar |       | Euro    |  | CanadianDollar |
| 2003           |  |               | 1.637 |             |  |             | 0.653 |    |  |           | 0.583 |    |  |   | 1.133 |    |  |   | 0.714 |    |
| 2002           |  |               | 1.502 |             |  |             | 0.544 |    |  |           | 0.468 |    |  |   | 0.945 |    |  |   | 0.637 |    |
| Increasevs.USD |  |               | 9.0   | %           |  |             | 20.1  | %  |  |           | 24.5  | %  |  |   | 19.9  | %  |  |   | 12.2  | %  |
|                |

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 2003 with 2002.

CameraRentalOperations

|                |  |                        |         |                    |  |        |         |         |  |        |        |         |  |        |        |          |  |  |
|----------------|--|------------------------|---------|--------------------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|----------|--|--|
| (inthousands)  |  | Year Ended December31, |         | Increase(Decrease) |
|           |  | 2003                   |         | 2002               |  |   |         | %       |
| Rentalrevenue  |  | $                      | 118,686 |               |  | $      | 122,223 |    |  | $      | (3,537 | )  |  |   | (2.9   | )%  |
| Costof rentals |  |                   | 62,620  |               |  |   | 62,482  |    |  |   | 138    |    |  |   | 0.2    | %   |
| Grossmargin    |  | $                      | 56,066  |               |  | $      | 59,741  |    |  | $      | (3,675 | )  |  |   | (6.2   | )%  |
| Cost%          |  |                   | 52.8    | %             |  |   | 51.1    | %  |  |   |   |    |  |   |   |     |
|                |

Thedecrease in camera rental revenues principally reflects decreasedfeature film revenue, partially offset by increased camera rentalrevenue from the Company's international operations due to thepositive translation effect of foreign exchange rate changes. Featurefilm revenues decreased due to several factors, principally a lowernumber of starts in 2003 as compared to 2002 in the film industry and,to a lesser extent, a lower percentage of industry starts captured bythe Company. Compared to 2002, the estimated increase in 2003 in camerarental revenue from higher translation of revenues from internationaloperations was approximately $7 million.

Cost of camera rentalsfor the year 2002 included $1.3 million of non-cash charges related tolens components. Adjusting for that amount, expense increased $1.4million in 2003. While there was reduction in certain types of camerarental expense due to lower revenue, this net increase in expenseoccurred due to higher international expenses attributable to foreignexchange rate changes, as well as higher personnel and other costs toenhance customer service consistent with the Company's strategy.Since camera rental revenues declined, the expense as a percentage ofcamera rental revenues increased from 51.1% to 52.8%.

Lighting RentalOperations

|                |  |                        |        |                    |  |        |        |         |  |        |        |         |  |        |        |          |  |  |
|----------------|--|------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|---------|--|--------|--------|----------|--|--|
| (inthousands)  |  | Year Ended December31, |        | Increase(Decrease) |
|           |  | 2003                   |        | 2002               |  |   |        | %       |
| Rentalrevenue  |  | $                      | 38,757 |               |  | $      | 32,844 |    |  | $      | 5,913  |    |  |   | 18.0   | %   |
| Costof rentals |  |                   | 34,667 |               |  |   | 27,524 |    |  |   | 7,143  |    |  |   | 26.0   | %   |
| Grossmargin    |  | $                      | 4,090  |               |  | $      | 5,320  |    |  | $      | (1,230 | )  |  |   | (23.1  | )%  |
| Cost%          |  |                   | 89.4   | %             |  |   | 83.8   | %  |  |   |   |    |  |   |   |     |
|                |

Theprimary driver of the change in lighting rental revenues was increasedactivity at Lee Lighting in the U.K. of $6.2 million, inclusive of thepositive translation effect of foreign exchange rates. PANY Rental alsocontributed $3.4 million in 2003 as a result of the Company'sconsolidation of PANY Rental's results of operations from thedate it increased ownership of PANY Rental to 67% in May 2003.These increases were offset by decreased lighting rental revenue inAustralia, principally due to decreased features activity.

19

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The increase in cost of lighting rentalswas primarily due to increased expense of approximately $4.7 millionrelated to increased activity at Lee Lighting in the U.K. This expenseincrease represents 76% of the revenue increase for Lee Lightingdue to part of the revenue increase pertaining to services inconnection with equipment rental for which the profitability margin waslow. The balance of the increase was driven by the consolidation ofPANY Rental's lighting business, partially offset by lowerexpenses due to lower volume in Australia. Because the Company believesthe decline in Australia's revenues in 2003 was atypical, thereduction in Australian expenses in 2003 related mostly to variablecosts associated with lower revenues. As a result, the decrease inAustralian lighting revenues had a significant impact on lighting grossmargin in 2003 as compared to 2002. Combined with the lower level ofprofitability of Lee Lighting's revenue increase, as discussedabove, the result was a reduction of $1.2 million in gross margin forlighting in 2003 as compared to 2002.

Sales andOther

|               |  |                        |        |                    |  |        |        |         |  |        |        |        |  |        |        |         |  |  |
|---------------|--|------------------------|--------|--------------------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--|
| (inthousands) |  | Year Ended December31, |        | Increase(Decrease) |
|          |  | 2003                   |        | 2002               |  |   |        | %       |
| Sales         |  | $                      | 33,697 |               |  | $      | 31,212 |    |  | $      | 2,485  |   |  |   | 8.0    | %  |
| Cost of sales |  |                   | 19,268 |               |  |   | 17,380 |    |  |   | 1,888  |   |  |   | 10.9   | %  |
| Grossmargin   |  | $                      | 14,429 |               |  | $      | 13,832 |    |  | $      | 597    |   |  |   | 4.3    | %  |
| Cost%         |  |                   | 57.2   | %             |  |   | 55.7   | %  |  |   |   |   |  |   |   |    |
|               |

Thechange in sales and other revenues was primarily due to internationaloperations, principally attributable to foreign exchange rate changes.Cost of sales and other for the year increased as the result of highertranslated expenses associated with the higher internationalrevenues

OperatingCosts

|                                   |  |                        |        |                    |  |        |        |        |  |        |        |        |  |        |      |         |  |  |
|-----------------------------------|--|------------------------|--------|--------------------|--|--------|--------|--------|--|--------|--------|--------|--|--------|------|---------|--|--|
| (inthousands)                     |  | Year Ended December31, |        | Increase(Decrease) |
|                              |  | 2003                   |        | 2002               |  |   |        | %      |
| Selling,general andadministrative |  | $                      | 61,829 |               |  | $      | 48,631 |   |  | $      | 13,198 |   |  |   | 27.1 | %  |
| Researchanddevelopment            |  |                   | 5,072  |               |  |   | 4,436  |   |  |   | 636    |   |  |   | 14.3 | %  |
|                                   |

Theincrease in SG&A expenses for the year ended December 31, 2003 wasprimarily due to severance expense of $4.6 million in connection withthe departure of the Company's former Chief Executive Officer,Chief Financial Officer, and President of US Operations andapproximately $3.2 million related to increased infrastructure expense,principally personnel related, to support future growth initiatives.The balance of the increase related primarily to translation ofinternational expenses into higher U.S. dollars due to foreign exchangerate changes, consistent with the increase in revenues frominternational operations as discussed earlier.

The increase inresearch and development expenses for the year ended December 31, 2003related to the Company's strategy to increase new productdevelopment efforts.

OperatingIncome

|                 |  |                        |       |                    |  |        |        |        |  |   |         |         |  |        |       |          |  |  |
|-----------------|--|------------------------|-------|--------------------|--|--------|--------|--------|--|---|---------|---------|--|--------|-------|----------|--|--|
| (inthousands)   |  | Year Ended December31, |       | Increase(Decrease) |
|            |  | 2003                   |       | 2002               |  |   |        | %      |
| Operatingincome |  | $                      | 7,684 |               |  | $      | 25,826 |   |  | $ | (18,142 | )  |  |   | (70.2 | )%  |
|                 |

20

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Operating income for 2003 was $7.7million, a decrease of $18.1 million as compared to 2002. Consistentwith the above discussion, year to year comparisons of revenue andprofitability were significantly impacted by several factors,principally the translation of international results into higher U.S.dollars. However, there were two primary factors impactingprofitability: the reduction in camera rental revenues andseverance.

|              |                                                                                                                                                                                                                                                         |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Camera rental revenues,excluding the translation effect on international results, declinedapproximately $10.5 million from 2003 to 2002. As a result, thisdecline of approximately $10.5 million in revenue significantlyimpacted profitability in2003. |

|              |                                                                  |
|--------------|------------------------------------------------------------------|
| •  | Severance expense caused $4.6million of the decline year toyear. |

|              |                                                                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | While other factors explainedabove impacted results, these two factors accounted for approximately$15 million of the reduction from 2002 to 2003. |

Interest,Taxes andOther

|                             |  |                        |         |                              |  |        |         |         |  |        |        |         |  |  |
|-----------------------------|--|------------------------|---------|------------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--|
| (inthousands)               |  | Year Ended December30, |         | Favorable(Unfavorable)Change |
|                        |  | 2003                   |         | 2002                         |  |
| Interestexpense             |  | $                      | (30,011 | )                       |  | $      | (34,951 | )  |  | $      | 4,940  |    |
| Interest income             |  |                   | 356     |                         |  |   | 429     |    |  |   | (73    | )  |
| Foreign exchangegain (loss) |  |                   | (604    | )                       |  |   | 943     |    |  |   | (1,547 | )  |
| Refinancingexpense          |  |                   | (1,505  | )                       |  |   | (4,523  | )  |  |   | 3,018  |    |
| Otherincome, net            |  |                   | 1,864   |                         |  |   | 1,463   |    |  |   | 401    |    |
| Income taxbenefit           |  |                   | 5,693   |                         |  |   | 2,464   |    |  |   | 3,229  |    |
|                             |

Thedecrease in interest expense for the year ended December 31, 2003primarily reflects lower debt compared to the prior year due to thecontribution in 2003 of $90.9 million principal amount of the9 5/8% Notes owned by MacAndrews & ForbesHoldings in exchange for equity, as well as payments of scheduledamortization.

The change to a foreign exchange loss for the yearended December 31, 2003 as compared to a gain for the year endedDecember 31, 2002 was primarily due to a weaker U.S. dollar as comparedto the prior year and primarily reflects the effects of the fluctuatingforeign currencies on the foreign currency denominated intercompanybalances held in the U.S.

Refinancing expense for the year endedDecember 31, 2003 reflects costs incurred in connection with theCompany's discontinued offering of secured notes in the summer of2003 and bank refinancing. These costs represent primarily professionalfees incurred by the Company. Refinancing expense for the year endedDecember 31, 2002 reflects costs incurred in connection with theCompany's discontinued offering of secured notes and the bankrefinancing. These costs included approximately $2.2 million ofprofessional fees incurred with the Company's potentialrefinancing and lenders' fees of $2.9 million paid in accordancewith the March 15, 2002 amendment to the Prior Credit Agreement (seeNote 12 of Notes to Consolidated Financial Statements). Such chargeswere offset by a gain of approximately $0.6 million associated with the$37.7 principal amount at maturity of 9 5/8%Notes that were cancelled on June 28, 2002.

The tax benefit forthe year ended December 31, 2003 increased due to an increase in thepre-tax loss from continuing operations of $11.4 million.

Capital Expenditures

The Company intends to use cashprovided by operating activities and its revolving line of credit tomake additional capital expenditures primarily to manufacture camerasystems and accessories and purchase other rental equipment. Consistentwith the Company's view of the market and its related strategy,and based on projected revenues in 2005 and beyond, the Companyanticipates incurring a higher level of capital expenditures in 2005 ascompared to 2004.

21

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Liquidity and Capital Resources

The following table sets forth certain information from theCompany's Consolidated Statements of Cash Flows for the yearsindicated (inthousands):

|                               |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|-------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                          |  | YearEnded December31, |         |
|                          |  | 2004                  |         | 2003    |  | 2002   |
| Netcash provided by (usedin): |  |                  |    |    |  |   |    |    |  |   |    |    |
| Operatingactivities           |  | $                     | 8,683   |    |  | $      | 13,748  |    |  | $      | 18,733  |    |
| Investingactivities           |  |                  | (12,071 | )  |  |   | (19,883 | )  |  |   | (13,254 | )  |
| Financingactivities           |  |                  | 3,087   |    |  |   | 277     |    |  |   | 4,182   |    |
|                               |

Cashprovided by operating activities for the year ended December 31, 2004totaled $8.7 million comprised of the net loss of $21.2 million,increased by adjustments for depreciation and amortization of $40.5million, writeoff and amortization of deferred financing costs of $4.5million, and dividends of $1.1 million from our equity investment inDHD, and reduced by the deferred income tax benefit of $8.2 million,gains on property dispositions of $3.2 million and the net change inworking capital (excluding cash) and other miscellaneous items totaling$4.8 million. The primary reasons for the decrease in cash provided byoperations as compared with the year ended December 31, 2003 was anincrease in net loss from continuing operations and an increase inworking capital used, primarily an increase in inventory for themanufacturing of our 300X zoom lens.

Total investing activitiesof $12.1 million included $38.3 million of capital expenditures andcash payments for the DHD and Technovision acquisitions totaling $7.8million, offset by $25.3 million in proceeds from the sale of EFILM,$5.0 million in proceeds received from dispositions of fixed assets,and $3.7 million collected on notes receivable. Cash used in investingactivities for the year ended December 31, 2004 was less than that ofthe prior year primarily because of proceeds from the EFILM sale andcollections of a note receivable that was also related to EFILM.Capital expenditures were approximately $13.6 million higher in 2004 ascompared with 2003 primarily due to our purchase of the WFW camerainventory in Canada.

Total net cash provided by financingactivities was $3.1 million. Cash inflows from financing activities,primarily related to the January 2004 Refinancing, comprised borrowingsof $135.6 million under the Amended Credit Agreement, proceeds from theissuance of Senior Notes of $100.0 million, borrowings of $10.5 millionunder the Second 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-termDebt below for definition of all terms and discussion of theJanuary 2004 Refinancing. Cash outflows from financing activitiescomprised repayments of long-term debt of $264.3 million, the majorityof which related to the January 2004 refinancing, repayments under theSecond MacAndrews Line of $4.8 million and payment of deferredfinancing costs of $1.6 million.

Cash provided by operatingactivities for the year ended December 31, 2003 totaled $13.7 millioncomprised of the net loss of $16.5 million adjusted for depreciationand amortization of $39.6 million offset by the net change in workingcapital (excluding cash) and other miscellaneous items totaling $9.4million. The primary reason for the decline compared with 2002 was anincrease in net loss from continuing operations.

Total investingactivities of $19.9 million included $22.3 million of capitalexpenditures, offset by $2.4 million in proceeds received from thedisposition of fixed assets. The Company also purchased an additional1/3 ownership interest in PANY Rental in May 2003 (such that, as of May2003, the Company owned a 2/3 interest in PANY Rental) that resulted inthe consolidation of PANY Rental's financial position and resultsof operations in the Company's accompanying consolidatedfinancial statements. The purchase price together with additionalpayments relating to this transaction approximated $0.6 million andwere offset by a similar amount of cash received upon consolidation.Capital expenditures were primarily used to manufacture camera rentalsystems and accessories.

Total net cash provided by financingactivities was less than $0.3 million, which was comprised ofborrowings of $14.5 million under the MacAndrews Line and SecondMacAndrews Line (as defined 

22

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below), repayments of $1.5 million under theMacAndrews Line, notes payable to Deluxe Laboratories, Inc.("Deluxe") of $0.6 million, proceeds from theissuance of Series B Preferred Stock of $4.4 million, and proceeds fromthe issuance of Series C Preferred Stock of $9.7 million, net oftransaction costs, offset by repayment of long-term debt of $23.3million, and payment of deferred financing costs of $4.1 million.

Cash provided by operating activities for the year ended December31, 2002 totaled $18.7 million comprised of the net loss of $8.3million adjusted for depreciation and amortization of $40.1 million andthe amortization of the discount on the 9 5/8%Notes of $1.5 million, offset by the net change in working capital(excluding cash) and other miscellaneous items totaling $14.6million.

Total investing activities of $13.3 million included$16.2 million of capital expenditures, offset by $2.9 million inproceeds received from the disposition of fixed assets. Capitalexpenditures were primarily used to manufacture camera rental systemsand accessories, and purchase lighting equipment.

Cash providedby financing activities was $4.2 million, reflecting borrowings of$32.2 million and repayments of $35.8 million under the Prior CreditAgreement, deferred financing costs of $2.2 million, and the issuanceof Series B Preferred Stock for $10.0 million in cash.

As ofDecember 31, 2004, the Company had a line of credit totalingapproximately $20.0 million, under which $9.2 million was drawn.

Although there can be no assurance, Panavision expects that cashflows from operations, borrowings under the revolving line of credit,and cash equity contributions and advances from affiliates will besufficient to enable Panavision to meet its anticipated operating,capital spending and debt service requirements through at least thenext twelve months.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Long-Term Debt

9 5/8%Notes

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

MacAndrews Lines

On August 13, 2003,MacAndrews & Forbes Inc. (formerly MacAndrews & Forbes HoldingsInc.) agreed to amend an existing line of credit provided to Panavisionto increase the amount available for borrowing from $4.0 million to$10.0 million and extend the maturity date to August 31, 2006 (asamended, 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 line of credit (the"Second MacAndrews Line") in the amount of$10.0 million at a rate equal to 50 basis points above the rateprovided for in the revolving facility pursuant to the Prior CreditAgreement and a maturity date of April 15, 2004. As described below, inconnection with the January 2004 Refinancing (as defined below), (i)amounts outstanding under the MacAndrews Line were retired in exchangefor shares 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 and extendedthe maturity date to April 16, 2009. As of December 31, 2004,Panavision had availability under the Second MacAndrews line ofapproximately $10.8 million. On March 30, 2005, the Second MacAndrewsLine was amended and restated to increase the amount to $32.0 million,plus an amount for the potential UK Acquisition (defined below), ifnecessary.

Prior Credit Agreement

On June 4, 1998,Panavision entered into a Credit Agreement with a syndicate of lenders(as subsequently amended on September 30, 1998, June 30, 1999, March15, 2002, June 14, 2002, September 30, 2002, March 25, 2003 andNovember 12, 2003, the "Prior CreditAgreement"). Panavision's obligations 

23

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under the Prior Credit Agreement weresecured by substantially all of Panavision's assets. The PriorCredit Agreement comprised two facilities, the Term Facility and theRevolving Facility. As of December 31, 2003, amounts outstanding underthe Prior Credit Agreement were $151.8 million and $99.2 million forthe Term Facility and Revolving Facility, respectively. As describedbelow, the Prior Credit Agreement was replaced with the Amended andRestated Credit Agreement pursuant to the January 2004 Refinancing.

January 2004 Refinancing

On January 16, 2004,Panavision consummated a series of transactions to refinance itsindebtedness under the Prior Credit Agreement (the"January 2004 Refinancing"). As part of theJanuary 2004 Refinancing, Panavision sold, in a private placement,$104.2 million 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 SeniorNotes were sold at an original issue discount of approximately4% for an aggregate purchase price of $100.0 million. The SeniorNotes are secured by a second-priority lien on substantially all of theCompany's assets. The indenture pursuant to which the SeniorNotes were issued (the "2004 Indenture")requires that, among other provisions, Panavision achieve certainEBITDA levels and abide by certain other restrictive covenants,including limitations on indebtedness, liens, disposition of assets,and certain restricted payments including dividends to stockholders.Upon certain events of default under the 2004 Indenture, the SeniorNotes will bear interest at 2.5% above the rate otherwiseapplicable.

Also as part of the January 2004 Refinancing,Panavision issued to PX Holding Corporation ("PXHolding") 215,274 shares of new Series D Preferred Stockin exchange for (a) 159,644 shares of Series C Cumulative Pay-in-kindPreferred Stock, par value $0.01 per share (the "Series CPreferred Stock"), of Panavision, held by PX Holding(together with approximately $13.2 million of accumulated dividendsthereon); (b) $23.0 million in cash; (c) the retirement of allprincipal and interest (an aggregate of $10,180,930) owed as of January16, 2004 under the MacAndrews Line; (d) 33.3 shares of common stock ofPANY Rental having a fair market value of $0.7 million (such that, asof January 16, 2004, Panavision owned 100% of the outstandingshares of PANY Rental); (e) the retirement of all amounts (consistingof $630,780 in principal and $82,913 in accrued and unpaid interest)owed by PANY Rental to PX Holding pursuant to a certain promissory noteheld by PX Holding; and (f) the retirement of all amounts (consistingof $7.8 million in principal and unpaid interest) owed to MacAndrews& Forbes Holdings under a certain promissory note in the principalamount of $6.7 million, dated July 1, 2002, issued by Panavision to M& F Worldwide and subsequently acquired by MacAndrews & ForbesHoldings. The Series D Preferred Stock was non-voting, had aliquidation preference of $1,000 per share plus accrued and unpaiddividends, and entitled the holder to cumulative dividends at a rate of10% per annum regardless of whether declared or earned.Additionally, the Series D Preferred Stock was subject to redemption incertain circumstances upon a change of control. Panavision also issuedto PX Holding 1,381,690 shares of new Series E Non-Cumulative PerpetualParticipating Preferred Stock, par value $0.01 per share, (the"Series E Preferred Stock") in exchange for1,381,690 shares of Series A Non-Cumulative Perpetual ParticipatingPreferred Stock, par value $0.01 per share (the "Series APreferred Stock"). The Series E Preferred Stock wasentitled to one vote per share, voting together with the Common Stockas a single class, had a liquidation preference of $1.00 per share plusaccrued and unpaid dividends, and provided for non-cumulative cashdividends at an annual rate of $0.05 per share if declared byPanavision. As a result of the January 2004 Refinancing transactions,all of the outstanding shares of Series A and Series C Preferred Stockwere transferred to Panavision. In addition, MacAndrews & ForbesInc. increased the amount of the Second MacAndrews Line to $20.0million and extended the maturity date to April 16, 2009**.**

Panavision used proceeds from the sale of the Senior Notes and theissuance of Series D Preferred Stock to reduce the indebtedness underthe Prior Credit Agreement by $115.4 million, and replaced the PriorCredit Agreement with an Amended and Restated Credit Agreement (the"Amended Credit Agreement") with the lendersunder the Prior Credit Agreement. The Amended Credit Agreement providesfor a single term loan facility in the principal amount of $135.6million repayable in quarterly installments with a final maturity ofJanuary 12, 2007, except that the term facility shall be due onDecember 1, 2005 if any of the 9 5/8% Notesremain outstanding on that date. Panavision is considering variousalternatives with respect to the repayment or refinancing of the9 5/8% Notes. While there can be 

24

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no assurance, Panavision expects that the9 5/8% Notes will be refinanced or otherwiserepaid by December 1, 2005. PX Holding has committed (the"9 5/8% NotesCommitment"), in the event that the9 5/8% Notes are not repaid, retired orrefinanced prior to December 1, 2005, or the applicable provision ofthe Amended Credit Agreement is not amended by such time such thatPanavision's term loans do not become immediately due andpayable, to provide financial support sufficient to allow therepayment, retirement or refinancing of the9 5/8% Notes.

The term facility bearsinterest at either the ABR or Eurodollar Rate (as defined in theAmended Credit Agreement) plus a margin of 5.25% in the case ofABR loans or 6.25% in the case of Eurodollar Loans. The termfacility under the Amended Credit Agreement is secured on substantiallythe same basis as indebtedness under the Prior Credit Agreement. Inconnection with the Amended Credit Agreement Panavision paid fees tolenders and professional advisors of approximately $3.5 million,including an original issue discount fee of approximately $2.0 million.Approximately $3.1 million of the fees paid were expensed in 2004.

Under the Amended Credit Agreement, Panavision is required to repay$7.2 million in principal in 2005. In addition, the Amended CreditAgreement revised certain financial tests and other restrictivecovenants set forth in the Prior Credit Agreement, including requiredEBITDA (as defined therein), limitations on indebtedness, and otherprovisions. As defined in the Amended Credit Agreement and 2004Indenture, EBITDA includes adjustments for certain severance expenses,refinancing expenses, foreign exchange (gain) loss, other non-cashcharges and the proforma effect of acquisitions and dispositions. Ascompliance with EBITDA levels is a material aspect of the AmendedCredit Agreement and the 2004 Indenture, the calculation of EBITDApursuant to these agreements for the year ended 2004 is set forthbelow, with the calculation for the year ended 2003 provided forcomparative purposes (in millions):

|                                    |  |                        |         |         |  |        |         |         |  |  |
|------------------------------------|--|------------------------|---------|---------|--|--------|---------|---------|--|--|
|                               |  | Yearended December 31, |
|                               |  | 2004                   |         | 2003    |
| Net loss from continuingoperations |  |                   | ($21.2  | )  |  |   | ($16.5  | )  |
| Netinterest expense                |  |                   | 31.8    |    |  |   | 29.7    |    |
| Incometax provision (benefit)      |  |                   | (7.5    | )  |  |   | (5.7    | )  |
| Depreciation andamortization       |  |                   | 40.5    |    |  |   | 39.5    |    |
| Severanceexpense                   |  |                   | — |    |  |   | 4.6     |    |
| Refinancingexpense                 |  |                   | 6.2     |    |  |   | 1.5     |    |
| Foreign exchange(gain) loss        |  |                   | (0.3    | )  |  |   | 0.6     |    |
| Non-cashcharges                    |  |                   | 2.3     |    |  |   | — |    |
| Assetpurchase/saleadjustments      |  |                   | 6.5     |    |  |   | 0.1     |    |
| EBITDA                             |  | $                      | 58.3    |    |  | $      | 53.8    |    |
|                                    |

Therequired level of EBITDA, as defined, for the years ended December 31,2004 and 2003, respectively, was $54.0 million and $50.0 millionpursuant to the Amended Credit Agreement and $50.0 million for bothyears pursuant to the 2004 Indenture. As defined in the Amended CreditAgreement and 2004 Indenture, the above table reflects EDITDA fromcontinuing operations. Certain amounts in previously issued financialstatements, including the presentation of EFILM, have been excludedfrom continuing operations.

Amendments to Amended CreditAgreement and 2004 Indenture

EFILM

Principallyto provide a mechanism for the reinvestment of the proceeds of theEFILM Sale, as described below, on August 11, 2004, Panavision and theother parties to the Amended Credit Agreement entered into an amendmentand waiver to the Amended Credit Agreement ("FirstAmendment and Waiver"). To provide a similar mechanism forthe reinvestment of the proceeds of the EFILM Sale under the 2004Indenture, on August 11, 2004, Panavision and Wilmington Trust Company,as Trustee, entered into a supplemental indenture("Supplemental Indenture"). On September 30,2004, in accordance with the terms of the Amended Credit Agreement andthe 2004 Indenture, upon repayment of $1.3 million to 

25

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Federal Financial Credit Inc., PANY Rentaland TFN Lighting Corp. (each subsidiaries of Panavision) becameguarantors under those debt instruments.

DHD

OnSeptember 16, 2004, Panavision purchased from Sony a 49%interest in DHD Ventures, making DHD a wholly-owned subsidiary ofPanavision. Following this acquisition, DHD was converted to a limitedpartnership, DHD Ventures, LP, the limited partner of which isPanavision and the general partner is DHD Holdings, Inc. DHD Ventures,LP and DHD Holdings, Inc. both became guarantors under the AmendedCredit Agreement and the 2004 Indenture on September 30, 2004.

Preferred Stock Exchange

On November 16, 2004,Panavision issued 30,610,810 shares of common stock, par value $.01 pershare to PX Holding Corporation, in exchange for all Series D PreferredStock and all Series E Preferred Stock held by PX Holding (the"Exchange"). The Exchange was completedpursuant to a letter agreement, dated November 16, 2004, betweenPanavision and PX Holding (the "LetterAgreement").

In the transaction, Panavisionissued:

|              |                                                                                                                                                                                                                                                                                                           |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | 29,229,120 shares of CommonStock in exchange for all 215,274 shares of Series D Preferred Stockheld by PX Holding at an exchange ratio of 125 shares of Common Stockfor each $1,000 of outstanding liquidation preference or accrued andunpaid dividends, valuing the Common Stock at $8.00 per share;and |

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

The 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 restrictions on its ability to acquire Panavision'sremaining Common Stock or to transfer the shares it holds. After givingeffect to the transaction, PX Holding holds approximately 96.3%of the Common Stock. The transaction follows a May 13, 2004 offer byMacAndrews & Forbes Holdings initially valuing the Common Stock at$7.00 per share.

Following the consummation of the Exchange, noshares of Series D Preferred Stock or Series E Preferred Stock wereoutstanding. 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.

Inaddition, in connection with the Exchange, Panavision entered into aSecond Amendment and Consent, dated as of November 15, 2004, withrespect to Panavision's Amended Credit Agreement.

WFW

In connection with the Panavision acquisition ofthe WFW camera inventory in Canada (the "WFWAcquisition"), Panavision entered into a Third Amendment,dated as of December 29, 2004 with respect to Panavision'sAmended Credit Agreement.  In addition, in connection with theWFW Acquisition, Panavision entered into a Fourth SupplementalIndenture, dated as of December 29, 2004, with respect to the 2004Indenture.

March 2005 Amendment

In addition,Panavision entered into a Fourth Amendment, dated as of March 30, 2005,to the Amended Credit Agreement and Fifth Supplemental Indenture, datedas of March 30, 2005, with respect to the 2004 Indenture. Thisamendment and indenture supplement was entered into principally to (a)provide a mechanism for the potential acquisition of the camera,lighting and grip assets of a company in 

26

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the United Kingdom (the "UKAcquisition"), (b) reduce required EBITDA levels, asprovided in the Amended Credit Agreement, to $52.0 million, $54.0million, $54.0 million and $58.0 million for the twelve-month periodsended March 31, 2005, June 30, 2005, September 30, 2005 and December31, 2005, respectively, (c) extend the date on which the term facilityunder the Amended Credit Agreement shall be due if the9 5/8% Notes remain outstanding from September1, 2005 to December 1, 2005, (d) increase the limitation on capitalexpenditure, as defined in the Amended Credit Agreement, from $25.0million to $37.5 million and (e) increase the Second MacAndrews Line to$32.0 million, plus an amount for the potential UK Acquisition, ifnecessary.

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

Panavision has certain cashobligations and other commercial commitments that will affect itsshort- and long-term liquidity. Such obligations and commitments wereas follows (inthousands):

|                                  |  |        |         |                      |  |          |         |           |  |              |         |        |  |        |         |        |  |        |         |        |  |  |
|----------------------------------|--|--------|---------|----------------------|--|----------|---------|-----------|--|--------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                             |  |   |         | Paymentsdue byPeriod |  |     |
| ContractualObligations           |  | Total  |         | Less than 1 year     |  | 1-3years |         | 4-5 years |  | After 5years |
| Long-termdebt                    |  | $      | 303,999 |                 |  | $        | 7,411   |      |  | $            | 192,421 |   |  | $      | 104,167 |   |  | $      | — |   |
| Capitalleases                    |  |   | 10,040  |                 |  |     | 2,571   |      |  |         | 4,763   |   |  |   | 2,433   |   |  |   | 273     |   |
| Operatingleases                  |  |   | 35,390  |                 |  |     | 9,755   |      |  |         | 12,038  |   |  |   | 7,358   |   |  |   | 6,239   |   |
| Purchaseobligations              |  |   | 6,800   |                 |  |     | — |      |  |         | 6,800   |   |  |   | — |   |  |   | — |   |
| Totalcontractual cashobligations |  | $      | 356,229 |                 |  | $        | 19,737  |      |  | $            | 216,022 |   |  | $      | 113,958 |   |  | $      | 6,512   |   |
|                                  |

Forinformation on Panavision's long-term debt obligations, see thediscussion herein and in Note 12 of the Notes to the ConsolidatedFinancial Statements included elsewhere in this Form 10-K. The abovetable does not include interest on long-term debt.

**Commitments and Contingencies** – Panavision periodicallyrecords the estimated impacts of various conditions, situations orcircumstances involving uncertain outcomes. These events are called"contingencies," and Panavision'saccounting for such events is prescribed by SFAS No. 5,"Accounting for Contingencies."

Theaccrual of a contingency involves considerable judgment on the part ofmanagement. Panavision uses its internal expertise, and outside experts(such as lawyers and tax specialists), as necessary, to help estimatethe probability that a loss has been incurred and the amount (or range)of the loss. Panavision currently does not have any materialcontingencies that it believes require accrual or disclosure in itsConsolidated Financial Statements.

Seasonality

Panavision's revenues are subject to seasonal fluctuations. InNorth America, episodic television programs cease filming in the secondquarter for several months, and typically resume production in August.Feature film production activity typically reaches its peak in thethird and fourth quarters.

Impact of Inflation

Panavision's results of operations and financial condition arepresented based upon historical cost. While it is difficult to measureaccurately the impact of inflation due to the imprecise nature of theestimates required, Panavision believes that the effects of inflation,if any, on its results of operations and financial condition have beenminor.

Critical Accounting Policies

Panavision reviewsthe accounting policies it uses in reporting its financial results on aregular basis. The preparation of these financial statements requiresPanavision to make estimates and judgments that affect the reportedamounts of assets, liabilities, revenues and expenses and relateddisclosure of 

27

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contingent assets and liabilities. On anongoing basis, Panavision evaluates its estimates, including thoserelated to accounts receivable, investments, rental assets, intangibleassets, income taxes, contingencies and litigation. Panavision basesits estimates on historical experience and on various other assumptionsthat are believed to be reasonable under the circumstances. Theseestimates form the basis for Panavision 's judgments about thecarrying value of assets and liabilities that are not readily apparentfrom other sources. Results may differ from these estimates if actualoutcomes are different from the estimates on which Panavision based itsassumptions. These estimates and judgments are reviewed by managementon an ongoing basis. Panavision believes the following criticalaccounting policies affect its more significant judgments and estimatesused in the preparation of the Consolidated Financial Statements ofPanavision.

**Revenue Recognition** – Panavisionrecognizes revenue over the related equipment rental period usingprices that are negotiated at the time of rental. Revenue from productsales is recognized upon shipment. Panavision does not have a historyof significant product returns or revenue adjustments.

**Allowance for Doubtful Accounts** – Panavision maintainsallowances for doubtful accounts for estimated losses resulting fromthe inability or unwillingness of its customers to make requiredpayments. If the financial condition of Panavision's customerswere to deteriorate, resulting in an impairment of their ability tomake payments, additional allowances may be required.

**Inventory Allowance** – Panavision reviews itsinventories for both obsolescence and quantities in excess of needsbased upon usage and demand forecasts within a specific time horizonand reserves are established accordingly.

**Income Taxes**– Panavision estimates its actual current tax liabilitiestogether with temporary differences resulting from differing treatmentof items, such as net operating losses and depreciation, for tax andaccounting purposes. These temporary differences result in deferred taxassets and liabilities. Panavision must then assess the likelihood thatits deferred tax assets will be recovered from future taxable incomeand to the extent Panavision believes that recovery is not likely, itmust establish a valuation allowance. At December 31, 2004, Panavisionhad a $8.1 million valuation allowance established against its deferredtax assets. To the extent Panavision establishes a valuation allowanceor changes this allowance in a period, it must reflect the change tothe allowance within the tax provision in the consolidated statement ofoperations. Significant management judgment is required in determiningthe provision for income taxes, deferred tax assets and liabilities andany valuation allowance recorded against its net deferred taxassets.

**Long-Lived Assets** – Panavision assesses theimpairment of property, plant and equipment (comprised principally ofits rental assets), goodwill, and other identifiable intangibleswhenever events or changes in circumstances indicate that the carryingvalue may not be recoverable. Some factors Panavision considersimportant which could trigger an impairment review include thefollowing:

|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| •  | Significant underperformancerelative to expected historical or projected future operatingresults; |

|              |                                                                                                                         |
|--------------|-------------------------------------------------------------------------------------------------------------------------|
| •  | Significant changes in themanner of Panavision's use of the acquired assets or the strategyfor its overall business;and |

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

Panavision determines whether the carryingvalue of 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 Panavisionceased to amortize goodwill and its trade name since both are believedto have an indefinite life. In lieu of amortization, Panavisionperforms an annual review of its goodwill and trade name (morefrequently if impairment indicators exist). If Panavision determines atany point in the impairment review process that goodwill or its tradename has been impaired, Panavision would record an impairment charge inits consolidated statement of operations.

RecentAccounting Pronouncements

In November 2004, the FinancialAccounting Standards Board ("FASB") issuedSFAS No. 151, "Inventory Costs – an amendment of ARBNo. 43, Chapter 4" ("SFAS 151").SFAS 151 amends the 

28

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existing guidance to clarify the accountingfor abnormal amounts of idle facility expense, freight, handling costsand spoilage. 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 "soabnormal" criterion. SFAS 151 also requires the allocationof fixed production overheads be based on the normal capacity of theproduction facilities. SFAS 151 will be effective forPanavision's 2006 fiscal year. Panavision believes thatimplementation of SFAS 151 will not have a material impact on itsconsolidated 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"). Theexisting guidance is 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 the provisionsof SFAS 153 are to be applied to prospective transactions, Panavisioncannot ascertain at this time whether implementation of SFAS 153 willhave any impact on its consolidated financial position, results ofoperations or cash flows.

In December 2004, the FASB issuedrevised SFAS  No.  123R, "Share-BasedPayment." SFAS  No.  123R sets accountingrequirements for "share-based" compensationto employees and requires companies to recognize in the incomestatement the grant-date fair value of stock options and otherequity-based compensation. SFAS  No.  123R is effective ininterim or annual periods beginning after June  15, 2005. TheCompany will be required to adopt SFAS  No.  123R in itsthird quarter of fiscal 2005 and currently discloses the effect on net(loss) income and (loss) earnings per share of the fair valuerecognition provisions of SFAS  No.  123,"Accounting for Stock-Based Compensation."The Company is currently evaluating the impact of the adoption ofSFAS  123R on its financial position and results ofoperations.

Forward-Looking Statements

This annualreport on Form 10-K for the year ended December 31, 2004, as well ascertain of Panavision's other public documents and statements andoral statements, contain forward-looking statements that reflectmanagement's current assumptions and estimates of futureperformance and economic conditions. Such statements are made inreliance upon safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995. Panavision cautions investors thatforward-looking statements are subject to risks and uncertainties thatmay cause actual results and future trends to differ materially fromthose projected, stated, or implied by the forward-looking statements.In addition, estimates of cost savings included in this Form 10-K arebased on various assumptions that are subject to inherent uncertaintyand actual cost savings could vary from these estimates. Further,Panavision encourages investors to read the summary of its criticalaccounting policies included elsewhere herein.

In addition tofactors described in Panavision's Securities and ExchangeCommission filings and others, the following factors could causePanavision's actual results to differ materially from thoseexpressed in any forward-looking statements made by Panavision: (a) asignificant reduction in the number of feature film, commercial orseries television productions; (b) competitive pressures arising fromchanges in technology, customer requirements, price competition andindustry standards; (c) an increase in expenses related to new productinitiatives and product development efforts; (d) unfavorable foreigncurrency fluctuations; (e) significant increases in interest rates; (f)lower-than-expected cash flows from operations; (g) difficulties ordelays in developing and introducing new products or failure ofPanavision's customers to accept new product offerings; (h)difficulties or delays in implementing improvements in operatingefficiencies; (i) delays in customer acceptance of digital laboratoryservices; or (j) the inability to secure capital contributions or loansfrom affiliates, refinance its indebtedness or sell its equitysecurities. Panavision assumes no responsibility to update theforward-looking statements contained in this filing.

29

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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.

Asof December 31, 2004 and 2003, Panavision's primary net foreigncurrency market exposures include the Euro, British pound, Canadiandollar, Australian dollar and the New Zealand dollar. At the presenttime, the Company does not generally hedge against foreign currencyfluctuation. Management does not foresee nor expect any significantchanges in foreign currency exposure in the near future.

As ofDecember 31, 2004 and 2003, a 10% appreciation in foreigncurrency exchange rates from the prevailing market rates would increasethe related net unrealized gain on intercompany balances by $1.9million and $2.6  million, respectively. Conversely, a 10%depreciation in these currencies from the prevailing market rates woulddecrease the related net unrealized loss on intercompany balances by$1.7 million and $2.6 million, respectively, as of December 31, 2004and 2003.

Panavision is exposed to changes in interest rates onits variable rate debt. A hypothetical 10% increase in theinterest rates applicable to 2004 and 2003 would have resulted in anincrease to interest expense of approximately $1.1 million and $1.6million, respectively. Conversely, a hypothetical 10% decreasein the interest rates applicable to 2004 and 2003 would have decreasedinterest expense by approximately $1.1 million and $1.6 million,respectively. As of December 31, 2004, Panavision believes that thecarrying value of its amounts payable under the Amended CreditAgreement approximate fair value.

The fair value ofPanavision's fixed rate long-term debt is sensitive to changes ininterest rates. Based upon a hypothetical 10% increase in theinterest rate, assuming all other conditions affecting market riskremain constant, the market value of Panavision's fixed rate debtwould decrease approximately $1.9 million and $0.8 million at December31, 2004 and 2003, respectively. Conversely, a hypothetical 10%decrease in the interest rate, assuming all other conditions affectingmarket risk remain constant, would result in an increase in marketvalue of approximately $1.9 million and $0.8 million over the sameperiod. Management does not foresee nor expect any significant changein its exposure to interest rate fluctuations or in how such exposureis managed in the future.

Panavision manages its fixed andfloating rate debt with the objective of achieving a mix thatmanagement believes is appropriate. To manage this mix in acost-effective manner, Panavision, from time to time, has entered intointerest rate swap agreements, in which it agrees to exchange variouscombinations of fixed and/or variable interest rates based upon agreedupon notional amounts. Panavision had no interest rate swap agreementsin effect at December 31, 2004.

Panavision believes the carryingvalue of its debt securities approximates fair value.

Item 8.Financial Statements and Supplementary Data

An index tofinancial statements and required financial statement schedules is setforth in Item 15(a).

Item 9. Changes In and Disagreements withAccountants on Accounting and Financial Disclosures

None.

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Item 9A. Controls andProcedures

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)  | Disclosure Controls andProcedures. Panavision 's management, with the participation ofthe its Chief Executive Officer and Chief Financial Officer, hasevaluated the effectiveness of the Company's disclosure controlsand procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended, (the"Exchange Act")) as of the end of the periodcovered by this report. Based on such evaluation, Panavision'sChief Executive Officer and Chief Financial Officer have concludedthat, as of the end of such period, such disclosure controls andprocedures 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 required disclosure. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b)  | Changes in Internal Control Over FinancialReporting. There have not been any changes in Panavision 'sinternal control over financial reporting (as such term is defined inRules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourthfiscal quarter ended December 31, 2004 that have materially affected,or are reasonably likely to materially affect, Panavision'sinternal control over financial reporting. |

Item 9B. OtherInformation

On March 30, 2005, the Company received the9 5/8% Notes Commitment from PX Holding. For adescription of the 9 5/8% Notes Commitment, seeItem 7, Management's Discussion and Analysis of FinancialCondition and Results of Operations—Liquidity and CapitalResources—Long-Term Debt. A copy of the9 5/8% Notes Commitment is attached tothis Form 10-K as Exhibit 99.1 and is incorporated herein byreference.

On March 30, 2005, Panavision entered a FourthAmendment to the Amended Credit Agreement, a Fifth SupplementalIndenture to the 2004 Indenture and an amendment and restatement of theSecond MacAndrews Line. For a discussion of these instruments, see Item7, Management's Discussion and Analysis of Financial Conditionand Results of Operations—Liquidity and CapitalResources—Long-Term Debt. Copies of the Fourth Amendment, theFifth Supplemental Indenture and the Second Amended and RestatedMacAndrews Line are attached to this Form 10-K as Exhibits 4.13, 4.14and 4.4, respectively, and are each incorporated herein byreference.

PART III

Panavision will provide theinformation otherwise set forth in Part III, Items 10 through 14, ofForm 10-K in its definitive proxy statement for its 2005 annual meetingof stockholders, which will be filed no later than April 30,2005.

31

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PART IV

|               |                                            |
|---------------|--------------------------------------------|
| Item15.  | Exhibits and Financial Statement Schedules |

|                        |                                                                                                            |
|------------------------|------------------------------------------------------------------------------------------------------------|
| (a)(1) & (2)  | The consolidatedfinancial statements of this Annual Report on Form 10-K can be foundbeginning on page F-1. |

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

|               |  |                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |  |
|---------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                    |
| 3.            |  | Certificateof Incorporation andBy-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 D Cumulative Pay-in-KindPreferred Stock of Panavision Inc. (incorporated herein by reference toExhibit 3.6 to Panavision's Annual Report on Form 10-K for theyear ended December 31,2003).**                                                                                                              |
| 3.4           |  | Certificate of Designations,Powers, Preferences and Rights of Series E Non-Cumulative PerpetualParticipating Preferred Stock of Panavision Inc. (incorporated hereinby reference to Exhibit 3.7 to Panavision's Annual Report on Form10-K for the year ended December 31,2003).**                                                                                              |
| 3.5           |  | Certificate of Elimination ofSeries D Preferred Stock (incorporated herein by reference to Exhibit3.1 to Panavision's Current Report on Form 8-K filed on November17, 2004).**                                                                                                                                                                                                 |
| 3.6           |  | Certificate of Eliminationof Series E Preferred Stock (incorporated herein by reference toExhibit 3.2 to Panavision's Current Report on Form 8-K filed onNovember 17, 2004).**                                                                                                                                                                                                 |
| 4.            |  | Instrumentsdefining the rights of security holders, includingindentures.                                                                                                                                                                                                                                                                                                       |
| 4.1           |  | Indenture, dated as ofFebruary 11, 1998, between PX Escrow and The Bank of New York, asTrustee, relating to the Company's 9 5/8%Senior Subordinated Discount Notes Due 2006 (incorporated herein byreference to Exhibit 4.1 to Panavision's Registration Statementon Form S-1, Registration No. 333-59363 filed with the Securities andExchange Commission on July 17,1998).** |
| 4.2           |  | First Supplemental Indenturedated June 4, 1998, among PX Escrow, Panavision and the Trustee,amending the Indenture identified at Exhibit 4.1 (incorporated hereinby reference to Exhibit 4.2 to Panavision's RegistrationStatement on Form S-1, Registration No. 333-59363 filed with theSecurities and Exchange Commission on July 17,1998).**                                |
| 4.3           |  | Amended and Restated SeniorSubordinated Line of Credit Agreement dated January 16, 2004, betweenPanavision Inc. and MacAndrews & Forbes Holdings Inc. (incorporatedherein by reference to Exhibit 4.16 to Panavision's Annual Reporton Form 10-K for the year ended December 31,2003).**                                                                                   |
| 4.4           |  | Second Amended and RestatedSenior Subordinated Line of Credit Agreement dated January 16, 2004,amended and restated as of March 30, 2005, between Panavision Inc. andMacAndrews & Forbes Inc. (formerly MacAndrews & ForbesHoldings, Inc.).*                                                                                                                           |
|               |

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |  |  |
|---------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4.5           |  | Indenture, dated as ofJanuary 16, 2004, between Panavision Inc. and Wilmington Trust Company,as Trustee, relating Panavision's 12.50% Senior SecuredNotes due 2009 (incorporated herein by reference to Exhibit 4.17Panavision's Annual Report on Form 10-K for the year endedDecember 31, 2003).**                                                                                                                                                                                               |
| 4.6           |  | Form of12.50% Senior Secured Note due 2009 (incorporated herein byreference from to Exhibit 4.17 to Panavision's Annual Report onForm 10-K for the year ended December  31,2003).**                                                                                                                                                                                                                                                                                                               |
| 4.7           |  | Amended and Restated CreditAgreement, dated as of May 28, 1998, as amended and restated as ofJanuary 16, 2004, among Panavision Inc., the several lenders namedtherein, and JP Morgan Chase Bank, as Administrative Agent(incorporated herein by reference to Exhibit 4.19 to Panavision'sAnnual Report on Form 10-K for the year ended December 31,2003).**                                                                                                                                      |
| 4.8           |  | First Amendment and Waiver,dated as of August 11, 2004, with respect to the Amended and RestatedCredit Agreement, dated as of May 28, 1998, as amended and restated asof January 16, 2004, among Panavision Inc., the several lenders namedtherein, and JP Morgan Chase Bank, as Administrative Agent.(incorporated herein by reference from Exhibit 4.21 fromPanavision's Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2004)**                                               |
| 4.9           |  | First SupplementalIndenture and Waiver, dated as of August 11, 2004, with respect toIndenture, dated as of January 16, 2004, between Panavision Inc. thesubsidiary guarantors and Wilmington Trust Company, as Trustee andCollateral Trustee, relating to Panavision's 12.50% SeniorSecured Notes due 2009. (incorporated herein by reference from Exhibit4.22 from Panavision's Quarterly Report on Form 10-Q for thequarter ended September 30,2004).**                                         |
| 4.10          |  | Second Amendment and Consent,dated as of November 15, 2004, with respect to the Amended and RestatedCredit Agreement, dated as of May 28, 1998, as amended and restated asof January 16, 2004, among Panavision Inc., the several banks and otherfinancial institutions or entities from time to time parties theretoand JPMorgan Chase Bank, as administrative agent. (incorporated hereinby reference from Exhibit 10.2 to Panavision's Current Report onForm 8-K filed on November 17,2004).** |
| 4.11          |  | Third Amendment, dated as ofDecember 29, 2004, with respect to the Amended and Restated CreditAgreement, dated as of May 28, 1998, as amended and restated as ofJanuary 16, 2004, among Panavision Inc., the several banks and otherfinancial institutions or entities from time to time parties theretoand JPMorgan Chase Bank, as administrative agent. (incorporated hereinby reference from Exhibit 10.1 to Panavision's Current Report onForm 8-K filed on January 4,2005).**                |
| 4.12          |  | Fourth Supplemental Indenture,dated as of December 29, 2004 with respect to the Indenture, dated asof January 16, 2004, among Panavision Inc. the subsidiary guarantorsand Wilmington Trust Company, as Trustee and Collateral Trustee,related to Panavision's 12.50% Senior Secured Notes due2009. (incorporated herein by reference from Exhibit 10.2 toPanavision's Current Report on Form 8-K filed on January 4,2005).**                                                                     |
| 4.13          |  | Fourth Amendment, dated as ofMarch 30, 2005, with respect to the Amended and Restated CreditAgreement, dated as of May 28, 1998, as amended and restated as ofJanuary 16, 2004, among Panavision Inc., the several banks and otherfinancial institutions or entities from time to time parties theretoand JPMorgan Chase Bank, as administrativeagent.*                                                                                                                                           |
| 4.14          |  | Fifth Supplemental Indenture,dated as of March 30, 2005, with respect to the Indenture, dated as ofJanuary 16, 2004, among Panavision Inc., the subsidiary guarantors andWilmington Trust Company, as Trustee and Collateral Trustee, related toPanavision's 12.50% Senior Secured Notes due2009.*                                                                                                                                                                                                |
|               |

33

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|               |  |                                                                                                                                                                                                                                                                                                                                |  |  |  |  |
|---------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                    |
| 10.           |  | MaterialContracts.                                                                                                                                                                                                                                                                                                             |
| 10.1          |  | Panavision Inc. 1999 StockOption Plan (incorporated herein by reference from Annex APanavision's 1999 Definitive Proxy Statement dated March 31,1999). **                                                                                                                                                                      |
| 10.2          |  | Panavision Inc. 2003Executive Incentive Compensation Plan (incorporated herein by referenceto Exhibit 10.2 to Panavision's Quarterly Report on Form 10-Q forthe quarter ended March 31,2003).**                                                                                                                                |
| 10.3          |  | Lease, dated June 13, 1995,between the Company and Trizec Warner Inc. (incorporated herein byreference to Exhibit 10.5 to Panavision's Registration Statementon Form S-1/A, Registration No. 333-12235 filed with the Securities andExchange Commission on October 31, 1996).**                                                |
| 10.4          |  | Letter Agreement, dated as of March27, 2003, between MacAndrews & Forbes Inc., PX Holding Corporationand Panavision Inc. (incorporated herein by reference to Exhibit 10.3from the Company's Annual Report on Form 10-K for the year endedDecember 31, 2002).**                                                            |
| 10.5          |  | Letter Agreement,dated as of January 31, 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).**                                                           |
| 10.6          |  | Registration Rights Agreement,dated as of December 3, 2002, by and between PX Holding Corporation andPanavision Inc. (incorporated herein by reference to Exhibit 3 fromPanavision's form SC 13D filed on December 9,2002).**                                                                                                  |
| 10.7          |  | Employment Agreement, datedApril 1, 2003, between Panavision Inc. and Robert L. Beitcher,President and (as of September 7, 2003), Chief Executive Officer(incorporated herein by reference to Exhibit 10.30 toPanavision's Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2003).**                               |
| 10.8          |  | Amended &Restated Employment Agreement, dated May 9, 2003, between PanavisionInc. and Bobby G. Jenkins, Executive Vice President and Chief FinancialOfficer (incorporated herein by reference to Exhibit 10.32 toPanavision's Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2003). **                       |
| 10.9          |  | Amended &Restated Employment Agreement, dated May 9, 2003, between PanavisionInc. and Eric W. Golden, Executive Vice President and General Counsel(incorporated herein by reference to Exhibit 10.31 toPanavision's Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2003). **                                 |
| 10.10         |  | SeparationAgreement, dated as of January 10, 2005, between Panavision and Eric W.Golden, formerly the Company's Executive Vice President, GeneralCounsel and Secretary.*                                                                                                                                                       |
| 10.11         |  | LetterAgreement, dated as of November 16, 2004, by and between PanavisionInc. and PX Holding Corporation (incorporated herein by reference fromExhibit 10.1 to Panavision's Current Report on Form 8-K filed onNovember 17, 2004).**                                                                                           |
| 10.12         |  | Loan Out ServiceAgreement, dated April 10, 2003, and made effective March 26, 2003,between Panavision Inc., and Ziffren, Brittenham, Branca, Fischer,Gilbert-Lurie & Stiffelman LLP (incorporated herein by reference toExhibit 10.15 to Panavision's Quarterly Report on Form 10-Q forthe quarter ended March 31,2003).** |
| 10.13         |  | Stock and Warrant PurchaseAgreement dated July 26, 2000 by and between Sony Electronics Inc. andPanavision Inc. (incorporated herein by reference to Exhibit 10.17 toPanavision's Quarterly Report on Form 10-Q for the quarter endedJune 30, 2000).**                                                                         |
|               |

34

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|               |  |                                                                                                                                                                                                                                                                                             |  |  |  |  |
|---------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                 |
| 10.14         |  | Warrant No. W-1, datedJuly 26, 2000, Warrant for Purchase of Shares of Common Stock fromPanavision Inc. by Sony Electronics Inc. (incorporated herein byreference to Exhibit 10.18 to Panavision's Quarterly Report onForm 10-Q for the quarter ended June 30,2000).**                      |
| 10.15         |  | Panavision Inc. StockholdersAgreement dated July 26, 2000 by and among Panavision Inc., SonyElectronics Inc. and PX Holding Corporation (incorporated herein byreference to Exhibit 10.19 to Panavision's Quarterly Report onForm 10-Q for the quarter ended June 30,2000).**               |
| 10.16         |  | Registration Rights Agreementdated July 26, 2000 by and between Panavision Inc. and Sony ElectronicsInc. (incorporated herein by reference to Exhibit 10.20 toPanavision's Quarterly Report on Form 10-Q for the quarter endedJune 30, 2000).**                                             |
| 10.17         |  | Letter Agreement,dated as of November 16, 2004, by and between Panavision Inc. and PXHolding Corporation (incorporated herein by reference from Exhibit 10.1to Panavision's Current Report on Form 8-K filed on November 17,2004).**                                                        |
| 10.18         |  | Letter Agreement, dated as ofJanuary 16, 2004, among Mafco Holdings Inc., MacAndrews and ForbesHoldings Inc., PX Holding Corporation and Panavision Inc. (incorporatedherein by reference to Exhibit 4.20 to Panavision's Annual Reporton Form 10-K for the year ended December 31, 2004)** |
| 21.           |  | Subsidiaries.                                                                                                                                                                                                                                                                               |
| 21.1          |  | Subsidiariesof Panavision. *                                                                                                                                                                                                                                                                |
| 23.           |  | Consents.                                                                                                                                                                                                                                                                                   |
| 23.1          |  | Consentof Ernst & Young LLP, independent registered public accountingfirm.*                                                                                                                                                                                                             |
| 24.           |  | Powers ofAttorney.                                                                                                                                                                                                                                                                          |
| 24.1          |  | Power of Attorney executed byRonald O. Perelman.*                                                                                                                                                                                                                                           |
| 24.2          |  | Power of Attorneyexecuted by 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.*                                                                                                                                                                                                                                              |
| 24.8          |  | Power of Attorney executed byJohn A. Scarcella.*                                                                                                                                                                                                                                            |
| 24.9          |  | Power of Attorneyexecuted by Robert S.Wiesenthal.*                                                                                                                                                                                                                                          |
| 24.10         |  | Power of Attorneyexecuted by KennethZiffren.*                                                                                                                                                                                                                                               |
|               |

35

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|               |  |                                                                                                                                                                                                                |  |  |  |  |
|---------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | Description                                                                                                                                                                                                    |
| 31.           |  | Section302 Certifications.                                                                                                                                                                                     |
| 31.1          |  | Certification ofRobert L. Beitcher, Chief Executive Officer, dated March 31,2005.*                                                                                                                             |
| 31.2          |  | Certification of Bobby G.Jenkins, Chief Financial Officer, dated March 31,2005.*                                                                                                                               |
| 32.           |  | Section906 Certifications.                                                                                                                                                                                     |
| 32.1          |  | Certification ofRobert L. Beitcher, Chief Executive Officer, dated March 31, 2005,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the Sarbanes-Oxley Act of 2002. (furnishedherewith) |
| 32.2          |  | Certification of Bobby G.Jenkins, Chief Financial Officer, dated March 31, 2005, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002. (furnishedherewith)   |
| 99.           |  | OtherExhibits                                                                                                                                                                                                  |
| 99.1          |  | PX Holding Corporation9 5/8% Notes Commitment Letter, dated as ofMarch 30, 2005.*                                                                                                                              |
|               |

|  |
|--|
|  |  |
|  |

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

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

36

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SIGNATURES

**Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the Registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.**

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

Date: March 31, 2005

|  | By: /s/ROBERT L. BEITCHER                     Robert L.Beitcher President and Chief Executive Officer |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | By: /s/ BOBBY G.JENKINS                            Bobby G.Jenkins Executive Vice President, Chief Financial Officerand Principal Accounting Officer |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

37

----

**Pursuant to the requirements ofthe Securities Exchange Act of 1934, this report has been signed belowby the following persons on behalf of the Registrant and in thecapacities and on the dates indicated.**

|                        |  |                                                                                   |  |               |
|------------------------|--|-----------------------------------------------------------------------------------|--|---------------|
| Signature              |  | Title                                                                             |  | Date          |
|                        |
| *                      |  | Co-Chairman of the Board andDirector                                              |  | March 31,2005 |
|                        |
| RonaldO. Perelman      |
|                        |
| *                      |  | Co-Chairman and Director                                                          |  | March31, 2005 |
|                        |
| KennethZiffren         |
|                        |
| *                      |  | Vice Chairman and Director                                                        |  | March31, 2005 |
|                        |
| Howard A.Gittis        |
|                        |
| /s/ ROBERT L.BEITCHER  |  | Presidentand Chief Executive Officer and Director                                 |  | March 31,2005 |
|                        |
| Robert L. Beitcher     |
|                        |
| /s/ BOBBY G. JENKINS   |  | Executive Vice President, Chief FinancialOfficer and Principal Accounting Officer |  | March 31,2005 |
|                        |
| BobbyG. Jenkins        |
|                        |
| *                      |  | Director                                                                          |  | March 31,2005 |
|                        |
| EdwardGrebow           |
|                        |
| *                      |  | Director                                                                          |  | March 31,2005 |
|                        |
| Ed GregoryHookstratten |
|                        |
| *                      |  | Director                                                                          |  | March 31,2005 |
|                        |
| James R.Maher          |
|                        |
| *                      |  | Director                                                                          |  | March 31,2005 |
|                        |
| Martin D.Payson        |
|                        |
| *                      |  | Director                                                                          |  | March 31,2005 |
|                        |
| John A.Scarcella       |
|                        |
| *                      |  | Director                                                                          |  | March 31,2005 |
|                        |
| Robert S.Wiesenthal    |
|                        |

*Bobby G. Jenkins, 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/ BOBBY G.JENKINS             |
|--|-------------------------------------------------------------------------------------------------|

|  | Name: Bobby G.Jenkins |
|--|-----------------------|

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

38

----

INDEX TOFINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

|                                                                                                                                    |  |        |      |        |  |  |
|------------------------------------------------------------------------------------------------------------------------------------|--|--------|------|--------|--|--|
|                                                                                                                               |  | Page   |
| Report of Independent Registered Public AccountingFirm                                                                             |  |   | F-2  |   |
| Consolidated Statements ofOperations — Years ended December 31, 2004, 2003, and2002                                          |  |   | F-3  |   |
| Consolidated Balance Sheets— Year Ended December 31, 2004 and 2003                                                           |  |   | F-4  |   |
| Consolidated Statements of Stockholders' Equity andComprehensive Income (Loss) — Years Ended December 31, 2004, 2003and 2002 |  |   | F-6  |   |
| Consolidated Statements ofCash Flows — Years ended December 31, 2004, 2003, and2002                                          |  |   | F-7  |   |
| Notes to Consolidated FinancialStatements                                                                                          |  |   | F-10 |   |
|                                                                                                                                    |

Financial StatementSchedules:

All schedules are included in theNotes to Consolidated Financial Statements or are omitted because theyare not required by the regulations or related instructions or are notapplicable.

F-1

----

Report of Independent Registered PublicAccounting Firm

The Board of Directors andStockholders Panavision Inc.

We have audited theaccompanying consolidated balance sheets of Panavision Inc. as ofDecember 31, 2004 and 2003, and the related consolidated statements ofoperations, stockholders' equity and comprehensive income (loss),and cash flows for each of the three years in the period ended December31, 2004. These financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinionon these financial statements based on our audits.

Weconducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. We were not engaged to perform an audit of theCompany's internal control over financial reporting. Our auditincluded consideration of internal control over financial reporting asa basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion of theeffectiveness of the Company's internal control over financialreporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amountsand disclosures 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 our opinion.

In our opinion, the financial statements referred to abovepresent fairly, in all material respects, the consolidated financialposition of Panavision Inc. at December 31, 2004 and 2003, and theconsolidated results of its operations and its cash flows for each ofthe three years in the period ended December 31, 2004, in conformitywith U.S. generally accepted accounting principles.

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

Los Angeles,California

March 30, 2005

F-2

----

Panavision Inc. ConsolidatedStatements of Operations

(Inthousands, except per shareamounts)

|                                                                                          |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|------------------------------------------------------------------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                     |  | Yearended December31, |
|                                                                                     |  | 2004                  |         | 2003    |  | 2002   |
| Camerarental                                                                             |  | $                     | 125,976 |    |  | $      | 118,686 |    |  | $      | 122,223 |    |
| Lightingrental                                                                           |  |                  | 42,730  |    |  |   | 38,757  |    |  |   | 32,844  |    |
| Salesandother                                                                            |  |                  | 38,746  |    |  |   | 33,697  |    |  |   | 31,212  |    |
| Totalrental revenue andsales                                                             |  |                  | 207,452 |    |  |   | 191,140 |    |  |   | 186,279 |    |
| Costof camerarental                                                                      |  |                  | 71,268  |    |  |   | 62,620  |    |  |   | 62,482  |    |
| Costof lightingrental                                                                    |  |                  | 36,670  |    |  |   | 34,667  |    |  |   | 27,524  |    |
| Costof sales andother                                                                    |  |                  | 22,344  |    |  |   | 19,268  |    |  |   | 17,380  |    |
| Grossmargin                                                                              |  |                  | 77,170  |    |  |   | 74,585  |    |  |   | 78,893  |    |
| Selling,general and administrativeexpenses                                               |  |                  | 65,879  |    |  |   | 61,829  |    |  |   | 48,631  |    |
| Researchand developmentexpenses                                                          |  |                  | 6,065   |    |  |   | 5,072   |    |  |   | 4,436   |    |
| Operatingincome                                                                          |  |                  | 5,226   |    |  |   | 7,684   |    |  |   | 25,826  |    |
| Interestincome                                                                           |  |                  | 522     |    |  |   | 356     |    |  |   | 429     |    |
| Interestexpense                                                                          |  |                  | (32,284 | )  |  |   | (30,011 | )  |  |   | (34,951 | )  |
| Foreignexchange gain(loss)                                                               |  |                  | 338     |    |  |   | (604    | )  |  |   | 943     |    |
| Refinancingexpense                                                                       |  |                  | (6,191  | )  |  |   | (1,505  | )  |  |   | (4,523  | )  |
| Otherincome,net                                                                          |  |                  | 3,726   |    |  |   | 1,864   |    |  |   | 1,463   |    |
| Lossfrom continuing operations before incometaxes                                        |  |                  | (28,663 | )  |  |   | (22,216 | )  |  |   | (10,813 | )  |
| Incometaxbenefit                                                                         |  |                  | 7,463   |    |  |   | 5,693   |    |  |   | 2,464   |    |
| Netloss from continuingoperations                                                        |  |                  | (21,200 | )  |  |   | (16,523 | )  |  |   | (8,349  | )  |
| Discontinuedoperations:                                                                  |  |                  |    |    |  |   |    |    |  |   |    |    |
| Income(loss) from EFILM (net of income tax (provision) benefit of $(462),$721 and$1,681) |  |                  | 715     |    |  |   | (1,233  | )  |  |   | (2,730  | )  |
| Gainon disposal of EFILM (net of income tax (provision) of $(6,682), $0 and$0)           |  |                  | 10,330  |    |  |   | — |    |  |   | — |    |
| Netincome (loss) from discontinuedoperations                                             |  |                  | 11,045  |    |  |   | (1,233  | )  |  |   | (2,730  | )  |
| Netloss                                                                                  |  | $                     | (10,155 | )  |  | $      | (17,756 | )  |  | $      | (11,079 | )  |
| Netloss from continuing operations attributable to commonstockholders                    |  | $                     | (40,524 | )  |  | $      | (30,308 | )  |  | $      | (11,206 | )  |
| Netloss from continuing operations per share — basic anddiluted                    |  | $                     | (3.21   | )  |  | $      | (3.46   | )  |  | $      | (1.28   | )  |
| Netloss per share — basic anddiluted                                               |  | $                     | (2.34   | )  |  | $      | (3.60   | )  |  | $      | (1.59   | )  |
| Sharesused in computation — basic anddiluted                                       |  |                  | 12,617  |    |  |   | 8,770   |    |  |   | 8,770   |    |
|                                                                                          |

Seeaccompanying notes.

F-3

----

Panavision Inc. Consolidated BalanceSheets

(In thousands, except sharedata)

|                                                                           |  |             |         |        |  |        |         |        |  |  |
|---------------------------------------------------------------------------|--|-------------|---------|--------|--|--------|---------|--------|--|--|
|                                                                      |  | December31, |
|                                                                      |  | 2004        |         | 2003   |
| **ASSETS**                                                                |  |
| Currentassets:                                                            |  |        |    |   |  |   |    |   |
| Cash and cashequivalents                                                  |  | $           | 6,593   |   |  | $      | 6,770   |   |
| Accountsreceivable (net of allowance of $1,618 in 2004 and $2,586 in2003) |  |        | 28,897  |   |  |   | 27,272  |   |
| Inventories                                                               |  |        | 14,926  |   |  |   | 11,794  |   |
| Prepaidexpenses                                                           |  |        | 3,912   |   |  |   | 4,211   |   |
| Notereceivable                                                            |  |        | 826     |   |  |   | — |   |
| Duefrom relatedparties                                                    |  |        | 106     |   |  |   | — |   |
| Othercurrentassets                                                        |  |        | 2,081   |   |  |   | 1,255   |   |
| Totalcurrentassets                                                        |  |        | 57,341  |   |  |   | 51,302  |   |
| Property,plant and equipment,net                                          |  |        | 230,795 |   |  |   | 210,251 |   |
| Goodwill,net                                                              |  |        | 259,909 |   |  |   | 259,208 |   |
| Patentsand trademarks,net                                                 |  |        | 66,266  |   |  |   | 66,389  |   |
| Otherassets                                                               |  |        | 6,349   |   |  |   | 12,907  |   |
| Netassets of discontinuedoperations                                       |  |        | — |   |  |   | 11,489  |   |
| Totalassets                                                               |  | $           | 620,660 |   |  | $      | 611,546 |   |
|                                                                           |

Seeaccompanying notes.

F-4

----

Panavision Inc. Consolidated BalanceSheets

(In thousands, except sharedata)

|                                                                                                                                                                                                                                                                |  |             |          |         |  |        |          |         |  |  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|-------------|----------|---------|--|--------|----------|---------|--|--|
|                                                                                                                                                                                                                                                           |  | December31, |
|                                                                                                                                                                                                                                                           |  | 2004        |          | 2003    |
| **LIABILITIESAND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                        |  |
| Currentliabilities:                                                                                                                                                                                                                                            |  |        |     |    |  |   |     |    |
| Accountspayable                                                                                                                                                                                                                                                |  | $           | 8,634    |    |  | $      | 6,554    |    |
| Accruedliabilities                                                                                                                                                                                                                                             |  |        | 28,119   |    |  |   | 26,697   |    |
| Dueto relatedparties                                                                                                                                                                                                                                           |  |        | —  |    |  |   | 1,190    |    |
| Currentmaturities of long-termdebt                                                                                                                                                                                                                             |  |        | 9,557    |    |  |   | 5,885    |    |
| Totalcurrentliabilities                                                                                                                                                                                                                                        |  |        | 46,310   |    |  |   | 40,326   |    |
|                                                                                                                                                                                                                                                           |  |        |     |    |  |   |     |    |
| Long-termdebt                                                                                                                                                                                                                                                  |  |        | 290,740  |    |  |   | 312,388  |    |
| Notes payableto affiliate                                                                                                                                                                                                                                      |  |        | 9,154    |    |  |   | 21,401   |    |
| Deferredtax liabilities,net                                                                                                                                                                                                                                    |  |        | 28,201   |    |  |   | 30,060   |    |
| Otherliabilities                                                                                                                                                                                                                                               |  |        | 3,323    |    |  |   | 2,701    |    |
| Commitmentsandcontingencies                                                                                                                                                                                                                                    |  |        |     |    |  |   |     |    |
| Stockholders'equity:                                                                                                                                                                                                                                           |  |        |     |    |  |   |     |    |
| Series ANon-Cumulative Perpetual Participating Preferred Stock, $0.01 parvalue; 1,500,000 shares authorized; 1,381,690 shares issued andoutstanding at December 31, 2003 (liquidation preference of $1 pershare, or $1,382, plus declared and unpaiddividends) |  |        | —  |    |  |   | 14       |    |
| SeriesC Cumulative Pay-in Kind Preferred Stock, $0.01 par value; 200,000shares authorized; 159,644 shares issued and outstanding at December31, 2003 (liquidation preference of $1,000 per share, or $159,644, plusaccrued and unpaiddividends)                |  |        | —  |    |  |   | 2        |    |
| CommonStock, $0.01 par value; 50,000,000 shares authorized; 39,380,729 and8,769,919 shares issued and outstanding at December 31, 2004 and 2003,respectively                                                                                                   |  |        | 394      |    |  |   | 88       |    |
| Additionalpaid-incapital                                                                                                                                                                                                                                       |  |        | 374,780  |    |  |   | 329,127  |    |
| Revaluationcapital                                                                                                                                                                                                                                             |  |        | 333,199  |    |  |   | 333,199  |    |
| Accumulateddeficit                                                                                                                                                                                                                                             |  |        | (471,950 | )  |  |   | (461,795 | )  |
| Accumulatedother comprehensiveincome                                                                                                                                                                                                                           |  |        | 6,509    |    |  |   | 4,035    |    |
| Totalstockholders'equity                                                                                                                                                                                                                                       |  |        | 242,932  |    |  |   | 204,670  |    |
| Totalliabilities and stockholders'equity                                                                                                                                                                                                                       |  | $           | 620,660  |    |  | $      | 611,546  |    |
|                                                                                                                                                                                                                                                                |

Seeaccompanying notes

F-5

----

PanavisionInc. Consolidated Statements 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 January 1,2002                                                                |  |                       | 1,382   |            |  | $                            | 14      |             |  |                        | – |    |  | $                        | – |                |  |               | 8,770   |                                        |  | $                                             | 88      |   |  | $      | 187,151 |    |  | $      | 333,135             |   |  | $      | (432,960 | )  |  | $      | (12,103 | )  |  | $      | 75,325  |    |
| Comprehensiveloss:                                                                       |  |                       |    |            |  |                         |    |             |  |                        |    |    |  |                     |    |                |  |               |    |                                        |  |                                          |    |   |  |   |    |    |  |   |                |   |  |   |     |    |  |   |    |    |  |   |    |    |
| Netloss                                                                                  |  |                       | – |            |  |                         | – |             |  |                        | – |    |  |                     | – |                |  |               | – |                                        |  |                                          | – |   |  |   | – |    |  |   | –             |   |  |   | (11,079  | )  |  |   | – |    |  |   | (11,079 | )  |
| Foreigncurrency translationadjustment                                                    |  |                       | – |            |  |                         | – |             |  |                        | – |    |  |                     | – |                |  |               | – |                                        |  |                                          | – |   |  |   | – |    |  |   | –             |   |  |   |     |    |  |   | 5,494   |    |  |   | 5,494   |    |
| Totalcomprehensiveloss                                                                   |  |                       | – |            |  |                         | – |             |  |                        | – |    |  |                     | – |                |  |               | – |                                        |  |                                          | – |   |  |   | – |    |  |   | –             |   |  |   | –  |    |  |   | – |    |  |   | (5,585  | )  |
| Accreteddividend on Redeemable Series B PreferredStock                                   |  |                       | – |            |  |                         | – |             |  |                        | – |    |  |                     | – |                |  |               | – |                                        |  |                                          | – |   |  |   | (2,857  | )  |  |   | –             |   |  |   | –  |    |  |   | – |    |  |   | (2,857  | )  |
| Non-cashdistribution to M&F Worldwide in connection With Las Palmaspurchase          |  |                       | – |            |  |                         | – |             |  |                        | – |    |  |                     | – |                |  |               | – |                                        |  |                                          | – |   |  |   | (1,414  | )  |  |   | –             |   |  |   | –  |    |  |   | – |    |  |   | (1,414  | )  |
| Revaluationcapitaladjustment                                                             |  |                       | – |            |  |                         | – |             |  |                        | – |    |  |                     | – |                |  |               | – |                                        |  |                                          | – |   |  |   | – |    |  |   | 64                  |   |  |   | –  |    |  |   | – |    |  |   | 64      |    |
| Contributionof net operating loss carryforwards by M&FWorldwide                      |  |                       | – |            |  |                         | – |             |  |                        | – |    |  |                     | – |                |  |               | – |                                        |  |                                          | – |   |  |   | 6,521   |    |  |   | –             |   |  |   | –  |    |  |   | – |    |  |   | 6,521   |    |
| Other                                                                                    |  |                       | – |            |  |                         | – |             |  |                        | – |    |  |                     | – |                |  |               | – |                                        |  |                                          | – |   |  |   | 75      |    |  |   | –             |   |  |   | –  |    |  |   | – |    |  |   | 75      |    |
| Balanceat 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 Non-Cumulative Perpetual 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 SeriesC                                             |  |                       | (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 interestin 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 |    |
|                                                                                          |

See accompanyingnotes

F-6

----

PanavisionInc.Consolidated Statements of CashFlows

(Inthousands)

|                                                                |  |                       |          |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------------------------|--|-----------------------|----------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                           |  | Yearended December31, |
|                                                           |  | 2004                  |          | 2003    |  | 2002   |
| **Operatingactivities**                                        |  |                  |     |    |  |   |    |    |  |   |    |    |
| Net lossfrom continuingoperations                              |  | $                     | (21,200  | )  |  | $      | (16,523 | )  |  | $      | (8,349  | )  |
| Adjustmentsto derive net cash provided by operatingactivities: |  |                  |     |    |  |   |    |    |  |   |    |    |
| Depreciationandamortization                                    |  |                  | 40,527   |    |  |   | 39,566  |    |  |   | 40,110  |    |
| Gainon dispositions of property andequipment                   |  |                  | (3,236   | )  |  |   | (1,507  | )  |  |   | (1,696  | )  |
| Write-offof deferred financingcosts                            |  |                  | 3,436    |    |  |   | — |    |  |   | — |    |
| Amortizationof deferred financingcosts                         |  |                  | 1,072    |    |  |   | 4,831   |    |  |   | 1,559   |    |
| Dividendsfrom equity methodinvestees                           |  |                  | 1,112    |    |  |   | — |    |  |   | — |    |
| Amortizationof discount on subordinatednotes                   |  |                  | —  |    |  |   | — |    |  |   | 1,480   |    |
| Deferredincome taxbenefit                                      |  |                  | (8,175   | )  |  |   | (10,755 | )  |  |   | (7,369  | )  |
| Changesin operating assets andliabilities:                     |  |                  |     |    |  |   |    |    |  |   |    |    |
| Accountsreceivable                                             |  |                  | (97      | )  |  |   | 547     |    |  |   | (5,126  | )  |
| Inventories                                                    |  |                  | (3,129   | )  |  |   | (825    | )  |  |   | (270    | )  |
| Prepaidexpenses and other currentassets                        |  |                  | (1,865   | )  |  |   | (1,902  | )  |  |   | (1,452  | )  |
| Duefromaffiliate                                               |  |                  | (106     | )  |  |   | 105     |    |  |   | (1,570  | )  |
| Accountspayable                                                |  |                  | 1,757    |    |  |   | (262    | )  |  |   | 204     |    |
| Accruedliabilities                                             |  |                  | 1,146    |    |  |   | 1,255   |    |  |   | 7,621   |    |
| Duetoaffiliate                                                 |  |                  | (801     | )  |  |   | 97      |    |  |   | (1,563  | )  |
| Other,net                                                      |  |                  | (1,758   | )  |  |   | (879    | )  |  |   | (4,846  | )  |
| Netcash provided by continuing operatingactivities             |  |                  | 8,683    |    |  |   | 13,748  |    |  |   | 18,733  |    |
| **Investingactivities**                                        |  |                  |     |    |  |   |    |    |  |   |    |    |
| Capitalexpenditures                                            |  |                  | (38,328  | )  |  |   | (22,269 | )  |  |   | (16,150 | )  |
| Acquisitionofbusinesses                                        |  |                  | (7,782   | )  |  |   | 9       |    |  |   | — |    |
| Netproceeds from sale ofEFILM                                  |  |                  | 25,300   |    |  |   | — |    |  |   | — |    |
| Proceedsfrom collection of notesreceivable                     |  |                  | 3,729    |    |  |   | — |    |  |   | — |    |
| Proceedsfrom dispositions of fixedassets                       |  |                  | 5,010    |    |  |   | 2,377   |    |  |   | 2,896   |    |
| Netcash used in investingactivities                            |  |                  | (12,071  | )  |  |   | (19,883 | )  |  |   | (13,254 | )  |
| **Financingactivities**                                        |  |                  |     |    |  |   |    |    |  |   |    |    |
| Borrowingsunder creditagreement                                |  |                  | 135,600  |    |  |   | — |    |  |   | 32,226  |    |
| Proceedsfrom issuance of SeniorNotes                           |  |                  | 100,000  |    |  |   | — |    |  |   | — |    |
| Borrowingsunder notes payable toaffiliates                     |  |                  | 10,450   |    |  |   | 14,500  |    |  |   | — |    |
| Repaymentunder notes payable toaffiliates                      |  |                  | (4,839   | )  |  |   | (1,500  | )  |  |   | — |    |
| Capitalcontribution                                            |  |                  | 22,730   |    |  |   | — |    |  |   | — |    |
| Repaymentsof long-term debt, including capitalleases           |  |                  | (264,275 | )  |  |   | (23,313 | )  |  |   | (35,816 | )  |
| Deferredfinancingcosts                                         |  |                  | (1,579   | )  |  |   | (4,087  | )  |  |   | (2,228  | )  |
| Saleof note receivable toaffiliate                             |  |                  | 5,000    |    |  |   | — |    |  |   | — |    |
| Proceedsfrom issuance of Series B PreferredStock*              |  |                  | —  |    |  |   | 4,372   |    |  |   | 10,000  |    |
| Proceedsfrom issuance of Series C PreferredStock*              |  |                  | —  |    |  |   | 9,725   |    |  |   | — |    |
| Notespayable to Deluxe Laboratories,Inc                        |  |                  | —  |    |  |   | 580     |    |  |   | — |    |
| Netcash provided by financingactivities                        |  |                  | 3,087    |    |  |   | 277     |    |  |   | 4,182   |    |
| Effectof exchange rate changes oncash                          |  |                  | 124      |    |  |   | 726     |    |  |   | 158     |    |
| Netincrease (decrease) in cash and cashequivalents             |  |                  | (177     | )  |  |   | (5,132  | )  |  |   | 9,819   |    |
| Cashand cash equivalents at beginning ofperiod                 |  |                  | 6,770    |    |  |   | 11,902  |    |  |   | 2,083   |    |
| Cashand cash equivalents at end ofperiod                       |  | $                     | 6,593    |    |  | $      | 6,770   |    |  | $      | 11,902  |    |
|                                                                |

|  |
|--|
|  |  |
|  |

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

See accompanyingnotes

F-7

----

    

|                                                           |  |                       |        |        |  |        |        |        |  |        |        |        |  |  |
|-----------------------------------------------------------|--|-----------------------|--------|--------|--|--------|--------|--------|--|--------|--------|--------|--|--|
|                                                      |  | Yearended December31, |
|                                                      |  | 2004                  |        | 2003   |  | 2002   |
| **Supplementalcash flowinformation**                      |  |                  |   |   |  |   |   |   |  |   |   |   |
| Interestpaid during the period, net of amountscapitalized |  | $                     | 30,574 |   |  | $      | 26,921 |   |  | $      | 23,299 |   |
| Incometaxes paid during theperiod                         |  |                  | 1,868  |   |  |   | 2,360  |   |  |   | 2,597  |   |
|                                                           |

Supplementalnon-cash financing activities

As described in Note 13 of theNotes to Consolidated Financial Statements, in January, 2004 theCompany issued to PX Holding Corporation ("PXHolding") 1,381,690 shares of new Series E Non-CumulativePerpetual Participating Preferred Stock, par value $0.01,("Series E Preferred Stock") in exchange for1,381,690 shares of Series A Non-Cumulative Perpetual ParticipatingPreferred Stock, par value $0.01, ("Series A PreferredStock"), which constituted all of the outstanding Series APreferred Stock.

As described in Note 13 of the Notes toCondensed Consolidated Financial Statements, in January, 2004 theCompany issued to PX Holding 215,274 shares of new Series D CumulativePay-in-Kind Preferred Stock, par value $0.01, ("Series DPreferred Stock") in exchange for, among otherconsideration, 159,644 shares of Series C Cumulative Pay-in-KindPreferred Stock, par value $0.01, ("Series C PreferredStock") held by PX Holding, which constituted all of theoutstanding Series C Preferred Stock. The other consideration includedthe contribution of MacAndrews & Forbes Holdings, Inc.'s,formerly known as Mafco Holdings Inc., one-third interest in the commonstock of PANY Rental Inc. ("PANY Rental") andthe contribution or retirement of various related party notes. Totalbook value, which approximates fair value, of the non-cashconsideration, excluding the Series C Preferred Stock issued, wasapproximately $19.0 million.

In connection with the August, 2004sale of its 80% interest in EFILM, LLC("EFILM"), the Company received, in additionto cash proceeds, a promissory note for $5 million that wassubsequently sold to MacAndrews & Forbes Holdings. In connectionwith a May, 2004 sale of property and equipment, the Company received,in addition to cash proceeds, promissory notes totaling approximately$1.5 million, of which approximately half was collected during2004.

During the year ended December 31, 2004, the Companyacquired rental equipment by entering into capital leases totalingapproximately $9.7 million.

On March 27, 2003, MacAndrews &Forbes Holdings contributed $90.9 million principal amount of the9 5/8% Senior Subordinated DiscountNotes Due 2006 (the "9 5/8%Notes") and $10.0 million in cash to the Company inexchange for 102,220 shares of Series C Cumulative Pay in KindPreferred 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 BPreferred Stock was transferred to the Company. In connection with thecontribution of 9 5/8% Notes by the majorityshareholder, deferred tax assets associated with the9 5/8% Notes of $18.0 million were chargedagainst additional paid-in capital.

For the year ended December31, 2003, the Company recorded an accreted dividend of $1.3 million onthe Series B Preferred Stock.

In 2002, M&F Worldwide Corp.contributed net operating loss carryforwards amounting to $6.5 million(See Note 7 to the Notes to the Consolidated Financial Statements).Such amounts were reduced by $1.6 million in 2003.

In June 2002,the Company issued 49,199 shares of Series B Cumulative Pay in KindPreferred Stock in exchange for $10.0 million in cash and $37.7 millionprincipal amount at maturity of 9 5/8%plus unpaid accrued interest of $1.5 million. For the year endedDecember 31, 2002, an accreted dividend of $2.9 million was recorded onthe Series B Preferred Stock. For the year ended December 31, 2003, theCompany recorded an accreted dividend of $1.3 million on the Series BPreferred Stock.

F-8

----

In July 2002, the Company purchased LasPalmas Productions, Inc. from M&F Worldwide by issuing a $6.7million note payable (see Note 2 to the Notes to Consolidated FinancialStatements).

In 2002 and 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. These adjustments resulted in an increase in goodwill of $7.6million and an increase in deferred tax liabilities of $7.2 million atDecember 31, 2003.

See accompanyingnotes

F-9

----

PanavisionInc. Notes to Consolidated FinancialStatements

(In thousands, except share data)

1. Summary of Significant Accounting Policies

Description of Business and 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 agent network. Inaddition to manufacturing and renting camera systems, the Company alsorents lighting, lighting grip, power distribution, generation andrelated transportation equipment and sells lighting filters and othercolor correction and diffusion filters.

The Company is anindirect majority-owned subsidiary of MacAndrews & Forbes HoldingsInc. ("MacAndrews & Forbes Holdings" or"Parent"), previously known as Mafco HoldingsInc. ("Mafco Holdings"), a corporation whosesole stockholder is Ronald O. Perelman. All of the Company'soperations are conducted through its subsidiaries.

As alsodescribed in Note 2, on April 19, 2001, M&F Worldwide Corp.("M&F Worldwide") purchased from PXHolding Corporation ("PX Holding"), awholly-owned subsidiary of MacAndrews & Forbes Holdings, all7,320,225 shares (the "Purchased Shares") ofthe Company'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 in M&FWorldwide to a majority position.

In connection with the M&FPurchase, 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% was reported using Panavision's historicalbasis.

During 2001, certain stockholders of M&F Worldwidebrought lawsuits against M&F Worldwide and its directorschallenging the M&F Purchase as an alleged breach of fiduciary dutyand sought, among other things, rescission of the M&F Purchasetransaction. One of the stockholders dismissed his lawsuit pursuant toa settlement.

On December 3, 2002, the remaining parties to thelitigation consummated a Stipulation of Settlement (the"M&F Settlement") whereby MacAndrews& Forbes Holdings acquired (1) through PX Holding, the shares ofthe Company's Common Stock that M&F Worldwide had purchasedin April 2001, (2) the shares of the Company's Series ANon-Cumulative Perpetual Participating Preferred Stock, par value $0.01per share (the "Series A Preferred Stock")that M&F Worldwide acquired in December of 2001, (3) the9 5/8% Senior Subordinated Discount Notes due2006 (the "9 5/8%Notes") that a subsidiary of M&F Worldwideacquired in November of 2001, and (4) the note in the amount of $6.7million (the "Las Palmas Note") that theCompany issued to M&F Worldwide on its acquisition of the shares ofLas Palmas Productions, Inc. ("Las Palmas").In addition, all agreements to which M&F Worldwide entered into inconnection with the M&F Purchase and the December 2001 issuance ofthe Series A Preferred Stock were terminated.

Thus, after theconsummation of the M&F Settlement, the Company ceased being asubsidiary of M&F Worldwide. MacAndrews & Forbes Holdings,after giving effect to the M&F Settlement, indirectly controlled85.7% of the voting shares of the Company. The M&FSettlement did not have a significant impact on the recorded values ofthe Company's assets or liabilities since the transaction wasbetween parties under common control.

On May 30, 2003, theCompany purchased an additional  1/3 interest in PANYRental Inc. ("PANY Rental") for a combinedpurchase price of approximately $0.6 million including transactioncosts. This 

F-10

----

PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

purchase increased the Company'sownership interest from a 1/3 interest to a 2/3 interest. As a resultof this increased ownership 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 Holding, the holderof approximately 83.5% of the Company's voting stock,purchased the remaining 1/3 interest in PANY Rental for a purchaseprice of $0.7 million and purchased a promissory note payable by PANYRental with a principal amount plus accrued interest of approximately$0.7 million.

As discussed in Note 13 of the ConsolidatedFinancial Statements, 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 the outstandingshares of PANY Rental. PANY Rental holds an exclusive license to rentthe Company's camera systems in the New York market and a licenseto use the Panavision trademark in connection with the rental of camerasystems and related equipment to customers.

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

Certain amounts in previouslyissued financial statements have been reclassified to conform to the2004 presentation, including, but not limited to, the presentation ofEFILM, LLC ("EFILM") and its holding company,LPPI, LLC, as discontinued operations for all periods presented.

Translation of Foreign Currencies

The functionalcurrency for the Company's foreign subsidiaries is the localcurrency. All assets and liabilities denominated in foreign functionalcurrencies are translated into U.S. dollars at rates of exchange ineffect at the balance sheet date. Statement of operations items aretranslated at the average rate of exchange prevailing during theperiod. 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 operating results.

Cash Equivalents

The Company considers all highlyliquid debt instruments purchased with original maturity dates of threemonths or less and investments in money market funds to be cashequivalents. The carrying amounts reported in the balance sheets forcash and cash equivalents approximate fair value.

Inventories

Inventories are valued at the lower ofcost or market value and are determined principally under the first-in,first-out method. Inventories are reviewed for excess and obsolescencebased upon demand forecasts within a specific time horizon and reservesare established accordingly.

Property, Plant andEquipment

With the exception of rental assets, which wereadjusted in connection with the M&F Purchase, property,plant and equipment are stated at cost. Maintenance and repairsare charged to expense as incurred. Additions, improvements andreplacements that extend asset life are capitalized.

Depreciation is provided on a straight-line basis over the estimateduseful lives of the assets. Leasehold improvements are amortized overthe shorter of the useful life of the related asset or the remaininglease term. Cost and accumulated depreciation applicable to assetsretired or otherwise disposed of are eliminated from the accounts, andany gain or loss on such disposition is reflected in operatingresults.

F-11

----

PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

Depreciation is provided principally overthe following usefullives:

|                          |  |                  |  |  |  |  |
|--------------------------|--|------------------|--|--|--|--|
| Buildingsandimprovements |  | 10–30years |
| Rental assets            |  | 3–20years  |
| Machinery and equipment  |  | 3–10years  |
| Furniture and fixtures   |  | 5–10years  |
|                     |  |             |
|                          |

Depreciationexpense totaled $38.9 million, $37.1 million, and $37.4 million for theyears ended December 31, 2004, 2003, and 2002, respectively.

Goodwill and Intangible Assets

Goodwill andintangible assets deemed to have indefinite lives are not amortized,but are subject to annual impairment tests. Other intangible assets areamortized over their estimated useful lives.

The Companyperformed an impairment test relating to its goodwill and tradename asof December 31, 2004 and December 31, 2003, and found that the fairvalues of its goodwill and its tradename are in excess of carryingvalue.

As of December 31, 2004 and 2003, goodwill was $259.9million and $259.2 million, respectively, net of accumulatedamortization of $9.1 million for both years. Goodwill is principallyrelated to the M&F Purchase (see Note 2).

Patents are beingamortized on a straight-line basis over their estimated useful livesranging from 5 to 12 years. Amortization expense amounted to $0.3million, $0.4 million and $0.4 million for 2004, 2003, and 2002,respectively. Accumulated amortization was $4.5 million and $4.4million at December  31, 2004 and 2003, respectively.

Accounting for Long-Lived Assets

The Companyassesses on an ongoing basis the recoverability of long-lived tangibleand intangible assets based on estimates of future undiscounted cashflows compared to net book value. If the future undiscounted cash flowestimates were less than net book value, net book value would then bereduced to estimated fair value, which generally approximatesdiscounted cash flows. The Company also evaluates the amortizationperiods of assets to determine whether events or circumstances warrantrevised estimates of useful lives.

Income Taxes

Income taxes are accounted for using the liability method inaccordance with Statement of Financial Accounting Standard("SFAS") No. 109, "Accountingfor Income Taxes" (see Note 7). Under this method,deferred tax assets and liabilities are recognized for the expectedfuture tax consequences of temporary differences between the carryingamounts and the tax bases of assets and liabilities. As of December 31,2004, the Company has provided deferred income taxes, includingwithholding taxes, on undistributed earnings from Canada totalingapproximately $4.2 million. All other foreign earnings are permanentlyreinvested.

Financial Instruments

Most of theCompany's customers are in the entertainment industry. TheCompany performs ongoing credit evaluations of its customers andmaintains allowances for potential credit losses. The Company does notgenerally require collateral. Actual losses and allowances have beenwithin management's expectations.

The carrying amounts forcash and cash equivalents, accounts receivable, accounts payable,accrued liabilities and debt approximate fair value.

F-12

----

PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

Revenue Recognition

Rental revenue is recognized over the related equipment rentalperiod. Sales revenue is recognized upon shipment. Returns andallowances, which have not been significant, are provided for in theperiod of sale.

Advertising Costs

For theyears ended December 31, 2004, 2003 and 2002, advertising costsamounted to $2.4 million, $1.9 million, and $1.6 million, respectively,and are included in selling, general and administrative expenses in theaccompanying consolidated statements of operations. Advertising costsare expensed as incurred.

Freight Costs

Forthe years ended December 31, 2004, 2003 and 2002, freight costsamounted to $2.0 million, $1.5 million, and $1.8 million, respectively,and are included in selling, general and administrative expenses in theaccompanying consolidated statements of operations.

Stock-Based Benefits

The Company follows theprovisions of SFAS Statement No. 123, "Accounting forStock-Based Compensation" ("SFAS123"), which permit companies to either expense theestimated fair value of stock options, or to continue to follow theintrinsic value method set forth in Accounting Principles Board OpinionNo. 25, "Accounting for Stock Issued toEmployees" ("APB 25"), butdisclose the pro forma effects on net income (loss) had the fair valueof the options been expensed. Through the year ended December 31, 2004,the Company has elected to continue to apply APB 25 in accounting forits stock option grants.

In accordance with APB 25 and relatedinterpretations, compensation expense for stock options is recognizedin income based on the excess, if any, of the quoted market price ofthe stock at the grant date of the award or other measurement date overthe amount an employee must pay to acquire the stock. Generally, theexercise price for stock options granted to employees equals or exceedsthe fair market value of the Company's common stock at the dateof grant, thereby resulting in no recognition of compensation expenseby the Company. For awards that generate compensation expense asdefined under APB 25, the Company calculates the amount of compensationexpense and recognizes the expense over the vesting period of theaward.

In December 2002, SFAS No. 148, "Accountingfor Stock-Based Compensation-Transition and Disclosure"("SFAS 148"), which amends SFAS 123, wasissued. SFAS 148 provides alternative methods of transition for avoluntary change to the fair value based method of accounting forstock-based employee compensation. In addition, SFAS 148 amends thedisclosure requirements of SFAS 123 to require more prominent and morefrequent disclosures in financial statements about the effects ofstock-based compensation. The Company has complied with the disclosurerequirements of SFAS 148 and has elected not to adopt the fair valuebased method of accounting for stock-based employee compensationprescribed by SFAS 148. As described below in New AccountingPronouncements the Company will be required to adopt SFAS 123 (R)in the third quarter of 2005.

Investments

Investments of approximately $0 and $5.0 million at December 31,2004 and 2003, respectively, accounted for under the equity method, areincluded in other assets in the accompanying consolidated balancesheets. The Company's share of earnings (losses) of its equityinvestees of approximately $(72,000), $137,000, and ($83,000) for theyears ended December 31, 2004, 2003, and 2002, respectively, isincluded in other, net in the accompanying consolidated statements ofoperations.

F-13

----

PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

New 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"). SFAS151 amends the existing guidance to clarify the accounting for abnormalamounts of idle facility expense, freight, handling costs and spoilage.Whereas existing guidance stated that under some circumstances theamount of these items may be so abnormal as to warrant treatment as acurrent period expense, SFAS 151 requires treatment as current periodexpense regardless 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.The Company believes that implementation of SFAS 151 will not have amaterial impact on its consolidated financial position, results ofoperations or cash flows.

In December 2004, the FASB issued SFASNo. 153, "Exchanges of Nonmonetary Assets — anamendment of APB No. 29" ("SFAS153"). The existing guidance is 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, the Company cannot ascertain at this timewhether implementation of SFAS 153 will have any impact on itsconsolidated financial position, results of operations or cashflows.

In December 2004, the FASB issued revised SFASNo.  123R, "Share-Based Payment."SFAS  No.  123R sets accounting requirements for"share-based" compensation to employees andrequires companies to recognize in the income statement the grant-datefair value of stock options and other equity-based compensation.SFAS  No.  123R is effective in interim or annual periodsbeginning after June  15, 2005. The Company will be required toadopt SFAS  No.  123R in its third quarter of fiscal 2005and 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 is currently evaluating theimpact of the adoption of SFAS  123R on its financial positionand results of operations.

Use of Estimates andAssumptions

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,"Accounting for Derivative Instruments and HedgingActivities" ("SFAS 133"), asamended by SFAS 137, requires the Company to recognize all derivativesas either assets or liabilities and measure those instruments at fairvalue. It further provides criteria for derivative instruments to bedesignated as fair value, cash flow and foreign currency hedges andestablishes respective accounting standards for reporting changes inthe fair value of the derivative instruments. All hedging instrumentsare to be adjusted to fair value in the balance sheet and theoffsetting gains or losses are recognized as adjustments to net loss orother comprehensive loss, as appropriate. The Company did not hold anyderivative instruments at December 31, 2004 and 2003, and did notrecognize any gains or losses on derivative instruments for the yearsended December 31, 2004, 2003 and 2002.

2.    Transactionswith M&F Worldwide Corp.

On April 19, 2001, M&FWorldwide purchased from PX Holding all 7,320,225 shares (the"Purchased Shares") of the Company'sCommon Stock held by PX Holding (the "M&FPurchase"). The Purchased 

F-14

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

Shares constituted approximately 83.5%of the Company's then outstanding Common Stock. The aggregateconsideration for the Purchased Shares consisted of (a) 1,500,000shares of M&F Worldwide common stock; (b) 6,182,153 shares ofM&F Worldwide preferred stock; and (c) $80.0 million in cash. As aresult of the purchase, MacAndrews & Forbes Holdings increased itsindirect interest in M&F Worldwide to a majority position.

The Company, PX Holding and M&F Worldwide entered into a letteragreement (the "Registration Rights Agreement TransferLetter"), dated as of April 19, 2001, which confirmedthat, upon acquisition of the Purchased Shares, M&F Worldwide orits designated affiliate, PVI Acquisition Corp., became a"Holder" under the Registration RightsAgreement dated as of June 5, 1998, between the Company and PX Holding(the "Registration Rights Agreement"), andthat all Purchased Shares became "RegistrableSecurities" under such agreement. The Registration RightsAgreement Transfer Letter was terminated on December 3, 2002, inconnection with the M&F Settlement.

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 (inthousands):

|                             |  |                    |         |         |  |  |
|-----------------------------|--|--------------------|---------|---------|--|--|
|                        |  | 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 deferred taxliabilities of $7.2 million at December 31, 2003.

At the closingof the M&F Purchase, Ronald O. Perelman, MacAndrews & ForbesHoldings' sole shareholder, delivered a letter to M&FWorldwide in which Mr. Perelman agreed that, if M&F Worldwidedetermined in its good faith reasonable judgment that Panavision wereunable to make required payments of principal or interest under itsPrior Credit Agreement or its 9 5/8% Notes, heor corporations under his control would provide such financial supportto M&F Worldwide as may be required by Panavision in connectionwith such payments of principal and interest. Pursuant to the M&FSettlement, this letter agreement was terminated on December 3,2002.

In satisfaction of the obligation of M&F Worldwideunder another agreement entered into contemporaneously with the closingof the M&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 of December21, 2001, pursuant to which M&F Worldwide purchased from PX Holding$22.0 million principal amount of 9 5/8% Notesfor an aggregate purchase price of $8.14 million, and M&F Worldwidedelivered to the Company an aggregate of $24.5 million principal amountof 9 5/8% Notes in exchange for 1,381,690 sharesof Series A Preferred Stock of the Company. The Series A PreferredStock was 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 

F-15

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

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 aletter agreement (the "Registration Rights AgreementAmendment Letter"), 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."

During 2001,certain stockholders of M&F Worldwide brought lawsuits againstM&F Worldwide and its directors challenging the M&F Purchase asan alleged breach of fiduciary duty and sought, among other things,rescission of the M&F Purchase transaction. One of the stockholdersdismissed his lawsuit pursuant to a settlement. On December 3, 2002,the remaining parties to the litigation consummated a Stipulation ofSettlement (the "M&F Settlement") wherebyMacAndrews & Forbes Holdings acquired, through PX Holding, (1) theshares of the Company's Common Stock that M&F Worldwide hadpurchased in April 2001, (2) 1,381,690 shares of the Company'sSeries A Preferred Stock that M&F Worldwide acquired in December of2001, (3) $11.4 million principal amount of9 5/8% Notes that a subsidiary of M&FWorldwide acquired in November of 2001, and (4) the Las Palmas Note inthe amount of $6.7 million that the Company issued to M&F Worldwideon its acquisition of the shares of Las Palmas (see Note 14 of theNotes to Consolidated Financial Statements). In addition, allagreements to which M&F Worldwide entered into in connection withthe M&F Purchase and the December 2001 issuance of the Series APreferred Stock were terminated.

Thus, after the consummation ofthe M&F Settlement, the Company ceased being a subsidiary ofM&F Worldwide. The M&F Settlement did not have a significantimpact on the recorded values of the Company's assets orliabilities since the transaction was between parties under commoncontrol.

On November 16, 2004, the Company issued to PX Holding30,610,810 shares of common stock, par value $.01 per share("Common Stock"), in exchange for 215,274shares of Series D Cumulative Pay-In-Kind Preferred Stock, par value$.01 per share ("Series D Preferred Stock"),and 1,381,690 shares of Series E Non-Cumulative Perpetual ParticipatingPreferred Stock, par value $.01 per share ("Series EPreferred Stock"), such shares representing alloutstanding 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.

3.    Discontinued Operations

In August 2004,the Company disposed of its 80% interest in EFILM. Accordingly,both EFILM and its holding company, LPPI, LLC, are presented asdiscontinued operations in the consolidated financial statements andthe accompanying notes.

F-16

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

Revenue and income (loss) before incometaxes from discontinued operations for the years ended December 31,2004, 2003 and 2002 were as follows (inthousands):

|                                 |  |                       |        |        |  |        |        |         |  |        |        |         |  |  |
|---------------------------------|--|-----------------------|--------|--------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                            |  | Yearended December31, |
|                            |  | 2004                  |        | 2003   |  | 2002   |
| Revenue                         |  | $                     | 15,488 |   |  | $      | 16,817 |    |  | $      | 6,903  |    |
| Income(loss) before incometaxes |  |                  | 1,177  |   |  |   | (1,954 | )  |  |   | (4,411 | )  |
|                                 |

4.    OtherIncome, net

The components of Other income, net for the yearsended December 31, 2004, 2004 and 2002 were as follows (inthousands):

|                                           |  |                       |       |         |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------|--|-----------------------|-------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                      |  | Yearended December31, |
|                                      |  | 2004                  |       | 2003    |  | 2002   |
| Netgain on sales of property andequipment |  | $                     | 2,489 |    |  | $      | 1,027   |    |  | $      | 1,396   |    |
| Minorityinterestincome                    |  |                  | 18    |    |  |   | 320     |    |  |   | 1       |    |
| Earnings(loss) of equityaffiliates        |  |                  | (72   | )  |  |   | 137     |    |  |   | 191     |    |
| Insurancesettlements                      |  |                  | 1,083 |    |  |   | 763     |    |  |   | 37      |    |
| Feesfrom relatedparty                     |  |                  | 420   |    |  |   | — |    |  |   | — |    |
| Otherexpense                              |  |                  | (212  | )  |  |   | (383    | )  |  |   | (162    | )  |
| Totalother income,net                     |  | $                     | 3,726 |    |  | $      | 1,864   |    |  | $      | 1,463   |    |
|                                           |

5.    ComprehensiveLoss

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

|                                       |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                  |  | Yearended December31, |
|                                  |  | 2004                  |         | 2003    |  | 2002   |
| Netloss                               |  | $                     | (10,155 | )  |  | $      | (17,756 | )  |  | $      | (11,079 | )  |
| Foreigncurrency translationadjustment |  |                  | 2,474   |    |  |   | 10,644  |    |  |   | 5,494   |    |
| Totalcomprehensive loss               |  | $                     | (7,681  | )  |  | $      | (7,112  | )  |  | $      | (5,585  | )  |
|                                       |

6.    Earnings PerShare

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.

F-17

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

The following table sets forth thecomputation for basic and diluted earnings per share (in thousands,except per sharedata):

|                                                                         |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                    |  | Yearended December31, |
|                                                                    |  | 2004                  |         | 2003    |  | 2002   |
| Numerators:                                                             |  |
| Netloss from continuingoperations                                       |  | $                     | (21,200 | )  |  | $      | (16,523 | )  |  | $      | (8,349  | )  |
| Accreteddividends on Redeemable Series B PreferredStock                 |  |                  | — |    |  |   | (1,319  | )  |  |   | (2,857  | )  |
| SeriesC Preferred Stock accumulateddividend                             |  |                  | (765    | )  |  |   | (12,466 | )  |  |   | — |    |
| SeriesD Preferred Stock accumulateddividend                             |  |                  | (18,559 | )  |  |   | — |    |  |   | — |    |
| Netloss from continuing operations attributable to commonstockholders   |  |                  | (40,524 | )  |  |   | (30,308 | )  |  |   | (11,206 | )  |
| Netincome (loss) from discontinuedoperations                            |  |                  | 11,045  |    |  |   | (1,233  | )  |  |   | (2,730  | )  |
| Netincome (loss) attributable to commonstockholders                     |  | $                     | (29,479 | )  |  | $      | (31,541 | )  |  | $      | (13,936 | )  |
|                                                                    |  |
| Denominator:                                                            |  |
| Denominatorfor basic loss per share-weighted averageshares              |  |                  | 12,617  |    |  |   | 8,770   |    |  |   | 8,770   |    |
| Effectof dilutive securities – stock options andwarrants          |  |                  | — |    |  |   | — |    |  |   | — |    |
| Denominatorfor diluted loss per share - adjusted weighted averageshares |  |                  | 12,617  |    |  |   | 8,770   |    |  |   | 8,770   |    |
| Income(loss) per share, basic and diluted:                              |  |
| Continuingoperations                                                    |  | $                     | (3.21   | )  |  | $      | (3.46   | )  |  | $      | (1.28   | )  |
| Discontinuedoperations                                                  |  |                  | 0.87    |    |  |   | (0.14   | )  |  |   | (0.31   | )  |
| Income(loss) per share, basic anddiluted                                |  | $                     | (2.34   | )  |  | $      | (3.60   | )  |  | $      | (1.59   | )  |
|                                                                    |  |
|                                                                         |

Outstanding stockoptions to purchase 614,000 shares, 642,000 shares and 992,000 sharesof common stock at December 31, 2004, 2003 and 2002, respectively, wereexcluded from the calculation of diluted loss per share as their effectwould have been antidilutive. Warrants outstanding at December 31,2004, 2003 and 2002 to purchase 714,300 shares of common stock wereexcluded from the calculation of diluted loss per share as their effectwould have been antidilutive.

7.    Income Taxes

Under applicable Internal Revenue Service regulations, the Companymay not join in filing a consolidated federal income tax return witheither MacAndrews & Forbes Holdings or the Company'ssubsidiaries until May 2006 without consent from the Internal RevenueService. Accordingly, since the effective date of the M&FSettlement of December 3, 2002, the Company has filed separate federalincome tax returns for the Company and each of its incorporatedsubsidiaries.

For the period from April 19, 2001 throughDecember 31, 2001 and for the period from January 1, 2002 throughDecember 3, 2002, the closing date of the M&F Settlement, theCompany, for federal income tax purposes, has been included in theaffiliated group of which M&F Worldwide is the common parent, andthe Company's federal taxable income is included in suchgroup's consolidated tax return filed by M&F Worldwide. TheCompany was also included in certain state and local tax returns ofM&F Worldwide or its subsidiaries. As of April 19, 2001, theCompany and M&F Worldwide entered into a tax sharing agreement (the"M&F Worldwide Tax Sharing Agreement"),pursuant to which M&F Worldwide 

F-18

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

agreed to indemnify the Company againstfederal, state or local income tax liabilities of the consolidated orcombined group of which M&F Worldwide (or a subsidiary of M&FWorldwide other than the Company or its subsidiaries) is the commonparent for taxable periods beginning after April 19, 2001 during whichthe Company or a subsidiary of the Company was a member of such group.Pursuant to the M&F Worldwide Tax Sharing Agreement, for alltaxable periods beginning on or after April 19, 2001 and endingDecember 3, 2002, the Company was obligated to pay to M&F Worldwideamounts equal to the taxes that the Company would otherwise have to payif it were to file separate federal, state or local income tax returns(including any amounts determined to be due as a result of aredetermination arising from an audit or otherwise of the consolidatedor combined tax liability relating to any such period which isattributable to the Company), except that the Company was not entitledto carry back any losses to taxable periods ending prior to April 19,2001. No payments were required under the M&F Worldwide Tax SharingAgreement as the Company had sufficient net operating losscarryforwards to offset its taxable income. The M&F Worldwide TaxSharing Agreement will continue in effect after December 3, 2002 onlyas to matters such as audit adjustments and indemnities.

For theperiod from February 1, 1999 through April 19, 2001, the Company, forfederal income tax purposes, had been included in the affiliated groupof which MacAndrews & Forbes Holdings was the common parent, andfor such period the Company's federal taxable income and loss hadbeen included in such group's consolidated tax return filed byMacAndrews & Forbes Holdings. As of February 1, 1999, the Companyand certain of its subsidiaries and MacAndrews & Forbes Holdings,formerly known as Mafco Holdings, entered into a tax sharing agreement(the "Mafco Holdings Tax Sharing Agreement")containing terms and conditions substantially the same as those in theM&F Worldwide Tax Sharing Agreement. The Mafco Holdings Tax SharingAgreement governed tax matters between the Company and MacAndrews &Forbes Holdings for the period from February 1, 1999 through April 19,2001 and continues in effect as to post MacAndrews & ForbesHoldings consolidation matters such as audit adjustments andindemnities.

Since the M&F Purchase constituted adeconsolidation event under the Mafco Tax Sharing Agreement, federaland state net operating loss carryforwards of approximately $31.8million and $17.3 million, respectively, are no longer available foruse by the Company.

Although the Company had taxable income on aconsolidated basis for the tax years ending December 3, 2002 andDecember 31, 2001, current operating losses and net operating losscarryforwards of M&F Worldwide were used to offset this incomebefore the Company's net operating loss carryforwards wereutilized due to the ordering rules set forth in the Internal RevenueCode. Consequently, upon leaving the M&F Worldwide consolidatedgroup on December 3, 2002, the Company took approximately $60.1 millionof net operating loss carryforwards, of which $15.1 million relates tonet operating loss carryforwards that otherwise would have been usedprior to December 3, 2002 but for the ordering rules. The Company hasaccounted for these additional net operating loss carryovers as acontribution to capital by M&F Worldwide.

Subsequent toDecember 31, 2001, new tax legislation was enacted that will allow forutilization of alternative minimum tax net operating losses to fullyoffset alternative minimum taxable income for 2001 and 2002. The impactrelating to this new legislation, which was recorded in the firstquarter of 2002, primarily resulted in accelerating utilization ofalternative minimum tax net operating losses.

F-19

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

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

|                             |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|-----------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                        |  | Yearended December31, |
|                        |  | 2004                  |         | 2003    |  | 2002   |
| Current(provision)benefit:  |  |
| Federal                     |  | $                     | — |    |  | $      | — |    |  | $      | — |    |
| State                       |  |                  | (48     | )  |  |   | — |    |  |   | (299    | )  |
| Foreign                     |  |                  | (1,491  | )  |  |   | (1,447  | )  |  |   | (3,019  | )  |
| Totalcurrentprovision       |  |                  | (1,539  | )  |  |   | (1,447  | )  |  |   | (3,318  | )  |
| Deferred(provision)benefit: |  |
| Federal                     |  |                  | 8,117   |    |  |   | 6,825   |    |  |   | 4,528   |    |
| State                       |  |                  | 885     |    |  |   | 315     |    |  |   | 1,254   |    |
| Foreign                     |  |                  | — |    |  |   | — |    |  |   | — |    |
| Totaldeferredbenefit        |  |                  | 9,002   |    |  |   | 7,140   |    |  |   | 5,782   |    |
| Totaltaxbenefit             |  | $                     | 7,463   |    |  | $      | 5,693   |    |  | $      | 2,464   |    |
|                             |

Forfinancial statement purposes, loss before income taxes includes thefollowing components (inthousands):

|                                  |  |                       |         |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------|--|-----------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                             |  | Yearended December31, |
|                             |  | 2004                  |         | 2003    |  | 2002   |
| Income(loss) before incometaxes: |  |
| Domestic                         |  | $                     | (24,974 | )  |  | $      | (19,469 | )  |  | $      | (12,121 | )  |
| Foreign                          |  |                  | (3,689  | )  |  |   | (2,747  | )  |  |   | 1,308   |    |
|                             |  | $                     | (28,663 | )  |  | $      | (22,216 | )  |  | $      | (10,813 | )  |
|                                  |

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, |
|                                                                                          |  | 2004                  |         | 2003    |  | 2002   |
| Taxat federal statutoryrate                                                                   |  | $                     | 10,032  |    |  | $      | 7,776   |    |  | $      | 3,785  |    |
| Stateincome tax benefit                                                                       |  |                  | 837     |    |  |   | 315     |    |  |   | 955    |    |
| Decrease/(increase)in valuationallowance                                                      |  |                  | (781    | )  |  |   | (474    | )  |  |   | 441    |    |
| Changein taxcredits                                                                           |  |                  | — |    |  |   | 449     |    |  |   | (4,343 | )  |
| Recognitionof foreign net losscarryforwards                                                   |  |                  | — |    |  |   | — |    |  |   | 6,159  |    |
| Non-deductibleitems                                                                           |  |                  | (79     | )  |  |   | (77     | )  |  |   | (53    | )  |
| Foreignincome taxed at varying rates including foreign losses for which nobenefit wasreceived |  |                  | (2,223  | )  |  |   | (3,038  | )  |  |   | (2,561 | )  |
| Other,net                                                                                     |  |                  | (323    | )  |  |   | 742     |    |  |   | (1,919 | )  |
|                                                                                          |  | $                     | 7,463   |    |  | $      | 5,693   |    |  | $      | 2,464  |    |
|                                                                                               |

F-20

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

Significant components of theCompany's deferred tax assets and liabilities as ofDecember  31, 2004 and 2003 are as follows (inthousands):

|                                                                   |  |             |         |         |  |        |         |         |  |  |
|-------------------------------------------------------------------|--|-------------|---------|---------|--|--------|---------|---------|--|--|
|                                                              |  | December31, |
|                                                              |  | 2004        |         | 2003    |
| Deferredtax assets:                                               |  |
| Debt original issuediscount                                       |  | $           | 230     |    |  | $      | 403     |    |
| Domesticnet operating losscarryforwards                           |  |        | 29,703  |    |  |   | 26,054  |    |
| Foreignnet operating losscarryforwards                            |  |        | 7,133   |    |  |   | 6,573   |    |
| Taxcredit carryforwards (primarily alternativeminimum taxcredits) |  |        | 10,355  |    |  |   | 10,973  |    |
| Expenseaccruals                                                   |  |        | 669     |    |  |   | 1,440   |    |
| Stateincome taxes andother                                        |  |        | 3,982   |    |  |   | 3,845   |    |
| Totaldeferred taxassets                                           |  |        | 52,072  |    |  |   | 49,288  |    |
| Valuationallowance                                                |  |        | (8,114  | )  |  |   | (7,333  | )  |
| Netdeferred taxassets                                             |  |        | 43,958  |    |  |   | 41,955  |    |
| Deferredtax liabilities:                                          |  |
| Fixedassets                                                       |  |        | (41,543 | )  |  |   | (41,083 | )  |
| Unremittedforeignearnings                                         |  |        | (2,415  | )  |  |   | (2,731  | )  |
| Intangibles                                                       |  |        | (28,201 | )  |  |   | (28,201 | )  |
| Totaldeferred taxliabilities                                      |  |        | (72,159 | )  |  |   | (72,015 | )  |
| Netdeferred taxliabilities                                        |  | $           | (28,201 | )  |  |   | (30,060 | )  |
| BalanceSheet Classification:                                      |  |
| Non-currentdeferred taxliability                                  |  | $           | (28,201 | )  |  | $      | (30,060 | )  |
|                                                                   |

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 and taxcredits in the future, the Company has provided a partial valuationallowance against its net domestic deferred tax assets.

Afterthe effect of the deconsolidation, as of December 31, 2004, the Companyhas federal and state net operating loss carryforwards of approximately$82.1 million and $11.4 million, respectively. The net operating losscarryforwards will expire at various dates beginning in 2006 through2024, if not utilized.

At December 31, 2004, the Company alsohad federal alternative minimum tax credit carryforwards ofapproximately $5.6 million, which may be used indefinitely, andresearch and development credit carryforwards of $0.3 million, whichwill expire from 2006 through 2021, if not utilized.

At December31, 2004, the Company also had California alternative minimum taxcredit carryforwards and California research and development creditcarryforwards totaling approximately $2.0 million, both of which may becarried forward indefinitely.

At December 31, 2004, the Companyhad U.K. net operating loss carryforwards totaling approximately $35.6million that may be carried forward indefinitely. A full valuationallowance has been provided against this asset.

8.    SegmentInformation

The Company has one reportable segment, the rentalof camera systems, lighting systems and other equipment, and the salesof related products. These activities are conducted in a number ofgeographic locations though the Company's owned-and-operatedfacilities and its network of independent distributors.

F-21

----

PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

The following table presents revenue andother financial information for the reportable segment by geographicregion (inthousands):

|                               |  |                  |         |        |  |                |        |              |  |             |        |        |  |   |        |        |  |   |        |        |  |   |         |        |  |  |
|-------------------------------|--|------------------|---------|--------|--|----------------|--------|--------------|--|-------------|--------|--------|--|---|--------|--------|--|---|--------|--------|--|---|---------|--------|--|--|
|                          |  | December31, 2004 |
|                          |  | UnitedStates     |         | Canada |  | United Kingdom |        | RestofEurope |  | AsiaPacific |        | Total  |
| Revenuefrom externalcustomers |  | $                | 82,262  |   |  | $              | 13,319 |         |  | $           | 63,641 |   |  | $ | 20,581 |   |  | $ | 27,649 |   |  | $ | 207,452 |   |
| Long-livedassets*             |  | $                | 183,657 |   |  | $              | 3,755  |         |  | $           | 27,294 |   |  | $ | 12,763 |   |  | $ | 9,675  |   |  | $ | 237,144 |   |
|                               |

|                               |  |                  |         |        |  |                |        |              |  |             |        |        |  |   |        |        |  |   |        |        |  |   |         |        |  |  |
|-------------------------------|--|------------------|---------|--------|--|----------------|--------|--------------|--|-------------|--------|--------|--|---|--------|--------|--|---|--------|--------|--|---|---------|--------|--|--|
|                          |  | December31, 2003 |
|                          |  | UnitedStates     |         | Canada |  | United Kingdom |        | RestofEurope |  | AsiaPacific |        | Total  |
| Revenuefrom externalcustomers |  | $                | 77,669  |   |  | $              | 16,026 |         |  | $           | 58,584 |   |  | $ | 16,904 |   |  | $ | 21,957 |   |  | $ | 191,140 |   |
| Long-livedassets*             |  | $                | 182,933 |   |  | $              | 4,685  |         |  | $           | 20,108 |   |  | $ | 5,858  |   |  | $ | 9,574  |   |  | $ | 223,158 |   |
|                               |

|                               |  |                  |        |        |  |                |        |              |  |             |        |        |  |   |        |        |  |   |        |        |  |   |         |        |  |  |
|-------------------------------|--|------------------|--------|--------|--|----------------|--------|--------------|--|-------------|--------|--------|--|---|--------|--------|--|---|--------|--------|--|---|---------|--------|--|--|
|                          |  | December31, 2002 |        |
|                          |  | UnitedStates     |        | Canada |  | United Kingdom |        | RestofEurope |  | AsiaPacific |        | Total  |
| Revenuefrom externalcustomers |  | $                | 78,206 |   |  | $              | 16,032 |         |  | $           | 51,196 |   |  | $ | 16,228 |   |  | $ | 24,617 |   |  | $ | 186,279 |   |
|                               |

|  |                              |
|--|------------------------------|
|  | *Excluding intangible assets |

No one customer accounted formore than 10% of the Company's consolidated net revenuesfor the years ended December 31, 2004, 2003, and 2002.

9.    Inventories

Inventories consist of the following(inthousands):

|                          |  |             |        |        |  |        |        |        |  |  |  |  |  |  |
|--------------------------|--|-------------|--------|--------|--|--------|--------|--------|--|--|--|--|--|--|
|                     |  | December31, |        |
|                     |  | 2004        |        | 2003   |  |
| Finishedgoods            |  | $           | 2,476  |   |  | $      | 2,464  |   |  |
| Work-in-process          |  |        | 315    |   |  |   | 302    |   |  |
| Componentparts           |  |        | 4,664  |   |  |   | 2,048  |   |  |
| Spare parts andsupplies  |  |        | 1,409  |   |  |   | 1,539  |   |  |
| Goods purchasedforresale |  |        | 6,062  |   |  |   | 5,441  |   |  |
|                     |  | $           | 14,926 |   |  | $      | 11,794 |   |  |
|                          |

10.    Property,Plant and Equipment

Property, plant and equipment consist ofthe following (inthousands):

|                                               |  |             |         |        |  |        |         |        |  |  |  |  |  |  |
|-----------------------------------------------|--|-------------|---------|--------|--|--------|---------|--------|--|--|--|--|--|--|
|                                          |  | December31, |         |
|                                          |  | 2004        |         | 2003   |  |
| Buildingsandimprovements                      |  | $           | 15,457  |   |  | $      | 13,947  |   |  |
| Rentalassets                                  |  |        | 359,972 |   |  |   | 305,812 |   |  |
| Machinery andequipment                        |  |        | 9,468   |   |  |   | 7,367   |   |  |
| Furniture andfixtures                         |  |        | 4,835   |   |  |   | 5,151   |   |  |
| Other                                         |  |        | 1,739   |   |  |   | 649     |   |  |
|                                          |  |        | 391,471 |   |  |   | 332,296 |   |  |
| Less:accumulated depreciation andamortization |  |        | 160,676 |   |  |   | 122,675 |   |  |
|                                          |  | $           | 230,795 |   |  | $      | 210,251 |   |  |
|                                               |

F-22

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

During 2004 and 2003, the Companyrecorded approximately $150,000 and $77,000 of capitalized interestcosts, respectively.

11.    Accrued Liabilities

Accrued liabilities consist of the following (inthousands):

|                              |  |             |        |        |  |        |        |        |  |  |  |  |  |  |
|------------------------------|--|-------------|--------|--------|--|--------|--------|--------|--|--|--|--|--|--|
|                         |  | December31, |        |
|                         |  | 2004        |        | 2003   |  |
| Interestpayable              |  | $           | 4,792  |   |  | $      | 5,029  |   |  |
| Professionalfees             |  |        | 1,723  |   |  |   | 2,792  |   |  |
| Taxes other thanincome taxes |  |        | 3,599  |   |  |   | 2,688  |   |  |
| Payroll andrelatedcosts      |  |        | 8,896  |   |  |   | 6,186  |   |  |
| Rent                         |  |        | 3,271  |   |  |   | 3,134  |   |  |
| Insurance                    |  |        | 1,058  |   |  |   | 1,125  |   |  |
| Severance,current portion    |  |        | 726    |   |  |   | 1,717  |   |  |
| Otherliabilities             |  |        | 4,054  |   |  |   | 4,026  |   |  |
|                         |  | $           | 28,119 |   |  | $      | 26,697 |   |  |
|                              |

12.    Long-TermDebt

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

|                                                  |  |             |         |        |  |        |         |        |  |  |
|--------------------------------------------------|--|-------------|---------|--------|--|--------|---------|--------|--|--|
|                                             |  | December31, |
|                                             |  | 2004        |         | 2003   |
| Amendedand Restated CreditAgreement              |  | $           | 125,694 |   |  | $      | — |   |
| 12.50%Senior Notes Due2009                       |  |        | 100,597 |   |  |   | — |   |
| PriorCredit Agreement:                           |  |
| RevolvingFacility                                |  |        | — |   |  |   | 99,200  |   |
| TermFacility                                     |  |        | — |   |  |   | 151,792 |   |
| 9 5/8%Senior Subordinated Discount Notes Due2006 |  |        | 65,084  |   |  |   | 65,353  |   |
| Notes payable toaffiliate                        |  |        | 9,154   |   |  |   | 21,401  |   |
| Other(including capitalleases)                   |  |        | 8,922   |   |  |   | 1,928   |   |
|                                             |  |        | 309,451 |   |  |   | 339,674 |   |
| Less:Currentmaturities                           |  |        | 9,557   |   |  |   | 5,885   |   |
| TotalLong-TermDebt                               |  | $           | 299,894 |   |  | $      | 333,789 |   |
|                                                  |

Asof December 31, 2004, the Company had a line of credit totalingapproximately $20.0 million, under which $ 9.2 million was drawn.

The 9 5/8% Notes were issued at a discountrepresenting a yield to maturity of 9 5/8%.There were no periodic or interest payments through February 1, 2002.Thereafter, they bear interest at a rate of9 5/8% per annum, payable semi-annually onFebruary 1 and August 1 of each year, commencing August 1, 2002.

On August 13, 2003, MacAndrews & Forbes Inc., formerlyMacAndrews & Forbes Holdings Inc., agreed to amend an existing lineof credit provided to the Company to increase the amount available forborrowing from $4.0 million to $10.0 million and extend the maturitydate to August 31, 2006 (as amended, the "MacAndrewsLine"). In connection with an amendment to theCompany's Prior Credit Agreement (as defined below), on November12, 2003, MacAndrews & Forbes Inc. agreed to provide a secondrevolving line of credit (the "Second MacAndrewsLine") in the amount of $10.0 million at a rate equal to50 basis points above the rate provided for in the revolving facilitypursuant to the Prior Credit 

F-23

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

Agreement and a maturity of April 15, 2004.As described below, in connection with the January 2004 Refinancing (asdefined below), (i) amounts outstanding under the MacAndrews Line wereretired in exchange for shares of new Series D Cumulative Pay-in-KindPreferred Stock, par value $0.01 per share (the "Series DPreferred Stock") and (ii) MacAndrews & Forbes Inc.increased the amount of the Second MacAndrews Line to $20.0 million andextended the maturity to April 16, 2009. As of December  31,2004, the Company had availability under the Second MacAndrews line ofapproximately $10.8 million.

On June 4, 1998, the Companyentered into a Credit Agreement with a syndicate of lenders (assubsequently amended on September 30, 1998, June 30, 1999, March 15,2002, June 14, 2002, September 30, 2002, March 25, 2003 and November12, 2003, the "Prior Credit Agreement"). TheCompany's obligations under the Prior Credit Agreement weresecured by substantially all of the Company's assets. The PriorCredit Agreement comprised two facilities, the Term Facility and theRevolving Facility. As of December 31, 2003, amounts outstanding underthe Prior Credit Agreement were $151.8 million and $99.2 million forthe Term Facility and Revolving Facility, respectively. As describedbelow, the Prior Credit Agreement was replaced with the Amended andRestated Credit Agreement pursuant to the January 2004 Refinancing.

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

Also as part of the January2004 Refinancing, the Company issued to PX Holding 215,274 shares ofnew Series D Preferred Stock in exchange for (a) 159,644 shares ofSeries C Cumulative Pay-in-kind Preferred Stock, par value $0.01 pershare (the "Series C Preferred Stock"), ofthe Company, held by PX Holding (together with approximately $13.2million of accumulated dividends thereon); (b) $23.0 million in cash;(c) the retirement of all principal and interest (an aggregate of$10,180,930) owed as of January 16, 2004 under the MacAndrews Line; (d)33.3 shares of common stock of PANY Rental, Inc., having a fair marketvalue of $0.7 million (such that, as of January 16, 2004, the Companyowned 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 the Company to M & FWorldwide and subsequently acquired by MacAndrews & ForbesHoldings. The Series D Preferred Stock is non-voting, has a liquidationpreference of $1,000 per share plus accrued and unpaid dividends, andentitles the holder to cumulative dividends at a rate of 10% perannum regardless of whether declared or earned. Additionally, theSeries D Preferred Stock is subject to redemption in certaincircumstances upon a change of control. The Company also issued to PXHolding 1,381,690 shares of new Series E Non-Cumulative PerpetualParticipating Preferred Stock, par value $0.01 per share, (the"Series E Preferred Stock") in exchange for1,381,690 shares of Series A Non-Cumulative Perpetual ParticipatingPreferred Stock, par value $0.01 per share (the "Series APreferred Stock"). The Series E Preferred Stock isentitled to one vote per share, voting together with the Common Stockas a single class, has a liquidation preference of $1.00 per share plusaccrued and unpaid dividends, and provides for non-cumulative cashdividends at an annual rate of $0.05 per share if declared by theCompany. As a result of the January 2004 Refinancing transactions, allof the outstanding shares of Series A and Series C Preferred Stock were

F-24

----

PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

transferred to the Company. In addition,MacAndrews & Forbes Inc, increased the amount of the SecondMacAndrews Line to $20.0 million and extended the maturity to April 16,2009.

The Company used proceeds from the sale of the SeniorNotes and the issuance of Series D Preferred Stock to reduce theindebtedness under the Prior Credit Agreement by $115.4 million, andreplaced the Prior Credit Agreement with an Amended and Restated CreditAgreement (the "Amended Credit Agreement")with the lenders under the Prior Credit Agreement. The Amended CreditAgreement provides for a single term loan facility in the principalamount of $135.6 million repayable in quarterly installments with afinal maturity of January 12, 2007, except that the term facility shallbe due on September  1, 2005 if any of the9 5/8% Notes remain outstanding on that date. TheCompany is considering various alternatives with respect to therepayment or refinancing of the 9 5/8% Notes.While there can be no assurance, the Company expects that the9 5/8% Notes will be refinanced or otherwiserepaid by December 1, 2005. See Note 22 – Subsequent Events.

The term facility bears interest at either the ABR or EurodollarRate (as defined in the Amended Credit Agreement) plus a margin of5.25% in the case of ABR loans or 6.25% in the case ofEurodollar Loans. The term facility under the Amended Credit Agreementis secured on substantially the same basis as indebtedness under thePrior Credit Agreement. In connection with the Amended CreditAgreement, the Company paid fees to lenders and professional advisorsof approximately $3.5 million, including an original issue discount feeof approximately $2.0 million. Approximately $3.1 million of the feespaid were expensed in 2004.

As a result of the January 2004Refinancing, in accordance with Statement of Financial AccountingStandards No. 6, "Classification of Short-Term ObligationsExpected to be Refinanced" ("SFAS6"), the Company reclassified $246.0 million of therefinanced debt to long-term debt as of December 31, 2003.

Underthe Amended Credit Agreement, the Company is required to repay $7.2million in principal in 2005. In addition, the Amended Credit Agreementrevised certain financial tests and other restrictive covenants setforth in the Prior Credit Agreement, including required EBITDA (asdefined), limitations on indebtedness, and other provisions. As definedin the Amended Credit Agreement and 2004 Indenture, EBITDA includesadjustments for certain severance expenses, refinancing expenses,foreign exchange (gain) loss, and other non-cash charges.

Amendments to Amended Credit Agreement and 2004 Indenture

EFILM

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

DHD

On September 16, 2004, the Companypurchased 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.

F-25

----

PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

Preferred StockExchange

On November 16, 2004, Panavision issued 30,610,810shares of common stock, par value $.01 per share to PX HoldingCorporation, in exchange for all Series D Preferred Stock and allSeries E Preferred Stock held by PX Holding (the"Exchange"). In connection with the Exchange,Panavision entered into a Second Amendment and Consent, dated as ofNovember 15, 2004, with respect to Panavision's Amended CreditAgreement.

WFW

In connection with thePanavision acquisition of the camera inventory of William F. WhiteInternational Inc., (the "WFW Acquisition"),Panavision entered into a Third Amendment, dated as of December 29,2004 with respect to Panavision's Amended CreditAgreement.  In addition, in connection with the WFW Acquisition,Panavision entered into a Fourth Supplemental Indenture, dated as ofDecember 29, 2004, with respect to the 2004 Indenture.

See Note22 – Subsequent Events, regarding amendments to the AmendedCredit Agreement, 2004 Indenture and Second MacAndrews Line that tookplace subsequent to December 31, 2004.

F-26

----

PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

The following sets forth the aggregateprincipal maturities of the Company's debt, including capitalleases, during the twelve-month periods ending December (inthousands):

|                   |  |        |         |        |  |  |
|-------------------|--|--------|---------|--------|--|--|
| 2005              |  | $      | 9,557   |   |
| 2006              |  |   | 83,331  |   |
| 2007              |  |   | 113,312 |   |
| 2008              |  |   | 1,708   |   |
| 2009andthereafter |  |   | 104,821 |   |
|              |  | $      | 312,729 |   |
|                   |

Theamounts presented for 2005 do not reflect the impact of the termfacility under the Amended Credit Agreement becoming due in December2005 if any of the 9 5/8% Notes remainoutstanding on that date. See Note 22 – Subsequent Events.

13.    Preferred Stock

As more fully described in Note 2,the Company issued 1,381,690 shares of Series A Preferred Stock inDecember 2001. The Series A Preferred Stock was entitled tonon-cumulative dividends at a rate of $0.05 per share per annumpayable, if declared, quarterly on each March 31, June 30, September 30and December 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 paid onthe Common Stock. The Company's Prior Credit Agreement restrictedthe payment of dividends.

As discussed in Note 12, the Companyissued 49,199 shares of Series B Preferred Stock to MacAndrews &Forbes Holdings on June 28, 2002. The Series B Preferred Stock wasnon-voting, had a liquidation preference of $49.2 million plus accruedand unpaid dividends, and entitled its holders to cumulative dividendsat a rate of 10% per annum. The terms of the Series B PreferredStock indicated 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. Since MacAndrews & Forbes Holdings maintained themajority shareholder vote of the Company, the Series B Preferred Stockwas deemed 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 B PreferredStock was redeemable at the option of MacAndrews & Forbes Holdings,the Company was required to carry the Series B Preferred Stock at itsredemption value. The Company recorded an accreted dividend of $1.3million and $2.9 million during the years ended December 31, 2003 and2002 in accordance with the terms of the Series B Preferred Stock.

In connection with the March 2003 Amendment, all the Series BPreferred Stock was contributed back to the Company and 102,220 sharesof Series C Preferred Stock were issued. The Series C Preferred Stock,par value $0.01 per share, was non-voting; had a liquidation preferenceof $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 D Preferred Stock wasnon-voting, had a liquidation preference of $1,000 per share plusaccrued and unpaid dividends, and entitled the holder to cumulativedividends at a rate of 10% per annum regardless of whetherdeclared or earned. Additionally, the Series D Preferred Stock wassubject 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 exchange for

F-27

----

PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

1,381,690 shares of Series A PreferredStock. The Series E Preferred Stock was entitled to one vote per share,voting together with the Common Stock as a single class, had aliquidation preference of $1.00 per share plus accrued and unpaiddividends, and provided for non-cumulative cash dividends at an annualrate of $0.05 per share if declared by the Company. As a result of theJanuary 2004 Refinancing transactions, all of the outstanding shares ofSeries A and Series C Preferred Stock were transferred to the Companyand a Certificate of Elimination was filed for each series.

Asdiscussed in Note 2, on November 16, 2004, Panavision issued 30,610,810shares of common stock, par value $.01 per share to PX HoldingCorporation, in exchange for all Series D Preferred Stock and allSeries E Preferred Stock held by PX Holding (the"Exchange"). The Exchange was completedpursuant to a letter agreement, dated November 16, 2004, betweenPanavision and PX Holding (the "LetterAgreement").

In the transaction, Panavisionissued:

|              |                                                                                                                                                                                                                                                                                                           |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | 29,229,120 shares of CommonStock in exchange for all 215,274 shares of Series D Preferred Stockheld by PX Holding at an exchange ratio of 125 shares of Common Stockfor each $1,000 of outstanding liquidation preference or accrued andunpaid dividends, valuing the Common Stock at $8.00 per share;and |

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

The 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 restrictions on its ability to acquire Panavision'sremaining Common Stock or to transfer the shares it holds. After givingeffect to the transaction, PX Holding holds approximately 96.3%of the Common Stock. The transaction follows a May 13, 2004 offer byMacAndrews & Forbes Holdings initially valuing the Common Stock at$7.00 per share. As a result of the Exchange, all of the outstandingshares of Series D and Series E Preferred Stock were transferred to theCompany and a Certificate of Elimination was filed for each series.

14.    Stock Based Benefits

During 1999, the Board ofDirectors adopted a stock option plan (the"Plan") which is open to participation bydirectors, officers, consultants, and other key employees of theCompany or of its subsidiaries and certain other key persons. The Planprovides for the issuance of incentive and nonqualified stock optionsunder the Internal Revenue Code. An aggregate of 1,500,000 shares ofPanavision Common Stock are reserved for issuance under the Plan. Theoptions are granted for a term of ten years. If an incentive stockoption is granted to an individual owning more than 10% of thetotal combined voting power of all stock, the exercise price of theoption may not be less than 110% of the fair market value of theunderlying shares on the date of grant and the term of the option maynot exceed five years. The Plan also provides that the aggregate fairmarket value (determined as of the time the option is granted) ofPanavision Common Stock with respect to which incentive stock optionsare exercisable for the first time by an optionee during any calendaryear shall not exceed $100,000.

F-28

----

PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

Option information with respect to theCompany's stock option plan is asfollows:

|                                         |  |        |          |               |  |                   |  |        |         |        |  |  |  |  |
|-----------------------------------------|--|--------|----------|---------------|--|-------------------|--|--------|---------|--------|--|--|--|--|
|                                    |  |   |          | ExercisePrice |
|                                    |  | Shares |          | Range         |  | WeightedAvg.Price |
| Options outstanding at December 31,2001 |  |   | 992,000  |          |  | $10.00-$7.50      |  | $      | 9.73    |   |
| Optionsexpired                          |  |   | —  |          |  | —           |  |   | — |   |
| Optionsoutstanding at December 31,2002  |  |   | 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   |   |
|                                         |

Theweighted-average remaining contractual life of options outstanding atDecember 31, 2003 is 4.8 years.

Information regarding stockoptions exercisable is asfollows:

|                                |  |             |         |        |  |        |         |        |  |        |         |        |  |  |
|--------------------------------|--|-------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                           |  | December31, |
|                           |  | 2004        |         | 2003   |  | 2002   |
| OptionsExercisable:            |  |
| Number                         |  |        | 614,000 |   |  |   | 642,000 |   |  |   | 992,000 |   |
| Weightedaverage exerciseprices |  | $10.00      |         | $10.00 |  | $9.67  |
|                                |

Therewere no options granted under the Plan during 2004, 2003, or 2002.

For purposes of the pro forma expense discussed in Note 1, theweighted 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-29

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

The following table illustrates theeffect on net loss and loss per share if the Company had applied thefair value recognition provision of FASB No. 123,"Accounting for Stock-Based Compensation," tostock-based employee compensation (in thousands, except per sharedata):

|                                                                                                       |  |                           |         |                           |  |                             |         |         |  |        |         |         |  |  |
|-------------------------------------------------------------------------------------------------------|--|---------------------------|---------|---------------------------|--|-----------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                                  |  | YearendedDecember 31,2004 |         | Year endedDecember31,2003 |  | Year ended December 31,2002 |
| Net loss asreported                                                                                   |  | $                         | (10,155 | )                    |  | $                           | (17,756 | )  |  | $      | (11,079 | )  |
| Add: stock-based employeecompensation expense included in reported netloss                            |  |                      | — |                      |  |                        | — |    |  |   | — |    |
| Deduct:total stock-based employee compensation expense determined under fairvalue method of allawards |  |                      | — |                      |  |                        | — |    |  |   | (15     | )  |
| Proforma netloss                                                                                      |  | $                         | (10,155 | )                    |  | $                           | (17,756 | )  |  | $      | (11,094 | )  |
| Proforma net loss attributable to commonstockholders                                                  |  | $                         | (29,479 | )                    |  | $                           | (31,541 | )  |  | $      | (13,951 | )  |
| Sharesused in computation – basic anddiluted                                                    |  |                      | 12,617  |                      |  |                        | 8,770   |    |  |   | 8,770   |    |
| Lossper share:                                                                                        |  |
| Basic and diluted net loss pershare – as reported                                               |  | $                         | (2.34   | )                    |  | $                           | (3.60   | )  |  | $      | (1.59   | )  |
| Basic and diluted net loss per share– pro forma                                                 |  | $                         | (2.34   | )                    |  | $                           | (3.60   | )  |  | $      | (1.59   | )  |
|                                                                                                       |

15.    Employee BenefitPlans

The Company sponsors a defined contribution 401(k) plancovering a majority of its domestic employees. Eligible employees maycontribute from 1% to 16% of their base compensation. TheCompany makes matching contributions equal to 75% of employeebefore-tax contributions from 1% to 6%. For the yearsended December 31, 2004, 2003 and 2002. The Company recorded expense of$0.9 million, $0.8 million, and $0.7 million respectively, related tothe 401(k) plan.

In addition, the Company sponsors definedcontribution retirement plans in Europe and Australia that covercertain foreign employees. Participating employees contribute from4% to 15% of their base compensation. The Companycontributes 10.5% to 13% of base compensation forparticipating employees depending upon their level of contribution. Forthe years ended December 31, 2004, 2003, and December 31, 2002, theCompany recorded expense of $1.8 million, $1.5 million, and $1.0million, 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 provisions,are based on contractually defined formulas. As of December 31, 2004,approximately $636,000 has been accrued in connection with these equityparticipation provisions.

16.    Change in Estimated AssetRetirement Obligations

Upon the initial adoption of SFAS No.143, "Accounting for Asset RetirementObligations", the Company estimated its liability forasset retirement obligations to be zero. After completing a recentfacilities rationalization review, the Company revised its estimate forleasehold restoration costs upward to approximately $2.4 million. Theimpact of the revision on net income from continuing operations for theyear ended December 31, 2004, was approximately $175,000, or $0.01 percommon share, basic and diluted.

F-30

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

Changes in estimated asset retirementobligations for the year ended December 31, 2004 are as follows (inthousands):

|                           |  |        |         |        |  |  |
|---------------------------|--|--------|---------|--------|--|--|
| BalanceJanuary 1,2004     |  | $      | — |   |
| Revision ofestimate *     |  |   | 2,394   |   |
| Accretionexpense          |  |   | 80      |   |
| Balance, December 31,2004 |  | $      | 2,474   |   |
|                           |

* Includes effects offoreign currency rate changes on balances denominated in currenciesother than the U.S. dollar

17.    Commitments andContingencies

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 |
| 2005                                                             |  | $         | 9,755  |    |  | $      | 2,571  |   |
| 2006                                                             |  |      | 6,847  |    |  |   | 2,443  |   |
| 2007                                                             |  |      | 5,191  |    |  |   | 2,320  |   |
| 2008                                                             |  |      | 4,164  |    |  |   | 1,930  |   |
| 2009                                                             |  |      | 3,194  |    |  |   | 503    |   |
| Thereafter                                                       |  |      | 6,239  |    |  |   | 273    |   |
| Minimumleasepayments                                             |  | $         | 35,390 |    |  |   | 10,040 |   |
| Less:imputed interest at rates ranging from 3.5% to8.75%         |  |      |   |    |  |   | 1,310  |   |
| Presentvalue of minimum lease payments included in long-termdebt |  |      |   |    |  | $      | 8,730  |   |
|                                                                  |

During theyears ended December 31, 2004, 2003 and 2002, rental expense underoperating leases was $9.8 million, $10.3 million, and $8.1 million,respectively.

As of December 31, 2004, the Company had acommitment of approximately $7 million to purchase digital cameras overa period of approximately eighteen months.

As of December 31,2004, the Company had a line of credit totaling approximately $20.0million, under which $9.2 million was drawn. In addition, the Companyhad various lines of credit totaling approximately $3.6 million atDecember 31, 2003, under which no amounts were drawn. The Company doesnot have any off-balance sheet financing arrangements.

TheCompany and its subsidiaries are defendants in actions for mattersarising out of normal business operations. The Company, based in parton the advice of legal counsel, does not believe that any suchproceedings currently pending will have a materially adverse effect onits consolidated financial position, results of operations, or cashflows.

18.    Related Party Transactions

Certainrelated party transactions between Panavision and MacAndrews &Forbes Holdings and between Panavision and PX Holding are disclosed inNote 1, Summary of Significant Accounting Policies — Descriptionof Business, Note 2, Transactions with M&F Worldwide Corp., Note 7,Income Taxes, Note 12, Long-Term Debt, and Note 13, PreferredStock.

Beginning in December 2002, the Company beganparticipating in MacAndrews & Forbes Holdings' directors andofficers insurance program, which covers the Company as well asMacAndrews & Forbes 

F-31

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PanavisionInc. Notes to Consolidated FinancialStatements (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 RightsAgreement") pursuant to which PX Holding and certain ofits transferees (the "Holders") have theright to require the Company to register under the Securities Act of1933 (a "Demand Registration") all or part ofthe Common Stock and certain other shares of capital stock(collectively, "Registrable Shares") owned bythe Holders. The Company may postpone giving effect to a DemandRegistration for up to a period of 30 days if the Company believes suchregistration might have a material adverse effect on any plan orproposal by the 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., the Company'sprincipal operating subsidiary, entered into a Security Officer ServiceAgreement (the "Security Agreement") with anoperating subsidiary of Allied Security Holdings LLC,("Allied Security") an affiliate ofMacAndrews & Forbes Holdings. Pursuant to the Security Agreement,Allied Security provides the Company with security officer services onterms which management believes are competitive with industry rates forsimilarly situated security firms and as favorable as terms that couldhave been obtained from an unrelated party in an arms-lengthtransaction. During 2004, amounts paid to Allied Security by theCompany pursuant to the Security Agreement were $145,000. Since July16, 2003, the Security Agreement has been continuing on amonth-to-month basis.

In December 2003, Panavision Imaging, LLC,a subsidiary of PX Holding, purchased the assets of Silicon Video,Inc., a designer of CMOS imaging sensors located in Homer, New York,and formed Panavision SVI, LLC to act as marketing affiliate withrespect to certain products designed by Panavision Imaging, LLC. TheCompany manages the operations of Panavision Imaging, LLC andPanavision SVI, LLC (together "PanavisionSVI") in exchange for certain research and developmentservices, management fees and most favored customer status with respectto certain products of Panavision Imaging, LLC. In addition, theCompany purchases certain sensors from Panavision Imaging, LLC on abasis that is at least as favorable as could be obtained in anarms-length transaction. Panavision Imaging, LLC and its marketingaffiliate Panavision SVI, LLC utilize the Panavision tradename pursuantto a license from the Company. The management and royalty fees chargedby the Company to Panavision SVI for 2004 were $420,000, of which$105,000 was payable at December 31, 2004.

On September 16,2004, the Company entered into an agreement with Sony, a holder of theCompany's Common Stock. Pursuant to the agreement, the Companyacquired from Sony the remaining 49% interest in DHD, not thenheld by the Company, making DHD a wholly owned subsidiary of theCompany for consideration of $4.4 million.

On December 29, 2004,in connection with the Company's acquisition of the camerainventory of William F. White International Inc. in Canada, LPPI, LLC("LPPI"), a wholly-owned subsidiary of the

F-32

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

Company, entered into a Sale and PurchaseAgreement with PX Holding pursuant to which LPPI sold and PX Holdingpurchased a promissory note (the "DeluxeNote"), dated August 6, 2004, issued by DeluxeLaboratories, Inc. ("Deluxe") in favor ofLPPI. The Deluxe Note was issued in connection with the sale of theCompany's interest in EFILM, LLC to Deluxe on August 6, 2004. TheDeluxe Note is in the principal amount of $5,000,000 and bears interestat a rate of 7% per annum. As consideration for the Deluxe Note,PX Holding paid $5,000,000 to LPPI and agreed to pay to LPPI anyaccrued and unpaid interest on the Deluxe Note through and includingDecember 29, 2004 upon receipt of such payment from Deluxe when theDeluxe Note matures on August 6, 2005.

19.    RecentAcquisitions

On September 16, 2004, the Company purchased fromSony a 49% interest in DHD for a cash purchase price of $4.4million, making DHD a wholly-owned subsidiary of the Company. As aresult, the Company has consolidated the financial position and resultsof operations of DHD in the accompanying consolidated financialstatements from the date of purchase. The effects of the consolidationwere immaterial for the period. There was no goodwill resulting fromthe purchase price allocation.

On August 13, 2004, the Companypurchased, through one of its wholly-owned subsidiaries, 100% ofthe share capital of Technovision France for a cash purchase price ofapproximately $3.4 million. Technovision is a film equipment rentalcompany located in Paris, France. The effects of the purchase wereimmaterial for the period. Goodwill of approximately $300,000 wasrecognized as result of the allocation of purchase price to the fairvalue of assets acquired and liabilities assumed.

20.    Valuation and Qualifying Accounts and Reserves

Thefollowing is a summary of the valuation and qualifying accounts andreserves for the years ended December 31, 2004, 2003, and 2002 (inthousands):

|                                |  |                  |       |                  |  |                     |       |               |  |   |       |        |  |   |       |        |  |  |
|--------------------------------|--|------------------|-------|------------------|--|---------------------|-------|---------------|--|---|-------|--------|--|---|-------|--------|--|--|
|                           |  | BeginningBalance |       | Amounts Reserved |  | Balances WrittenOff |       | EndingBalance |
| Allowance for DoubtfulAccounts |  |
| December 31,2004               |  | $                | 2,586 |             |  | $                   | 962   |          |  | $ | 1,930 |   |  | $ | 1,618 |   |
| December31,2003                |  | $                | 1,634 |             |  | $                   | 1,924 |          |  | $ | 972   |   |  | $ | 2,586 |   |
| December31,2002                |  | $                | 1,414 |             |  | $                   | 576   |          |  | $ | 356   |   |  | $ | 1,634 |   |
|                                |

F-33

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

21.    Quarterly Operating Data(unaudited)

The following is a summary of unaudited quarterlyresults of operations (in thousands, except per sharedata):

|                                                                       |  |         |         |         |  |        |         |         |  |        |        |         |  |        |        |         |  |  |
|-----------------------------------------------------------------------|--|---------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                                                                  |  | Quarter |
|                                                                  |  | First   |         | Second  |  | Third  |         | Fourth  |
| **Yearended December 31, 2004**                                       |  |
| Total revenue(1)                                                      |  | $       | 49,050  |    |  | $      | 46,979  |    |  | $      | 54,018 |    |  | $      | 57,405 |    |
| Grossmargin(2)                                                        |  |    | 18,911  |    |  |   | 15,733  |    |  |   | 21,259 |    |  |   | 21,267 |    |
| Netloss 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  | )  |
| **Yearended December 31, 2003**                                       |  |
| Total revenue(1)                                                      |  | $       | 43,988  |    |  | $      | 44,125  |    |  | $      | 50,221 |    |  | $      | 52,806 |    |
| Grossmargin(2)                                                        |  |    | 17,891  |    |  |   | 15,208  |    |  |   | 19,761 |    |  |   | 21,725 |    |
| Netloss from continuingoperations                                     |  |    | (6,571  | )  |  |   | (3,417  | )  |  |   | (2,141 | )  |  |   | (4,394 | )  |
| Netloss from continuing operations attributable to commonshareholders |  |    | (8,062  | )  |  |   | (7,418  | )  |  |   | (6,236 | )  |  |   | (8,592 | )  |
| Netincome(loss)                                                       |  |    | (7,354  | )  |  |   | (3,682  | )  |  |   | (2,376 | )  |  |   | (4,344 | )  |
| Netloss attributable to commonshareholders                            |  |    | (8,845  | )  |  |   | (7,683  | )  |  |   | (6,471 | )  |  |   | (8,542 | )  |
| Lossfrom continuing operations per share*                             |  | $       | (0.92   | )  |  | $      | (0.85   | )  |  | $      | (0.71  | )  |  | $      | (0.98  | )  |
| Lossper share*                                                        |  | $       | (1.01   | )  |  | $      | (0.87   | )  |  | $      | (0.74  | )  |  | $      | (0.98  | )  |
|                                                                       |

|     |                                                                                                                                                                                                                                                                           |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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, and $2,311, $4,309, $4,725 and $5,472 for thefirst through fourth quarters of 2003, respectively. |

|     |                                                                                                                                                                                                                                                                             |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Presentation of EFILM and LPPI as discontinuedoperations reduced previously reported gross margin by $2,892 and$3,701for the first and second quarter of 2004, respectively, and $490,$1,835, $2,065 and $2,830 for the first through fourth quarters of2003, respectively. |

|   |                   |
|---|-------------------|
| * | Basic and diluted |

22.    Subsequent Events

On March 30, 2005, the Companyreceived a commitment from PX Holding (the"9 5/8% NotesCommitment"), that in the event that the9 5/8% Notes are not repaid, retired orrefinanced prior to December 1, 2005, or the applicable provision ofthe Amended Credit Agreement is not amended by such time thatPanavision's term loans do not become immediately due andpayable, PX Holding will provide financial support sufficient to allowthe repayment, retirement or refinancing of the9 5/8% Notes.

F-34

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PanavisionInc. Notes to Consolidated FinancialStatements (Continued)

In addition, Panavision entered into aFourth Amendment, dated as of March 30, 2005, to the Amended CreditAgreement and a Fifth Supplemental Indenture, dated as of March 30,2005, with respect to the 2004 Indenture. This amendment and indenturesupplement was entered into principally to (a) provide a mechanism forthe potential acquisition of the camera, lighting and grip assets of acompany in the United Kingdom ("the UKAcquisition"); (b) reduce required EBITDA levels, asprovided in the Amended Credit Agreement, to $52.0 million, $54.0million, $54.0 million and $58.0 million for the twelve-month periodsended March 31, 2005, June 30, 2005, September 30, 2005 and December31, 2005, respectively; (c) extend the date on which the term facilityunder the Amended Credit Agreement shall be due if the9 5/8% Notes remain oustanding fromSeptember  1, 2005 to December  1, 2005; (d) increase thelimitation on capital expenditure, as defined in the Amended CreditAgreement, from $25.0 million to $37.5 million; and (e) increase theSecond MacAndrews Line to $32.0 million, plus an amount for thepotential UK Acquisition, if necessary.

On March 30, 2005, theSecond MacAndrews Line was amended and restated to increase the amountto $32.0 million, plus an amount for the potential UK Acquisition, ifnecessary.

F-35

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